In a recent judgment of the Court of Justice of the European Union, a definitive stance has been taken for the first time as to the entitlement of a commercial agent to receive commission on repeat transactions of the same kind with the same customer under the EU Agents Directive. This marks a significant change to the interpretation of the entitlement to commission of commercial agents in the EU and may also have an impact on UK agents and principals.
Various key provisions in the Directive and the Regulations make it clear when it is not open for principal and agent to derogate in their agreement from the statutory entitlements afforded to the agent.
One example of this concerns the agent’s entitlement to back commission – that is, commission on confirmed orders which are then unfulfilled by the principal for a reason for which the principal is to blame.
Often where an agent is appointed on an exclusive basis, the written agency agreement will provide for the agent to receive commission on orders received by the principal from customers that have been previously introduced by the agent.
In turn this reflects the position under the Directive and the Commercial Agents Regulations. Indeed it could be claimed that whilst it was arguable that there was no express prohibition from derogation, it was to be implied into the legislation that derogation from this right was not possible.
The recent Court of Justice judgment in Rigall Arteria Management sp. z o.o. sp.k. v Bank Handlowy w Warszawie S.A means that this is no longer the case.
The case before the Court of Justice was concerned with an agency agreement in place in Poland for financial intermediation services. The agent, Rigall Arteria Management (RAM) had been the agent for the Bank between 1999 and 2015.
The Bank decided to terminate the agency and RAM demanded that the Bank provide it with information on the commission that had been payable to RAM over the span of the agency. The Bank refused on the basis that this information had already been provided during the course of the agency and so there was no further reason to do so. The Bank also claimed that the information was covered by banking secrecy. RAM commenced litigation to try and force the supply of the information needed in order to calculate commission owed.
Ultimately the Polish Supreme Court asked the Court of Justice whether it was possible for the parties to derogate in the agency agreement from the right of an agent to receive commission for a transaction that is entered into with a customer that the agent has previously introduced for a transaction of the same kind.
The Court of Justice decided that the provision in the Directive had to be interpreted as allowing derogation given the lack of express wording in the Directive to make it clear that derogation was prohibited.
Further the Court of Justice appeared to justify its decision on the basis that even if the provision were to be interpreted as prohibiting derogation, this would not necessarily lead to increased protection for commercial agents – the lodestone of the Directive and, in turn, the Regulations.
However, the Court of Justice’s judgment has been the subject of criticism both inside the EU and in the UK on the basis that the Court of Justice:
misinterpreted the relevant part of the Directive
as a result flawed reasoning was put forward in its judgment
failed to address the issue of the potential effect of inequality of bargaining power between principal and agent
Indeed it is to be hoped that the opportunity will present itself at some point in the future for the Court of Justice to reverse its decision.
Where does this leave us?
Whilst for English courts the judgment is of persuasive authority only, it does raise the possibility that in respect of UK based principals and agents the entitlement to commission on repeat orders can be excluded by agreement.
In respect of an agency agreement between an EU based principal and a UK based agent:
The agent will need to be alert to the possibility that the principal could take advantage of the Court of Justice judgment and claim that this means that the agent is not entitled to commission on repeat transactions in the absence of an express provision in the agency agreement that the agent is so entitled.
Where the principal is based in the UK and the agent is based in the EU:
It would seem that it is open to the parties to agree to exclude the agent’s entitlement to commission for repeat transactions.
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