Concept of commercial agent

The Austrian Commercial Agents Act (Handelsvertretergesetz, HVertrG) regulates the contractual relations between principals and self-employed commercial agents.

Commercial agents are self-employed intermediaries having continuing authority to negotiate or conclude transactions in the name and for the account of another person referred to as ‘principal’. This does not include negotiating or concluding transactions for immovable property (section 1 (1) Commercial Agents Act).

Commercial agent’s entitlement to an indemnity

Pursuant to the Commercial Agents Act, commercial agents shall be entitled to a reasonable indemnity after termination of the contractual relationship, provided that certain requirements are met. Among other things, the commercial agent must have introduced new clients or significantly enhanced existing business connections. Furthermore, it needs to be expected that the principal or its legal successor will be able to derive considerable benefits from such business connections also after the termination of the contractual relationship. And, finally, the payment of an indemnity must be fair and equitable, taking into consideration all circumstances.

Continued benefits from new customers

If the company is sold, the question arises to what extent benefits derived from new customers introduced by the commercial agent may continue to apply. The Austrian Supreme Court (OGH) has addressed this issue already in several rulings (including 9 Ob 21/13y; 8 ObA 9/15d; 10 Ob 55/16k) – most recently in OGH 28.6.2018, 9 Ob 44/18p.

The following principles can be identified:

• No indemnity will be due to the commercial agent if the principal disposing of its business can not actually derive any benefit from the newly established customer base upon disposal of its company or business. This may happen, for instance, if the acquiror is interested in the operating resources only and does not attach importance to such customer base. In that case, the customer base will not be included in the assessment of the purchase price.
• The principal will be deemed to have benefitted from the introduction of new customers if the value of its company has increased by the opportunity to make use of the new customer base.
• The burden of proof for the eligibility requirements regarding the indemnity having been met is on the commercial agents. If they succeed in proving to have introduced new customers and supplying evidence of concluded transactions, the burden of proof for the remaining requirements will be eased for them.Principals must assert and bear the burden of proof for the fact that the opportunities for income established for them by a commercial agent do not or will not survive the termination of the contractual relationship in an individual case.
• The assessment whether a principal disposing of its business was able, upon disposal of the business, to derive a benefit from the new customer base established by the commercial agent can be based only on the specific circumstances of the individual case.
• It is permissible for the principal to make strategic changes to its business activities. If realignments fail after the termination of the contract, this shall not automatically impair the entitlement to an indemnity; it depends on the circumstances of the individual case whether such failure will affect the determination of the indemnity.

Conclusion

No indemnity will be due to the commercial agent in all cases where the principal disposing of its business cannot actually derive any benefit from the newly established customer base upon disposal of its company.

The burden of proof for the eligibility requirements regarding the indemnity having been met is on the commercial agent. Principals, in turn, must assert and bear the burden of proof for the fact that the opportunities for income established for them by a commercial agent do not or will not survive the termination of the contractual relationship in an individual case.