Croatia

AGENCY LAW IN CROATIA

Agency law in Croatia is governed by the Obligations Act which came into force on 1 January 2006 and replaced the previous Obligations Act which came into force on 1 October 1978. The Obligations Act is government issued statute adopted by the Croatian Parliament (Sabor). Croatia is subject to a civil law system.
The provisions of the Obligations Act which rule the commercial agency contract mostly reflect the provisions of the Council Directive of 18 December 1986 on the co-ordination of the laws of the Member States relating to self-employed commercial agents (86/653/EEC).

Definitions
The terms ‘commercial agent’ and ‘principal’ are not directly defined in the Obligations Act. Rather, a  commercial agency contract is defined as a contract by which an agent undertakes to negotiate with third persons the conclusion of contracts in the name and on behalf of the principal, while the principal undertakes to pay to the agent remuneration for every contract that is concluded as a result of his activities. Unlike the Commercial Agents Regulations in the UK, the Obligations Act includes the provision of services as well as goods in commercial agency contracts.

Exclusions
Parties are allowed to contract out of certain parts of the Obligations Act i.e. certain statutory provisions can be overridden by the contract itself. These statutory provisions are seen as default statutory rules which apply to the parties unless the parties do not contract otherwise. For example, under the Obligations Act, an agent does not have the right to be compensated for expenses which arise from usual daily affairs, although the parties are allowed to contract otherwise.

Croatian law does not generally exclude agents whose agency activities are secondary (i.e. not the primary purpose of their agency agreement with their principal). According to Croatian law, the legal nature of a contract is to be determined by the evaluation of the overall rights and obligations of the parties as well as taking into account their intentions at the time of contracting. The question of whether a certain contract would be characterised or not as being an agency contract would be determined on a case by case basis.

Termination
The Obligations Act provides statutory notice periods to which an agent is entitled on termination. The statutory period of notice required to be given depends on the duration of the contract, with one month’s notice required to be given per each year of the contract commenced up to a maximum of 6 month’s notice for contracts lasting more than five years. The parties may agree to longer notice periods than stipulated by statute but cannot agree on shorter notice periods. Notice of termination of the agency contract must be given in writing.

Under the Obligations Act, a terminated agent is entitled to an indemnity and/or damages for payment on termination. The commercial agent shall be entitled to an indemnity if and to the extent: (i) he has brought the principal new customers; or (ii) he has significantly increased the volume of business with existing customers; and (a) the principal continues to derive substantial benefits from the business with such customers; and (b) the payment of this indemnity is equitable having regard to all the circumstances, and, in particular, the commission lost by the commercial agent on the business transacted with such customers. 

The amount of the indemnity may not exceed the amount of the commercial agent’s average annual remuneration over the preceding five years and if the contract goes back less than five years the indemnity shall be calculated on the average for the period in question. The entitlement to an indemnity does not exclude the agent’s right to be compensated for the damage suffered in case the amount of damage exceeds the amount of indemnity. However, there are no punitive damages in Croatia.

Damages and/or indemnity are not payable in the following circumstances:

(a) where the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract;

(b) where the commercial agent has terminated the agency contract, unless such termination is justified by circumstances attributable to the principal or on grounds of age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities;

(c) where, with the agreement of the principal, the commercial agent assigns his rights and duties under the agency contract to another person.

Agents, with the agreement of their principals, can assign their rights and duties under the contract to another person. This is not expressly stipulated by the Obligations Act but is governed by the general rules of assignment.

Commission
Under Croatian law a terminated agent is entitled to the following commission:

Pre-termination commission, i.e. commission on transactions concluded during the agency contract (including all orders accepted by the principal up to the date of termination, even if the transaction is performed by the principal only after termination).

Post-termination commission, i.e. commission on transactions concluded within a reasonable period after the agency contract has terminated. The relevant transactions are those which are mainly attributable to work done by the agent during the agency contract and which are entered into within a reasonable period after termination.

Back commission, i.e. commission on orders obtained by the agent and accepted by the principal, but where the customer does not pay the principal in respect of the order for a reason for which the principal is to blame (for example, delivery of defective goods). This right arises both during and after termination of the agency contract.

Choice of Law and Jurisdiction
Parties are able to choose the proper law and forum of the contract. Accordingly, provisions in an agency agreement stipulating that English law is to govern the contract (and that English courts are to have jurisdiction) are likely to be given effect. However, rules of private international law have to be followed, e.g. the parties are not allowed to choose the jurisdiction of another country’s courts if there is no international element to the contract.