The CJEU decides: it is lawful to exclude Turkish Agents from the Belgian Agency Act’s scope

In the context of a dispute between a Turkish agent and a Belgian principal, the Commercial Court of Ghent (Belgium) referred a request to the Court of Justice of the EU (CJEU) concerning the legal protection of a Turkish agent under Belgian/EU law.

The agent and principal had expressly agreed that their agency agreement was subject to Belgian law.  After the agency relationship was terminated, the agent claimed compensation in lieu of notice and a goodwill indemnity from the principal under the Belgian Agency Act (the Act), which implements Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents (the Agency Directive).

On 3 September 2015, the Commercial Court held that, according to the Act’s parliamentary preparations, the Act does not apply when an agent has its principal place of business outside Belgium (i.e. the Act’s so-called ‘self-limiting character’).  Therefore, the Commercial Court initially established that the choice of law clause between the parties did not require the Act’s application.

However, the Commercial Court, giving weight to the agent’s reasoning based on both the implementation of the Agency Directive into Turkish law and the Association Agreement between Turkey and the EU (the Association Agreement), referred the matter to the CJEU. The preliminary ruling request asked the CJEU whether the Act (read in the sense that it does not apply to an agent that has its principal place of business in Turkey) is contrary to the Agency Directive and/or the Association Agreement.

On 16 February 2017 the CJEU (C-507/15) decided that the Agency Directive and the Association Agreement must be interpreted “as not precluding national legislation transposing that directive into the law of the Member State concerned, which excludes from its scope of application a commercial agency contract in the context of which the commercial agent is established in Turkey, where it carries out activities under that contract, and the principal is established in that Member State, so that, in such circumstances, the commercial agent cannot rely on rights which that directive guarantees to commercial agents after the termination of such a commercial agency contract”.

The CJEU referred to the purpose of the Agency Directive, which serves to make uniform the conditions of competition within the EU.  According to the CJEU, it is not necessary for this purpose to provide agents who are established and carry out their activities outside the EU with protection comparable to that of agents who are established and/or carry out their activities within the EU.  Therefore, Member States are not obliged to adopt harmonisation measures concerning commercial agents in situations as in the case at issue.

The CJEU furthermore held that one should distinguish between the objective pursued by the Treaty on the Functioning of the EU (TFEU) and the Association Agreement. In the context of the TFEU, the protection of the freedom of establishment and the freedom to provide services, by means of the Agency Directive, is based on the objective of establishing an internal market, conceived as an area without internal borders.  Even though Article 14 of the Association Agreement refers to the principles of free movement enshrined in the TFEU as a source of guidance, the development of economic freedoms of a general nature that may be compared to those afforded to EU citizens under the TFEU is not an objective of the Association Agreement.  The Association Agreement is intended to promote Turkey’s economic development, not to establish an internal market. The Association Agreement guarantees the enjoyment of certain rights within the territory of the host Members State only.  The fact that Turkey transposed the Agency Directive into its national law does not alter this analysis, as this transposition does not result from an obligation under the Association Agreement, but from Turkey’s will.

The CJEU also considered the standstill clause of Article 41 of the Additional Protocol to the Association Agreement, which prohibits the introduction of new internal measures that have the effect of making the exercise by a Turkish citizen of an economic freedom subject, on the territory of the Member State concerned, to conditions more stringent than those that applied at the date of entry into force of the Additional Protocol.  According to the CJEU, this standstill clause concerns only Turkish citizens who exercise their economic freedoms in a Member State.  In the matter at issue the agent was established in Turkey and so the standstill clause did not apply.

The CJEU firmly decided on the question of EU law and the Association Agreement.  It, however, noted that the observations submitted to it revealed a divergence regarding the Act’s interpretation and noted that the question of whether the Act actually has the self-limiting character which the referring court attributes to it, remains to be determined by the Belgian courts.  In this respect, as the CJEU indicated, it is noteworthy that in the proceedings before the CJEU the Belgian Government maintained the view that Article 27 of the Act does not have this ‘self-limiting character’.

Alexander Hansebout
Partner, Altius