Compensation payments for commercial agents and official distributors

According to Section 89b of the German Commercial Code commercial agents and (by way of analogy) official distributors can be entitled to compensation payments against the entrepreneur in case of termination of the distribution contract. The idea behind this provision is that a commercial agent who brings the principal more profit on the long run should also profit from this and gain appropriate return on his personal investments. The maximum level for such compensation is one annual commission calculated on the basis of the average of the last five years of the agent's activities, and in general the compensation claim is calculated on the basis of the commissions earned by the commercial agent with newly acquired customers. However, para. 1, sentence 2 of the stated provision specifies: "It is equal to the acquisition of a new customer if the commercial agent has so significantly increased the volume of business with an existing customer that it is economically equivalent to the acquisition of a new customer."

So far jurisdiction took the view that the volume of business with an existing customer had to be doubled in order for it to count as "significantly increased", reasoning that doubling the business volume is just the equivalent of canvassing a new customer.

According to the new OLG judgment, the volume of business is "significantly increased" if it is increased by more than 50 percent. The court confirms that the provision must be interpreted conform to the Council Directive relating to self-employed commercial agents (86/653/EEC) (the "Directive"). Unlike the German provision the Directive does not require the increase to be "economically equivalent" to the acquisition of a new customer but only that the commercial agent "...has significantly increased the volume of business with existing customers...". Some authors in legal literature argue that depending on the sector and the market position increasing the business by 10 – 30 percent can already constitute such significant increase. These reflections might have brought the court to setting the benchmark of more than 50 percent.

The judgement is final, but it remains to be seen if other courts will follow the OLG and apply the threshold value of more than 50 percent going forward. Given the diverse markets and market positions, a schematic "one for all" approach might not be regarded as an appropriate solution. However, if other courts will join the OLG, or even go below the "more than 50 percent"-threshold set by the OLG, depending on specific circumstances relating to the sector or market share in each case, calculations might be even more complex in the future and the maximum level for compensation payments might apply in far more cases.