Agency Law in Romania is governed by legislation known as Law no. 509/2002 regarding Commercial Agents (“Law no. 509/2002”), which came into force on 5 October 2002. Generally an agency agreement is used to express the rights and obligations of the principal and the agent. In the absence of a clear agreement, Law no. 509/2002 contains some mandatory rules and provisions which set out the parties’ rights and obligations and aim to offer legal protection to commercial agents.
According to the provisions of Law no. 509/2002, a commercial agent is defined as “the merchant, natural or legal entity, who, as an independent intermediary, is consistently empowered to negotiate businesses for another natural or legal entity, known as principal or to negotiate and conclude businesses in the name and on behalf of the principal”.
A principal is defined as “any merchant that is interested in using the services of a professional intermediary in order to sell goods and offer services”.
The parties are free to contract out of all but a few specific provisions of Law no. 509/2002 that refer to the parties’ obligations under the agency agreement. Generally, the contracting parties are entitled to set out the terms and conditions of the agreement. This combination allows important provisions to be incorporated into the agreement, whilst more trivial aspects of the agreement are determined by agreement to reflect the parties’ intentions.
Law no. 509/2002 is wide-reaching. It applies equally to agents whose agency activities are secondary (i.e. their activities are not the primary purpose of their agency agreement), as long as the agent remains independent and retains the power to negotiate contracts on behalf of the principal.
According to Law no. 509/2002, the statutory notice period for termination is 1 month for each year of the contract commenced ie:
and so on but limited to a maximum of 6 months. Furthermore, the parties are free to choose the form of the notice of termination.
Law no. 509/2002 provides that the agent is entitled to receive an indemnity from the principal upon termination of the contract if he complies with the conditions specified within the law. The parties can decide on an appropriate amount of indemnity. However, this sum must not exceed a figure equivalent to an indemnity for one year calculated from the agent’s average annual remuneration over the preceding five years. If the agreement goes back less than five years the indemnity must be calculated as the average over the period that the agreement was in force. Under case law the acceptance of an indemnity by the agent does not amount to a waiver of the agent’s rights. The agent may still obtain damages if it incurs losses as a result of the termination of the agreement by the principal.
There are a few circumstances where the agent is not entitled to receive an indemnity from the principal, where:
Under Law no. 509/2002 a terminated agent is entitled to the following commission:
Pre-termination commission (being commission on transactions concluded during the agency contract) where the transaction was concluded:
Post-termination commission (being commission on transactions concluded within a reasonable period after the agency contract has terminated) where the transaction was concluded:
Back commission (being commission on orders obtained by the agent and accepted by the principal, but where the customer does not pay the principal in respect of the order for a reason for which the principal is to blame; for example, the delivery of defective goods).
The agent has no other entitlements on termination of the agency agreement beyond those specified in Law no. 509/2002 and the agency agreement itself. However, neither the principal nor the agent are prevented by law from seeking damages in an action for breach of contract against each other.
Applicable Jurisdiction and Law Clauses
If either agent or principal is a foreign legal entity, Romanian law permits the contracting parties to select the applicable law and the competent court to hear the claim. If the contracting parties incorporate an applicable law and jurisdiction clause in their contract, the provisions of the Law no. 509/2002 will not apply.
Romanian law clearly states that non-compete clauses must be formally incorporated into the agency agreement to have effect. Such clauses are effective for the duration of the agency agreement and for a maximum period of 2 years after the termination of the agreement.
agentlaw.co.uk wishes to thank Danila, Petre & Partners of Bucharest for its contribution to this section.