Coordination of the laws of Member States relating to commercial agents
Pursuant to Article 17 of the Council Directive from 18th of December 1986 (86/653/EEC) where Member States shall take the measures necessary to ensure that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraph 2 or compensated for damage in accordance with paragraph 3 of Article 17.
The legal case C-381/98 - Ingmar GB Ltd v Eaton Leonhard Technologies Inc – was about a concluded contract, under which the plaintiff was appointed as commercial agent in the United Kingdom. One clause of the contract stipulated that the contract was governed by the law of the state of California. The contract was terminated in 1996, whereupon the plaintiff instituted proceedings before the High Court of Justice, seeking payment of commission and compensation for damage suffered as a result of its relations with the defendant. The High Court judged that the Regulations did not apply, since the contract was governed by the law of the State of California. Against that judgment the plaintiff appealed to the Court of Appeal, which decided to stay proceedings and to refer the question to the EuGH for a preliminary ruling.
According to the EuGH decision from 9th of November 2000, the purpose of Articles 17 to 19 of the Directive is to protect the commercial agent after termination of the contract. An additional purpose of Articles 17 to 19 is to protect, for all commercial agents, freedom of establishment and the operation of undistorted competition in the internal market. And therefore that Articles, which guarantee certain rights to commercial agents after termination of agency contracts, must be applied where the commercial agent carried on his activity in a Member State although the company is established in a non-member country and a clause of the contract stipulates that the contract is to be governed by the law of that country.
Conclusion: Article 17 is a Member State mechanism required to provide reparation to a commercial agent after termination of a contract. However it allows the Member State to choose between indemnification or compensation for damages. Articles 17 and 18 will also allow Member States at their discretion, the choice of calculation methods for the indemnity or compensation. If the commercial agent works inside the EU – you are not able to choice for example Argentinian law and a court in Buenos Aires.