COMMERCIAL AGENCY LAW IN UKRAINE
Agency Law in Ukraine is governed by the Civil Code of Ukraine and the Commercial Code of Ukraine, which came into force on I January 2004. These Codes apply to agreements between commercial agents and principals. The Civil Code of Ukraine (the “Civil Code”) describes the general rights and obligations arising from any contract between Ukrainian parties. The Commercial Code of Ukraine (the “Commercial Code”) contains provisions that relate specifically to commercial agency. Where an agency agreement has a foreign element (i.e. either of the contracting parties is located or incorporated outside Ukraine or is a foreign national) the Law of Ukraine “on Private International Law” the (“LPIL”) will also apply.
There is no clear definition of commercial agent. However, the Commercial Code defines a “Commercial Intermediation” as business activities that envisage services provided by commercial agents to business entities in the process of their commercial activities by way of intermediation on behalf and under control of the entity represented.
“Business activities” in this sense extend to both the provision of goods and services.
Similarly the Commercial Code simply defines a “principal” as a person who is represented by an agent.
Contracting parties may not contract out of the Civil Code and the Commercial Code. However, where the LPIL applies, the contracting parties may agree on the applicable law.
The Civil Code also states that agents whose activities are secondary (i.e. not the primary purpose of their agency agreement with their principal) are excluded from its scope, since it applies only to agents who represent their principal both permanently and independently.
Unless the agency agreement states otherwise, a contracting party must notify the other contracting party of the intention to terminate at least one month prior to termination.
Ukrainian law does not recognise indemnity as a form of compensation, and there are no statutory provisions as to the payment of compensation to an agent in case of premature termination of the agency agreement. However the Commercial Code permits parties to agree on the order and sums to be paid to the agent for all contracts concluded after the termination of the agency agreement.
According to the Civil Code, an agent must prove its entitlement to successfully obtain damages after termination of an agency agreement. This sum is equivalent to the profits lost by the agent as a result of the termination of the agreement by the principal.
The agent is not entitled to receive damages according to the Civil Code, where:
• the principal has proven that the breach arose in the event of force majeure or that the contract was frustrated; or
• the agent has breached the agency agreement, and the court can reduce the amount of damages being claimed from the principal accordingly.
Under Ukrainian law a terminated agent is entitled to the following commission:
Pre-termination commission (i.e. commission on transactions concluded during the agency contract.) The Commercial Code states that the agent is entitled to commission for the transactions which are mainly attributable to work done by the agent during the agency contract.
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)). Such commision is uncommon in Ukraine. However, the parties are free to agree terms regarding back commision in the agency agreement.
There are no express statutory provisions regarding Post-termination commission (i.e. commission on transactions concluded within a reasonable period after the agency contract has terminated). However, the Commercial Code permits parties to agree on the order and amount of compensation to be paid to the agent for transactions concluded after the termination of the agency agreement.
Where there are no express provisions in the agency agreement regarding entitlements on termination, the Commercial Code provides that the agent has the right to receive the commission in the amount envisaged by the agency agreement and damages caused by the non-fulfilment or improper fulfilment of the principal’s obligations. Such damages arising from the agency agreement include expenses incurred, such as loss or damage to property, or loss of the income that would have been received on fulfilment of the contract terms.
Assignment of rights
It is possible for an agent to assign its rights under an agency agreement to another party if the conditions of the assignment are expressly incorporated in the agency agreement or are subsequently agreed by the parties in writing.
Ukrainian Law distinguishes the rights of agents and principals to bring a claim before the Ukrainian Court against a foreign counterpart. Such disputes can be brought before a Ukrainian Court if a defendant:
• has a place of residence or domicile in Ukraine; or
• owns property in the Ukraine, with which to levy execution; or
• is a branch company of a foreign enterprise.
A clause which purports to refer any dispute arising from an agency agreement to a foreign court is invalid.
An order made in foreign courts will be recognised and enforced in Ukraine if permitted by an international treaty. Such decisions must enforced in Ukraine within three years from the date of the decision.
agentlaw.co.uk. wishes to thank Vasil Kisil & Partners of Kiev for its contribution to this section