Mário Conforti
Lawyer at Marcos Martins Advogados
As discussed in the last article on the subject, the activity of independent commercial representation is governed by Law 4.886/65, as amended by 8.420/92. This is old and outdated legislation in the context of technological and economic-commercial development.
Bill 1128/2019, which was limited to amending Law 4.886/65 on two points: (i) establishing a minimum level for the compensation provided for in cases of termination of the contract without just cause; and (ii) reducing the limitation period from 5 to 2 years from the end of the contract for the representative to file a lawsuit against the represented party, was withdrawn by its rapporteur, Congressman Alexis Fonteyne.
The same deputy then presented Bill No. 5761/2019, which brought in a few more changes, as well as backtracking on the changes brought in Bill No. 1128/2019.
In this text we will deal with the retreat of Bill No. 5761/2019 by increasing from 3 to 10 years the period to be used as a basis for calculating the indemnity provided for in Article 27(j) retroactive to the termination of the contract without just cause. Although the criterion for setting the time limit at 3 years by Bill 1128/2019 could be debated, such a change was extremely necessary in view of the provisions of the law in force, whereby the calculation of the indemnity of 1/12th in the event of unjustified termination of the contract is carried out over the entire duration of the contract.
The way the termination of the contract currently works, commercial representation provides for much higher compensation than other types of contract such as agency and distribution (regulated by the Civil Code) or even the commercial concession of motor vehicles (regulated by the Ferrari Law). The comparison between these types of contract is opportune insofar as they all belong to the genre of intermediation contracts, and it is certain that both distribution and commercial concession require, in theory, much more significant investments to make the operation of the business viable (infrastructure for storage and transportation of goods and/or merchandise, stock, etc.) than commercial representation, which further reinforces the inadequacy from an economic point of view of the way of calculating the 1/12th indemnity provided for in Law 4.886/65.
It can be seen from the explanatory memorandum contained in Bill 1128/2019 that limiting the basis for calculating the indemnity provided for in Article 27(j) to 3 years would serve to provide predictability for those contracting commercial representation (the represented parties) as to the delimitation of the amount of this severance payment over time.
In the explanatory memorandum to Bill 5761/2019, however, there is no clarification of the increase in the time limit for calculating this indemnity from 3 to 10 years.
This step backwards only reinforces the clearly paternalistic nature of a law enacted in 1965, which certainly hinders the development of the commercial representation activity itself.
Although Bill No. 5761/2019 was recently withdrawn from consideration at the request of the rapporteur himself, it is extremely timely to comment on it, as we believe it is possible to make great progress in the discussion on reforming the commercial representation law. For this reason, the next text will comment on the amendment provided for in Bill 5761/2019 regarding the possibility of early payment of the indemnity of 1/12ths provided for in paragraph “j” of article 27 of Law 4.886/65.
The Marcos Martins law firm is attentive to discussions involving changes to laws that may directly impact economic activities, in order to provide adequate and effective advice to all clients.
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