Where should a principal be sued?

By Adam Maher
Partner, Neil Myerson LLP

In a world of increasing
globalised trade, it is often
the case that a commercial
agent operates in a number
of different European Union
countries.
This can give rise to difficult questions concerning the
correct national court for an agent to bring a
compensation claim against a principal. The case of
Wood Floor Solutions Andreas Domberger GmbH -v-
Silva Trade SA, examined this issue and provided
guidance to help determine which country’s national
court has jurisdiction to hear a commercial agency
dispute, especially in circumstances where an agent
operates in a number of different countries.
The basic rule is that a defendant must be sued in their
local court. If the defendant is an individual this is the
place where they are domiciled and if they are a
corporate body it is the place where it has its registered
office. There are various exceptions to the basic rule
and proceedings can be brought in a different country
to the defendant’s place of domicile if one of the
exceptions applies. For example, if there is a breach of
contract (as in the case of an agent’s claim for
compensation), the defendant can be sued in the
country where the contractual obligations are
performed.
Wood Floor (The Agent) was a commercial agent based
in Austria and wished to pursue its principal, Silva Trade
(The Principal), for compensation following the
termination of the commercial agency contract.
Although The Principal is a company incorporated in
Luxembourg, The Agent brought proceedings in Austria
because it argued that it carried on its business of
signing up and acquiring clients in Austria and Austria
was therefore, the place where the contractual
obligations were performed. The Principal argued that
the case should not be heard in the Austrian Courts
because more than three-quarters of The Agent’s
turnover was generated in countries other than Austria
and that the place of performance of the contractual
obligation could not be established. The Principal
argued that jurisdiction had to be determined in
accordance with the basic rule and that The Agent
should have sued The Principal in its place of domicile,
being Luxembourg.

The Agent was successful in the lower court and The
Principal appealed. The Austrian Court of Appeal
referred the matter to the European Court of Justice for
clarification of the issues. The European Court of Justice
held that where services were provided by an agent in
several countries, the exception to the basic rule did still
apply and the Court that had jurisdiction to hear and
determine all the claims arising from the contract was
the Court in whose jurisdiction the place of the main
provision of services was located. The Court held that
for a commercial agency contract that place was either:
1. the place of the main provision of services by
the agent as stated in the contract (i.e the agent’
territory if that was defined in the contract);
2. in the absence of such provisions in the
contract, it is the place where the agent had
carried out the activities in performance of the
contract; and
3. where the place of performance could not be
established, the courts local to where the agent
was domiciled have jurisdiction.
The case provides useful guidance as to the correct
jurisdiction for an agent to bring a claim for
compensation pursuant to the Commercial Agents
Regulations. It has established that in most cases an
agent should be able to bring proceedings in its home
court rather than the local court of the defendant. This
potentially will have the effect of increasing costs for a
principal in defending claims for compensation from
foreign based agents and may assist agents in
negotiating a swifter settlement to their claims.

KEY JURISDICTION POINTS FOR UK AGENTS:

Agents and principals are free to negotiate
choice of law and jurisdiction clauses in a
contract. Therefore UK agents should
ensure that their preferred country’s courts
are stated to have jurisdiction in the
contract. In most cases it will probably be
preferable for the courts of England and
Wales or Scotland to have jurisdiction.

Agents operating in Europe with principals
based outside of Europe are still protected by
the Regulations. Any attempt by, say, a US
based principal to enforce US a law and
jurisdiction clause will be overridden by the
European Courts as an attempt to derogate
from the Regulations.

If jurisdiction has not been agreed in the
agency contract then an agent can sue in the
country where the contract is performed. In
most cases, UK based agents will be
operating in UK defined territories and thus
would be able to sue in the UK courts

If it is not possible to determine in which
country the contact was being performed, an
agent will be able to sue in the country where
the agent is domiciled and thus UK based
agents will be free to sue in the UK.

By Adam Maher
– Partner
Neil Myerson LLP
adammaher@neilmyerson.co.uk

Neil Myerson LLP are experts in Commercial
Agents law and have a wealth of experience
advising with regard to both international and
domestic arrangements relating to commercial
agents, including pursuing claims for
compensation.

The Cottages, Regent Road
Altrincham, Cheshire WA14 1RX
0161 941 4000
www.neilmyerson.co.uk

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, Neil Myerson LLP and the writer accept no liability in connection with the general guidance given in this column.

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