Ukraine International Airlines appointed Pace as its general cargo agent. Pace in turn entered into an agreement with Aerotrans. Under the terms of this agreement Aerotrans was to market cargo space on UIA flights as Pace’s general cargo sales agent throughout Germany.
When the parties fell out, Pace sought to recover monies due to it under unpaid invoices. In its defence, Aerotrans claimed that it was an agent under the Regulations and so was entitled to compensation on termination. This was met by Pace’s claim that the Regulations did not apply, on the basis that:

  1. the agent’s activities took place in Germany;
  2. the Regulations do not apply to sub-agents;
  3. the sale of cargo space was not the sale “goods” within the meaning of the Regulations.

The Court was not convinced by these arguments. The judge made reference to agents being at a commercial disadvantage and that they are likely to be down trodden by their principals.

In respect of the first argument, the Court criticised the guidance notes to the Regulations issued by the Department of Trade and Industry. These notes state that where an agent carries on activities outside Great Britain it is open to the parties to chose that English law applies. It is also open to them to incorporate some or all of the provisions of the Regulations. The implication is that if they do not, such provisions will not apply in respect of the agency agreement. The court found that such an approach ran counter to the purpose of the Directive.

Turning to the second argument, the Court stated that guidance was needed as to whether the European Self-Employed Agents Directive (on which the Regulations are based) was intended to cover sub-agency.
With reference to the third argument, the Court made a number of comments about what are “goods” for the purpose of the Regulations. The judge took the view that “goods” in the Regulations should be interpreted widely and that the definition may be wide enough to encompass the sale of cargo space.

As a result of these uncertainties, the Court was uncertain as to whether or not the Regulations applied. Accordingly the judge ordered that a number of questions be referred to the European Court of Justice. However, following this referral, the case did not proceed as the parties settled the matter out of court.

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

Written by Jane Elliot

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