Estonia

Agency Law in Estonia

Implementing legislation

The Law of Obligations Act, which came into force on 1 July 2002.

Proper notice

• 1 month if less than or equal to 2 years, such notice to expire at the end of a calendar month;
• 2 months if more than 1 year but less than or equal to 2 years, such notice to expire at the end of a calendar month;
• 3 months if more than 2 years, such notice to expire at the end of a calendar month.

Indemnity or compensation or both

Indemnity and damages for loss occasioned by termination.

Calculation of indemnity/compensation

• Indemnity may not exceed the average annual commission over last 5 years or if, less than 5 years, over the contractual period.
• Level of damages depends on the extent to which the agent has suffered loss.

Pre-termination commission

Yes.

Post-termination commission

Yes.

Back commission

Yes.

Other entitlements on termination

If the agent is subject to a post-termination non-compete restriction, the agent is entitled to reasonable compensation from the principal for the duration of the post-termination non-compete restriction.

Restrictive Covenants

Implementing Legislation

Law of Obligations Act (1 July 2002).

General Principles of the Civil Code Act (1 September 1994).

1) Under Estonian law is it possible to have a restraint of trade clause operating during the agency agreement and, if so, is it subject to any qualifications?

Under the general freedom of contract principle contained in the Law of Obligations Act and the General Principles of the Civil Code Act, agency agreements can contain provisions by which the agent agrees not to compete with the principal during the term of the agency agreement. Penalty provisions are often inserted into the agency agreement on the basis of which the agent will be obliged to pay a penalty to the principal should he breach the restraint of trade clause.

2) Under Estonian law is it possible to have a restraint of trade clause operating following the termination or expiry of the agency agreement and, if so, is it subject to any qualifications?

Restraint of trade clauses operating following the termination or expiry of the agency agreement are possible under Estonia law subject to the following qualifications:

1. Pursuant to Article 689–1 of the Law of Obligations Act, the restraint of trade clause which restricts the economic activity of the agent after the termination of the agency contract must be entered into in writing.
2. According to Article 689-2 of the Law of Obligations Act the restraint of trade clause shall be entered into for a term of up to two years after termination of the agency contract and shall only extend to the area determined by the agency contract or to the group of customers with whom the agent was to negotiate or enter into contracts pursuant to the agency contract and only to contracts which the agent was to negotiate or enter into.
3. Under Article 689-3 of the Law of Obligations Act the principal shall pay reasonable compensation to the agent for the period of the duration of the restraint of trade clause even if this has not been agreed. Accordingly, it is advisable to insert a penalty provision into the agency agreement that will have effect during the entire term of the restraint of trade clause.

General

Pursuant to Article 689-4 of the Law of Obligations Act, before the expiration of the agency contract, the principal has the right to cancel the restraint of trade clause in writing. According to Article 689–5 of the Law of Obligations Act, if the agency contract is cancelled due to a violation of the contract by a party, the cancelling party may also cancel the restraint of trade clause within one month. In such circumstances, the principal is not required to pay the compensation due under Article 689-3 to the agent.

Any agreement which deprives the agent of the rights outlined above is considered void under Article 689-6 of the Law of Obligations Act.

sub-agents: how are sub-agents treated under your national law?

• The Law of Obligations Act does not use the term “sub-agency”.

Pursuant to article 670-4 of the Law of Obligations Act, the provisions for authorisation agreements apply to agency contracts unless the provisions of Chapter 38 (Agency Contract) provide otherwise. Article 622 (from the chapter concerning authorisation agreements) provides that it is presumed that a mandatary shall perform the mandate in person and that a mandatary also has the right to use the assistance of third parties in performing the mandate. Using the assistance of third parties can mean: Firstly, the mandatary still performs the mandate in person but uses the help of a third person. Secondly, it is possible for the mandatary to delegate their obligations to a third party while still remaining responsible before the mandator. Such a possibility for delegation should be clearly stated and regulated in the contract between the mandator and the mandatary.

Retirement: is there a specific age that the agent must reach in order to retire from the agency and be able to make a claim under the provisions of your law which implement Article 18 (b) of the Agents Directive 86/653/EC?

• A certain age is not specified. Also there is no case law. We point out that pursuant to the provisions which implement Article 18 (b) of the Agents Directive, namely article 688-4-1 of the Law of Obligations Act, an agent does not have the right to a termination-of-contract compensation or compensation for damage specified in subsection (3) of this section if the agency contract is cancelled by the agent, except in the case where the reason for the cancellation is a circumstance dependent on the mandator or the age or state of health of the agent which does not enable the agent to continue the activities thereof.

Retirement and corporate entity: if the agency is operated by one person who has decided to form a corporate entity which is to act as the agent, and that person is the sole shareholder/owner and sole director/manager of such entity and that person retired, would any protection under Articles 18(b) and 17 of the Directive be extended to that person despite the fact that such person operates his/her agency through a corporate entity?

• Once again, there is no specification. Also there is no case law. It is debatable, but it can be argued that the natural person who formed the corporate entity which acted as an agent, upon retirement, may be entitled to protection under Articles 18(b), 17; and 688(-4-1) of the Law of Obligations Act.

agentlaw.co.uk wishes to thank TGS Baltic Estonia for its involvement with this page. Last updated 07.02.2022