Law Legal News [November 2023]: What is the correct definition of a lost commission?
According to the judgment of the Constitutional Court, the full amount of a subsidy should be reduced only in the most serious cases or under special circumstances. Moreover, in its judgment, Case No III. ÚS 1344/23, the Constitutional Court declared that the administrative authorities and the courts erred in failing to exercise administrative discretion in the present case as to the significance of the breach of the legal conditions or the appropriateness of the reduction of the subsidy. And in the past month, the Supreme Court ruled on "lost commissions" and "reflective loss". Enjoy reading the latest Legal News!
- The “lost commissions” of a commercial agent were dealt with by the Grand Panel of the Civil and Commercial Division of the Supreme Court. Specifically, the question was whether commissions lost by a commercial agent in terms of Article 669(1)(b) of the Commercial Code are commissions for contracts which the commercial agent would hypothetically have concluded, had the commercial agency continued, with those customers which they acquired for the represented party or with existing customers with whom they significantly developed business. Since the provision in question is also a transposition of European law (Article 17 of Directive 86/653/EEC on the coordination of the laws of the Member States relating to self-employed commercial agents), the Supreme Court referred the matter to the Court of Justice of the European Union for preliminary rulings. The judgment of the CJEU has shown that the view that has been established in the previous decision-making practice of the Supreme Court, i.e. that lost commissions are commissions that the agent would otherwise have received from the transactions already made, cannot hold up in the light of an interpretation that is in conformity with EU law. The commissions that the commercial agent loses in terms of Section 669(1)(b) of the Commercial Code are not (cannot be) commissions from transactions already made to which the commercial agent is entitled under the agency agreement. The lost commissions are the commissions that the agent would have received in the hypothetical case of the continuation of the contract for transactions carried out after the termination of the contract with customers that they have acquired for the represented party as well as with existing customers with whom they have significantly developed business.
- In its latest judgment, 27 Cdo 3333/2022, the Supreme Court dealt with the question of whether an owner of a limited liability company can invoke Section 2913(1) of the Civil Code to recover damages incurred by the company as a result of which the value of the owner’s share in the company has been reduced, i.e. a “reflective loss”. There is settled case law on this issue in situations where a member of the statutory body has caused damage to the company. In such cases, an owner can use a joint (derivative) action as a tool to protect their rights. The Supreme Court concluded that these case law conclusions are applicable even in a situation where the damage was not caused by a member of the company’s statutory body. The statutory executive is obliged to recover damages on behalf of the company, taking into account the requirement of due managerial care. If the statutory executive is inactive, the tool for protecting the rights of the owner (and the company) against the inaction of the statutory executive in recovering damages caused to the company (which is reflective loss in relation to the owner) is the owner’s joint (derivative) action against the statutory executive. The Supreme Court stated that the opposite conclusion, according to which an owner would be entitled to recover damages directly if the damage was not caused by a member of the company’s statutory body, cannot hold. The reason for this is that while compensation for the actual damage caused to the company also compensates for the reflective loss caused to the owner, compensation for (only) the reflective loss to the owner does not compensate for the actual damage caused to the company. On the contrary, compensating an owner directly for the reflective loss could cause damage to the company itself as well as to other owners or creditors of the company.
- We also provide a summary of the Supreme Court judgment 23 Cdo 2921/2022 dealing with the moderation of contractual penalties in the public procurement regime. The Supreme Court stated that the fact that the contractual relationship of the parties arose under the public procurement regime is not automatically a reason that would prevent the application of a court’s right of moderation. It is only one of the facts (potentially) relevant for the assessment of the adequacy of the contractual penalty. In view of the previous case law on this issue, the Supreme Court also emphasised that it is necessary to assess the circumstances of negotiating the contractual penalty in the context of a public tender in order to avoid retroactive effects on the tender. However, the moderation of a contractual penalty which has its origin in an obligation arising under a public procurement regime is not excluded across the board.
- In its judgment of 18 October 2023, Case No III ÚS 1344/23, the Constitutional Court dealt with the reduction of subsidies. It concluded that the full amount of the subsidy should be reduced only in the most serious cases or under special circumstances. In this respect, the administrative authorities and the administrative courts erred in failing to exercise administrative discretion as to the significance of the breach of the statutory conditions or the adequacy of the reduction of the subsidy. This infringed the applicant’s right to judicial protection. According to the Constitutional Court, under the rule of law, the intensity of a failure to comply with a statutory obligation must be carefully weighed in each particular case in relation to the negative consequences resulting from that failure. If the law expressly provides for administrative discretion on the part of the provider of the subsidy, the provider must comply with this obligation and exercise administrative discretion. A contrary approach is in conflict with the fundamental principle of the rule of law, according to which state power may be exercised only in the cases and within the limits laid down by law and in the manner prescribed by law.
