Service provider for clients, Independent sales representative is an intermediary between suppliers or producers and clients. European agency law, with Directive 86/653/EEC, has enabled to establish a legal framework to this indispensable profession of national and international commerce. Indeed, prior to the 1986 Directive, some member States of the European Union did not legally recognize the status of commercial agent. A situation that was, to say the least, delicate given the increasing number of international exchanges.
The legal framework of European agency law
Adopted in 1986, the Directive 86/653/EEC on the self-employed independent business representative, also known as the Directive on the coordination of the rights of Member States, established the foundations for a harmonized legal framework rights and obligations of representatives within the European Union, with the aim of clarifying contractual relationships between the self-employed business representative and the principal. This Directive is therefore the backbone of European self-employed business representative law within the European Union, which has subsequently been implemented at the level of each Member State.
Contract of a sales representative in European law: how it was before 1986 ?
When Directive 86/653/EEC on the sales representative did not exist, depending on their country of residence, sales representatives could encounter uncertainties and difficulties when they wished to prospect abroad and/or work for clients located abroad.
Prior to the adoption of the Directive :
- The activity of sales representative did not benefit from any legislative harmonization at the European level , which could make (at the very least!) a collaboration project with mandates located in another State, particularly.
- There was not really any protection for the sales representative in some countries as he/she did not have a genuine legal status across Europe.
- The sales representative was not always compensated according to clear standards , which gave rise to significant risks of non-payment of commissions or abusive termination of contracts.
- The The mandate agreement was not always fair , with sometimes unilateral and abusive clauses that placed the sales agent in a position of weakness.
The key principles of Directive 86/653/EEC on the sales representative
The European Directive of 1986 on business agents sets out the framework of European law on the business agent :
- The Directive 86/653/EEC on the Sales Representative defines the sales representative is that which, as an independent intermediary, is charged permanently either of negotiating the sale or purchase of goods for another person, hereinafter referred to as the “client,” or of negotiating and concluding such transactions on behalf and for the account of the client. The sales representative may be a natural person (independent salesperson, self-employed worker, sole trader) or a legal person. The sales representative is therefore not an employee (notably, not a VRP under French law), but rather an independent intermediary.
- She states the the rights and obligations of agents and principals , specifying the duties of each party in the business relationship.
- She establishes rules on the remuneration of the sales agent (level of remuneration, failing agreement, commission entitlement, commission payment term, statutory right of withdrawal, etc.).
- It integrates also protective rules for business agents in case of termination of contract , including the guarantee of a fair compensatory indemnity in case of contract termination, therefore the right to a termination indemnity.
- She establishes minimum notice period for unjustified termination of a fixed-term contract, periods longer may be imposed by Member States: 1 month for the first year, 2 months for the second year, 3 months from the third year and thereafter.
- She frames the possibility of providing a The obligation of non-competition post-contractual shall be borne by the sales agent.
- Finally, Directive 86/653/EEC on the sales representative specifies the areas in which Member States may choose between several options for transposing the directive into their national law (compensation system for the sales representative, notice period, etc.).
European status of the commercial agent: national particularities
Following the adoption of Directive 86/653/EEC on the commercial agent, Member States had the obligation to transposing its provisions into their own legislation by January 1, 1990. Its transposition could have known variations from one country to another, namely due to transitional provisions, or due to options that could be left to Member States, or still due to national specificities prior to the Directive having been maintained after (subject to their compliance with the Directive). These particularities have a direct impact on the European law of the commercial agent as it exists today :
- Transitional Provisions : Member States have been able to maintain certain specific rules applicable to their territory for a defined period, prior to aligning with the standards established by the Directive. The term of the contract or termination payments may thus be affected.
- Options : as indicated above, on certain aspects, Member States have benefited from a margin of manoeuvre to implement certain provisions of the Directive. Specific national rules can therefore be chosen within the framework of one of these options.
- National specifics : pre-existing national regulations may have been maintained by certain Member States, such as termination conditions or the methods for determining fees, for example.
It should also be noted that national understanding of Directive 86/653/EEC on the sales representative, therefore by national courts, may also lead to differences on “the” European law of the sales representative. Indeed, the judgments of justice of the different Member States regarding the scope of the provisions of the Directive may lead to a national interpretation, varying from one Member State to another, until the Court of Justice of the European Union is seized.
Court of Justice of the European Union and case law on the commercial agent
The Court of Justice of the European Union plays thus a leading role in the interpretation and application of the European trade law. Indeed, it has the task of ensuring a uniform interpretation and a consistent application of Union law in all Member States.
She intervenes therefore :
- In the event of questions or disputes regarding the interpretation of the Directive : Indeed, national courts may then submit a preliminary question to the CJEU in order to obtain clarification on the meaning of a provision, its scope, etc. The interpretation provided by the CJEU then applies to all Member States.
- For to verify compliance with national European Union law : it is possible to refer to the CJEU for it to examine whether a Member State has correctly transposed the provisions of the Directive into its national legislation. If this is not the case, it orders the concerned country to take the necessary corrective measures to comply with the European trade law.
On several occasions since the adoption of Directive 86/653/EEC, judgments by the Court of Justice of the European Union have contributed to clarifying European agency law. Some representative examples are as follows :
- Case C-104/95 – KONTOGEORGAS :
THE COURT FOUND THAT THE AGENT WAS ENTITLED TO COMMISSION ON ALL SALES WITHIN HIS SECTOR, EVEN IN THE ABSENCE OF EXCLUSIVITY, PROVIDED THAT NO SUCH PROVISION DID NOT EXIST IN THE CONTRACT. THE COURT’S RULING THEREFORE CLARIFIED THE PROVISIONS REGARDING THE SCOPE OF right to commission of the commercial agent. - Case C-215/97 – Barbara BELLONE / Case C-58/98 – Joseph CORSTEN :
In these two cases, the Court established that national legislation could not condition the benefit of independent representative status on national administrative measures. The grant of this status must therefore not be subject to the implementation of administrative measures. - Case C-828/18 – TRENDSETTEUSE :
In the context of this case, the Court clarified the meaning of the term “negotiate,” concluding “a person must not necessarily have the power to modify the prices of goods it sells on behalf of the principal in order to be qualified as a commercial agent.” This decision by the CJEU therefore reverses the case law of the French Court of Cassation in this area.
The commercial agent contract in European law: an essential document to protect yourself
The European law of agency, as resulting from the 1986 Directive, has thus allowed to harmonize the rights and obligations of the agent commercial in Europe in order to better protect it while allowing for a certain degree of freedom for Member States.
However, as a result, this European right of the commercial agent is at once one and multiple, the national provisions continuing to play an important role.
Furthermore, the question arises regarding the rules for determining the applicable law (national) to the contract as well as the competent jurisdictions in the event of a dispute relating to an international commercial agent agreement, that is to say involving a principal in one State and a commercial agent in another Member State.
These are not established in the 1986 Directive but fall under European regulations.
AUMANS AVOCATS
Drawing on its experience in commercial agency law, both in France and at the European level, for over twenty years, AUMANS AVOCATS (Formerly FOUSSAT AVOCATS) is therefore at your disposal to advise and assist you with any questions relating to your commercial agent agreement with a foreign principal.
