Law applicable to agency agreements reconsidered

by Emma Butcher
of Clarkslegal LLP

A recent decision of the European
Court of Justice (United Antwerp
Maritime Agencies (Unamar) NV v
Navigation Maritime Bulgare) has
cast doubt on the law which will be
applicable to commercial agency
agreements where the parties are
located in separate EU member
states. This has potentially
significant implications for the
freedom of principals and agents to
choose the law which will apply to
their agreements, in circumstances
where some EU member states
grant greater protection to agents
than others.

The courts of all EU member states must apply
the same rules in order to determine the law
which will be applicable to a contract. Generally,
where the parties have made an express choice
of law in the contract, the courts will apply that
law, but in relation to commercial agency
agreements, the EU Commercial Agency
Directive (the Directive) provides that the parties
cannot evade the protection afforded to agents
by the Directive by choosing the law of a non-EU
member state. This was confirmed in the case of
Ingmar GB Ltd v Eaton Leonard Technologies Inc,
where the parties to a commercial agency
agreement had chosen the law of California
(where the principal was based) to apply. The
European Court of Justice (ECJ) found that as the
agent was based within the EU, the commercial
agency law of the country in which the agent
carried out his business (England) would apply,
notwithstanding that the agency agreement was
governed by the law of a non-EU member state.

In this case, though, both parties were located
within the EU. The claimant agent was United
Antwerp Maritime Agencies NV (Unamar), a
company located in Belgium. The defendant
principal, Navigation Maritime Bulgare (NMB),
was located in Bulgaria, and the agency
agreement was stated to be governed by
Bulgarian law. NMB terminated the agreement
and Unamar brought a claim in the Belgian courts
seeking compensation.
EU member states can choose exactly how they
will implement the provisions of EU Directives
into their national law. This means that whilst
roughly the same laws apply in each member
state in relation to commercial agents, there are
some important differences.
In particular, member states are free to grant
agents greater protection than that required by
the Directive, leading to some countries having
more favourable compensation regimes than
others.
In this case, Bulgarian law offered the agent the
minimum protection only required by the
Directive, whereas Belgian law gave the agent
greater protection and its application would have
led to Unamar receiving more compensation.
Unamar therefore argued that Belgian law should
apply, notwithstanding that the contract
provided for Bulgarian law to apply, and the
Belgian courts referred the matter to the ECJ.
In coming to its decision, the ECJ had to consider
the provisions of the Rome Convention, which
determines the governing law of contracts
entered into before December 2009. (For
contracts entered into after that date, the Rome
II Regulation applies, but the relevant principles
are the same). The Convention provides that
rules of the country where the claim is brought
can apply if they are deemed to be mandatory,
irrespective of the law applicable to the contract.

A mandatory rule is one where it is considered
that there are overriding public policy reasons for
why it should apply. Generally, the ECJ will
interpret this strictly. However, the Belgian
courts had previously decided that the provisions
of Belgian commercial agency law were
mandatory. They asked the ECJ to clarify
whether this meant they could therefore
disregard Bulgarian law and apply their own rules,
which gave the agent greater protection.
The ECJ decided that Bulgarian law could be
overridden by Belgian law, but only if the Belgian
parliament had considered, when it was
implementing the Directive, that it was crucial to
grant agents additional protection going beyond
that required by the Directive. This would be for
the Belgian courts to determine, and the case will
now be remitted to them.
The case is significant as it demonstrates that
even where the law of an EU member state, which
has perfectly validly implemented the Directive,
has been chosen by the parties to apply, this
choice has the potential to be overridden. We
will await the decision of the Belgian court with
interest.

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Tel: 0118 958 5321
www.clarkslegal.com

Emma Butcher

Disclaimer: This column does not contain legal advice and is for general
guidance only. Agentbase, Clarkslegal LLP and the writer accept no liability
in connection with the general guidance given in this column.
Please ensure that you obtain legal advice before acting in reliance upon
anything in this article. For example, please be clear that the answers given
in this column may not cover all possible angles, aspects, relevant
considerations and/or points of law and so that all or any information
which is given above needs in every instance to be referred for legal advice
for clarification and amplification, before being relied upon

 

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