European Communities (Commercial Agents) Regulations, 1994 (SI No 33 of 1994) of 21.2.94, European Communities (Commercial Agents) Regulations, 1997 (SI No. 31 of 1997) of 7.1.97.
Indemnity or compensation or both
Calculation of indemnity/compensation
An agency contract in Ireland is not valid unless it is evidenced in writing.
agentlaw.co.uk wishes to thank Kenny Stephenson Chapman Solicitors for its contribution to this section.
Irish Competition Act 2002 (the “Act”).
Unlike the European Commission which has published guidelines on vertical restraints in agency agreements, the Irish Competition Authority (“ICA”) has not issued a general Notice on this subject, although it has issued various decisions, which are helpful in setting out its view concerning the legal status of restraint of trade clauses typically included in agency agreements. The ICA has defined an agent for the purposes of the Act in the following terms:
“A commercial agent is a self-employed intermediary between the principal and a purchaser or seller. The commercial agent concludes the sale or purchase of goods and services on behalf of the principal, on a continuing basis. The commercial agent is an auxiliary organ forming an integral part of the principals business and is bound to carry out the instructions of the principal, and his position in this respect is similar to that of an employee. Being integrated into the principal’s business, the commercial agent can undertake no autonomous commercial behaviour under the agreement, and certain restrictions on him are fundamental to the relationship. The ICA considers that profits or losses essentially accrue to the principal and not to the commercial agent.”
1) Under Irish 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?
An understanding of the ICA’s analysis is essential in considering the application of the Act to the relationship of principal and agent. The ICA considers that while the relationship subsists, agreements between a principal and an agent fall outside the scope of Section 4(1) of the Act (which broadly corresponds to Article 81(1) of the Treaty of Rome). Accordingly, the ICA has determined in various decisions since its establishment in 1991 that certain restrictions may be imposed upon a commercial agent without offending against Section 4(1) of the Act whereas they would offend against that Section if they were imposed on an independent trader.
Therefore it is possible, and is standard commercial practice in Ireland, to include within an agency agreement various restrictions which apply during the term of the agency agreement. This includes a restriction on the agent selling or being any way concerned in the sale of any products which are competitive with the products which are the subject matter of the agency and a restriction on the agent being interested directly or indirectly in any business firm or company which manufactures or sells products which are so competitive or are likely to be so.
2) Under Irish 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?
Irish law would uphold the imposition of a restraint of trade clause following the termination or expiry of an agency agreement provided that it does not exceed a term of one year following the termination or expiry of the agency agreement and the scope of the restriction applies to the subject matter of the former agency. The rationale for upholding post termination restrictions is that during the term of the agency the special relationship of agent and principal means that the agent is wholly integrated into the distribution system of the principal and is privy to the principal’s affairs and with the principal’s customers. This would, therefore, enable the agent to compete unfairly with his principal or the agent who succeeds him.
The ICA applies a somewhat restrictive approach concerning post-termination provisions. In broad terms provided that they are limited in time and are confined to the customers of the agent’s geographical area, they do not offend Section 4(1) of the Act. In this regard, the ICA draws an analogy with post-termination restrictions imposed on employees. Accordingly, a restriction on an agent soliciting those customers of the former principal with whom he has dealt may, therefore, be regarded as essential to protect the principal’s proprietary interest in the goodwill of his business. If the agency agreement seeks to extend the restrictions to a wider area and to customers other than the customers of the agent, these would be regarded as contravening the Act. Accordingly, careful drafting is required in order to ensure that the agency agreement does not contravene the Act.
agentlaw.co.uk wishes to thank MJ O’Connor Solicitors of Waterford for its contribution to this section.