Written by Steve Sidkin
1 July 99

Just over three years ago the European Commission drew attention to the problems facing lawyers in the United Kingdom in trying to interpret the provisions of Article 17 of the Self-Employed Agents Directive (86/653/EEC). In respect of the right of a terminated agent to an indemnity, the Commission’s report called in effect for the adoption of principles with which German lawyers had been familiar for many years. In the case of the right to compensation, principles applied in the French courts should be followed.

This was recognised last year by Judge Mitting QC in his judgement in Moore v. Pireta PTA Ltd (1997) 1 All ER 174. This judgement has served as a beacon in determining how to calculate the indemnity to be given to an agent under the Commercial Agents (Council Directive) Regulations 1993 (as amended). This is despite the fact that he misdirected himself in the calculation which he made in this case.

The light from this beacon has now been shone on to the murky area of compensation under Regulation 17(6) in Roy v. M R Pearlman Limited (10 March 1999, unreported).

Fourteen years after making an agency agreement, the principal gave immediate notice of termination of the agency. Apart from the fact that a full time representative had been hired for the agent’s area, the justification for termination was unstated. The principal offered three months’ commission based on the average of the previous 12 months. But whether this was in lieu of notice or by way of compensation was equally unstated.

With reference to the issue of compensation it was argued on behalf of the principal that the national law of another member state (French) was irrelevant to the interpretation and application of the Regulations. It was also claimed that if there was to be reliance on French law, expert evidence should be given so as to assist the court.

On an interlocutory hearing this was unequivocally rejected by Lord Hamilton. He approved Judge Mitting’s view:

“Consistent with the purpose of achieving harmony between member states, it is in my judgment permissible to look into the law and practice of the country in which the relevant right …originated….; and to do so for the purpose of construing the English Regulations and to use them as a guide to their application.”

Lord Hamilton then went on to slay the dragon of the need for expert evidence. He drew a distinction between the determination of an issue in accordance with French law and the undertaking of a comparative law exercise. For the former, expert evidence is required. For the latter it is not, as what is happening is that regard is being had to the longer experience of the French courts in this area given that the Directive’s compensation remedy is derived from French law. The Scots court is entitled to directly consider sources of foreign law.

In adopting this position Lord Hamilton’s opinion is to be welcomed. Following somewhat uncertain references to French law in last year’s decisions in AMB Imballaggi v Pacflex and King v. T Tunnock (1997) Tr L Rep 362, no question mark should now be revised to the adoption of French principles in determining compensation.

As to the lack of the need for expert evidence, Lord Hamilton’s position is understandable. But given decisions to date on both sides of the border, there must be some doubt as to whether the courts can properly apply the principles they glean from French and German law.

In Pearlman there was also a consideration of how to determine the amount to be paid for failure to give proper notice. It was argued for the agent that existing rules of domestic law should be excluded from consideration. Lord Hamilton drew attention to the interpretation of TUPE in British Fuels v. Baxendale [1998] 4 All ER 609. In robust language he rejected the possibility that domestic law should not be taken into account. On the contrary, on a purported termination of an agency agreement without proper notice the agent’s remedies are the consequential rights and remedies of common law. They will only be displaced if inconsistent with the Regulations. Clearly this is not the case.

Lord Hamilton ordered that the case proceed to trial. What will be the result is uncertain. But having reached this position in applying the Regulations, it is to be hoped that there will now be greater consistency in decisions.

This briefing note is for general information. For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team.(www.agentlaw.co.uk)

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