It is essential that when you are negotiating the terms of your agency contract with a principal or agent based in another country, you do not forget to sort out jurisdiction and governing law.
Jurisdiction determines which country’s courts will hear any claim that is brought under the contract. Governing law is the law that will be applied by the courts hearing a claim made under the contract. The two do not have to match, so for example the English courts could hear a dispute arising from a contract and apply Italian law to determine the outcome of the dispute.
Below are a few key points to keep in mind when negotiating your agency contract with agents or principals in EU countries.
Express choice made by the parties
Ideally, you and the other party should expressly agree whose country’s courts will hear any proceedings which arise, and the law which will apply in the event of a dispute. If you are based in England, you should seek to agree with the other party that if a dispute arises, the courts of England and Wales will hear the dispute and English law will apply.
Express jurisdiction clauses can either provide for exclusive jurisdiction to be granted to a particular country’s courts, or non-exclusive jurisdiction.
Exclusive jurisdiction is intended to prevent a party from being able to bring proceedings in another jurisdiction other than the one named in the jurisdiction clause. However, if a dispute arises with, for example, your Italian agent or principal, it is advisable to issue proceedings as soon as possible even if you have an express clause in your contract providing for the courts of England and Wales to have exclusive jurisdiction. If you do not do so, there is a chance that your opponent could sue in the Italian courts first. If your opponent brought proceedings in Italy just before you started proceedings in the English courts, the English courts would have to stay the proceedings before them until the Italian courts had declared that they had no jurisdiction. This adds another layer of legal costs and uncertainty which can be avoided by getting in first.
If you have agreed a non-exclusive jurisdiction clause and wish to bring proceedings against your EU-based agent or principal, you will be entitled either to bring proceedings in the courts of the country identified in the jurisdiction clause or in the courts of another country which has jurisdiction over the dispute under its own rules.
Where the parties have not made an express choice
If you have an agency agreement with a principal or agent based in another country in the EU which is silent on jurisdiction and governing law, jurisdiction and governing law will be determined by EU law.
On jurisdiction, the general rule is that a party must be sued in his local court (for a company, that means where the company has its central place of administration or principal place of business). However, the exceptions to the general rule mean you would also be able to sue your agent or principal in the courts of the country where the agency agreement was being performed or should have been performed.
If the governing law of the contract has not been agreed, the applicable law will be the law of the country with the closest connection to the agency agreement (this will be the country where the agent has its place of central administration or principal place of business). If it can be shown, however, that the contract is more closely connected with the law of a country other than that in which the agent is based, then the law of that other country will apply.
The cost of getting it wrong
If you are a principal based in England and want to sue your Spanish agent, you may have agreed that the courts of England and Wales will have jurisdiction over any disputes. However, if you have not agreed on which law will govern your contract, it could be the case that although the claim would be heard in the English court, it would have to apply Spanish law. Alternatively, if neither jurisdiction nor governing law are agreed, and a dispute arises between you and your principal or agent, you could find that you have to litigate the dispute in a foreign country whose laws and procedures are alien to you. This is more likely to disadvantage principals who are suing agents or are being sued by agents, because of the way that the EU default rules explained above favour suing a party in the place where the agency agreement was being performed, and applying the law of the country where the agent has its principal place of business.
It is therefore worth ensuring that jurisdiction and governing law are agreed by way of an express governing law and jurisdiction clause in your agency agreements, or you could find yourself facing a complicated and expensive battle over jurisdiction and governing law years down the line – and before you get to resolve the actual dispute in respect of the agency!
Principals based outside of the EU
If you are a principal established in a non-EU country which has contracts with agents in the UK (or another EU member state), you may be wondering at this point whether you can evade the provisions of the European Self-Employed Agents Directive by opting in your agency agreements for all disputes to be resolved in your national courts (or by arbitration in your country) and for the governing law to be the law of your country.
Stop wondering – the ECJ confirmed in 2000 that principals could not contract out of the Directive by a choice of law clause. Further, this issue arose towards the end of last year in the English High Court. Accentuate Limited (an English company) was seeking (amongst other things) to challenge the choice of law and jurisdiction provisions in its agreement with Asigra Inc (a Canadian company) which provided for disputes to be referred to arbitration in Toronto and to be resolved by Ontario and federal Canadian law. Accentuate argued that the governing law and jurisdiction clause in its agreement with Asigra had the practical effect of depriving Accentuate of the right to claim compensation pursuant to the Commercial Agents Regulations. The Court agreed with Accentuate Limited, and held that the ECJ’s decision required it to give effect to mandatory provisions of EU law such as the Directive, notwithstanding any agreement between the parties to the contrary.
This article was written by Emma Roake, an associate in the dispute resolution team at Fox Williams LLP. For further information Emma can be contacted on 020 7614 2663
Written by Agentlaw Team