In 1983, Mr Roy and M R Pearlman (“MRP”) entered in a commercial agency agreement. Mr Roy was MRP’s sole selling agent in Scotland for a particular range of products, subject to certain terms and conditions. According to the terms of the agreement, either party could terminate on six months’ notice. On 30 June 1997, MRP sent Mr Roy a letter stating that they had decided to terminate his services and were prepared to give him three months’ notice. MRP explained that they had made this decision to terminate on the basis that they felt a full-time agent covering Mr Roy’s area was preferable to the part-time services he currently provided. Mr Roy responded on 1 July 1997, stating that whilst he accepted that he would no longer be agent for MRP the offer of three months’ commission fell short of the six months’ period specified in the agreement.
Following this letter, Mr Roy brought a claim against MRP under the Commercial Agents (Council Directive) Regulations 1993 (“Regulations”), seeking the payment of the six months’ commission together with the payment of compensation under the Regulations. MRP argued that:
- Any action brought by Mr Roy should be for breach of contract. MRP asserted that whilst offering three instead of six months’ notice amounted to a material breach of the contract, Mr Roy had two choices – either to accept the breach and make a claim for damages, or to reject the breach so that the contract remained in force, in which case Mr Roy could not make a claim for early termination (in accordance with regs 15 and 16);
The common law rules of Scottish law had not been displaced by the Regulations and remained valid so long as they did not contradict the Regulations. MRP argued that common law applied in this case and Mr Roy’s claim under the Regulations, in respect of his notice period, was therefore unsustainable; and
- Mr Roy had relied on French law and practice in relation to his claim for compensation under the Regulations. MRP asserted that French law was irrelevant for the purposes of interpretation.
Lord Hamilton held that, whilst EC law would be adopted where it conflicted with domestic law, no conflict arose in this matter and therefore Mr Roy’s claim for compensation under the Regulations was dismissed. He stated that the European Self-Employed Directive (“Directive”) had been replicated to a large extent by the English language version and therefore, in this instance, no inconsistencies arose. Lord Hamilton rejected a submission from Mr Roy’s counsel that, in applying the Regulations the court should exclude domestic law from its consideration. According to existing authorities in relation to termination of agency agreements, an agent may only seek remuneration of commission for sales he has produced. An agent could not accept a serious breach of contract but state that it only took effect from a later date i.e. the expiry of the six months’ notice period. Mr Roy’s attempt to argue that although he had accepted the breach of contract it did not take effect until the expiry of his notice, therefore entitling him to commission for sales during his six months’ notice period failed, since for all intent and purposes, the agency agreement ended on 1 July 1997.
Lord Hamilton, however, rejected MRP’s assertion that the national law of another Member State was irrelevant to the interpretation of the Regulations. The court endorsed the judgment of Moore v Piretta Ltd (1999), stating that the purpose of the Directive was to harmonise the laws governing the treatment of agents across the European Union. Lord Hamilton contended that it was not necessary for French law and practice to be formally invoked by Mr Roy, because the compensation provisions within the Regulations derive from French law, which has a developed body of case law concerning the right to, and measure of, compensation. The court therefore had a legitimate right to have regard to and follow such law and practice in the interests of harmonisation.
Briefing notes referring to this judgment:
- “Courts Clarify Commercial Agents Regulations” 1 July 1999
- “Compensation for Commercial Agents” 1 March 2001
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)
Written by Steve Sidkin