In an increasingly International world, UK agents are finding themselves being appointed agents in the UK for foreign principals. If the agent in the UK is retained to promote the sale of goods in the UK then the agent will have the benefit of the Commercial Agents (Council Directive) Regulations 1993 (“the Agency Regulations”). In particular the agent will have the right to receive a termination payment on the agency coming to an end, even where the agency contract terminates at the end of its fixed term.
Many principals are US corporations seeking to expand their business in the UK via agents. The agency contracts put forward by US principals almost invariably provide that the laws of a specified US State should have exclusive jurisdiction to hear any dispute and that the laws of that State should apply. The concept of an agent being entitled to a termination payment on an agency contract coming to an end is not recognised in the US whereas the Agency Regulations are a product of European law intended to give protection to commercial agents; they provide that the right of a commercial agent to claim a termination payment cannot be overridden by agreement between the parties. So where does the UK commercial agent stand as regards making a claim under the Agency Regulations?
Having a claim and pursuing a claim in the courts are two different things. It is not enough just to issue proceedings in England – those proceedings have to be served on the US defendant. A UK agent needs the permission of an English court to serve court proceedings issued in England on a principal in the US. In order to obtain that permission, the claim must fall within one of the “jurisdictional gateways” listed in the procedural rules to be followed when conducting proceedings in the English court system.
In the case of Fern Computer Consultancy Limited v. Intergraph Cadworx & Analysis Solutions a commercial agent brought a claim in England against a Texas principal under the Agency Regulations. The agency contract provided that the courts in Texas should have exclusive jurisdiction and that Texas law should govern. The English court held that the claim under the Agency Regulations did not come within any of the “jurisdictional gateways” and refused to grant permission to serve the English proceedings on the Texas principal. This meant that the Texas principal had managed to escape having to make a termination payment under the Agency Regulations by reason of having an agency contract which required that the proceedings making that claim had to be brought in Texas and where the Texas court would not recognise the right of an agent to receive a termination payment. The English court was unhappy with the result and indicated that if the proceedings were to be framed as a claim that the failure to pay the termination payment provided for by the Regulations was a breach of statutory duty then the claim would pass one of the “jurisdictional gateways” listed in the procedural rules and permission would be given for the English proceedings to be served on the Texas principal in Texas. This would then open up a way for the English court, when it heard the case, to award a termination payment to the agent under the Agency Regulations (notwithstanding that the agency contract provided that the Texas courts had exclusive jurisdiction and that Texas law applied).
The agent in Fern was also claiming for unpaid commission but because this was a claim under the agency contract (in other words a contractual claim and not one under the Regulations) it fell squarely within the exclusive jurisdiction of the Texas courts which the agency contract provided for and accordingly the unpaid commission claim would have to be pursued in those Texas courts.
Having obtained a judgment in the English Court, this would leave the agent with the problem of having to enforce that English judgment against the US principal in the US. Having a judgment and enforcing a judgment are again two different things. If the US principal does not pay, an agent who has obtained a judgment in the English Court against his former principal has the task of enforcing that judgment against the principal in the US. Although there is a longstanding trading and commercial relationship between the two countries, there is no treaty or convention in force between the UK and the US on reciprocal recognition and enforcement of judgments. Enforcement of foreign court judgments is mainly a matter for each State to rule upon, rather than involving Federal law. The laws and procedures of each State vary. Some States require only that the English judgment be recorded at the Court to trigger that State’s enforcement procedures whilst others require the holder of the English judgment to start a new action setting out how the English judgment came about and how it complies with that State’s rules for the recognition and enforcement of foreign judgments.
The advice for an agent about to enter into an agency with a US principal where the agency contract provides that the courts of a specific US State are to hear any dispute and are to apply the laws of that State to that dispute, is for the agency contract to spell out that upon termination the agent will be paid a sum ascertained by reference to a formula, e.g. a sum equal to the commission earned by the agent in the last 12 months of the agency or whatever formula the parties agree upon. Non-payment according to the formula will be a breach of contract and the agent should be able to obtain judgment in the US court for the formula sum without too much difficulty – or at least the formula approach should facilitate an out of court settlement being reached fairly quickly before the legal costs mount up. Unlike in the case of Fern, he will not have to go to the trouble and expense of issuing proceedings in England putting forward a claim under the Regulations and obtaining permission to serve those UK proceedings on the US principal before having his substantive case heard before the English Court. Moreover, enforcement of that judgment should be straightforward as it would be given by the courts of the State where the principal can be expected to have assets to satisfy it.
© Paul Samuel
Ashby Cohen Solicitors Ltd
Tel: 020 7408 1338