THE SALES AGENT “The principal can benefit from quasi-harmonized rules”

Marcello Mantelli
Lawyer in Milan and Turin


The commercial agent is an independent intermediary who has the task of promoting business on behalf of the producer or supplier (the “principal”) to the customers of a certain territory, in exchange for a renumeration consisting of a commission. International distribution networks, depending on the business marketing plan, may consist of intermediaries (e.g. agents, procurers, commission agents) or resellers (e.g. wholesalers, sales dealers, franchisees) or both.

Note that SMEs adapt their marketing plan related to a specific foreign country also in derogation from the marketing plan on the basis of real commercial policy choices, often preferring the use of a person who generates turnover, be it an intermediary or retailer.

Pros and cons

The advantage for the principal in choosing an agent compared to choosing a dealer based abroad consists above all in the possibility for the principal (called so in the Anglo-Saxon framework and mandant in French law) to sell directly to foreign customers, of which, if he has done well, he will probably enjoy in whole or in part after the end of the relationship.

However, it should be considered that the principal directly suffers the risk of non-payment of the customers procured by the agent, a risk that he does not suffer with the retailer who bears the risk of non-payment of the customers who resell the products he has purchased from the manufacturer.

Another aspect to be considered with extreme attention is the presence, above all, in the European Union, of the obligation to pay compensation to the agent which, where certain conditions exist, must be paid by the principal at the end of the relationship and which may constitute a significant economic burden.

Eu protection

Since 1942 the agency relationship had been regulated by our legislator in articles 1742-1753 of the Civil Code. This rule had remained essentially unchanged until, in the European context, the matter became the subject of coordination of the different national laws of the Member States. In fact, following Directive (EEC) no. 653/1986 of the 18th of December 1986, all the Member States of the then European Community-including Italy – have transposed into their internal legislation this harmonization framework, contributing to the realization within the European borders of a common legal framework with reference to different elements of the agency relationship including the definition of agency contract, rights and obligations (mandatory) of the parties, wages, rules on withdrawal times and conditions necessary for the emergence of the right of indemnity for termination of the relationship in favour of the agent.

The drive for harmonisation of this framework arose as a result of the need to abolish the existing and significant differences between the individual European laws relating to the agency relationship and the type of protection afforded to commercial agents, in order to create a level playing field between the various member States.

The final objective was to simplify commercial transactions and make it easier to draw up and manage contracts concluded between subjects of different nationalities, also guaranteeing equal protection of the agent in the relations with the principal.

Directive 86/653 has thus significantly affected the legislation of the various European systems to the point of making them homogeneous in some respects. As regards the uniform scope of the European Directive, from the subjective point of view, it mainly refers to the rights and obligations of the principal and the agent.

In Article 1 (2) the agent is defined as “The person who, as an independent intermediary, is permanently in charge of dealing for another person, called the principal, the sale, namely the purchase of goods or with dealing and concluding such transactions in the name or on behalf of the principal”.

The Italian legislation

As for Italy, Directive 86/653 was transposed through Legislative Decree 303 of the 10th of December 1991, called “Implementation of Directive 86/653/EEC on the coordination of the rights of Member States concerning independent commercial agents”, which novelized the rules of the Civil Code of 1942 relating to the agency contract. Subsequently, Legislative Decree 65 of the 15th of February 1999 was issued, named “Adaptation of the discipline relating to independent commercial agents, in further implementation of Directive 86/653/EEC”, with which further changes were made to the agency’s discipline to correct aspects not implemented or implemented in a manner different from the directive.

Incomplete harmonization

In any case, it should be recalled that the harmonisation of national legislation through the directive has not been fully achieved with regard to every aspect of the framework in question. In fact, the implementation of the directive has resulted in only partial standardization, on the one hand because it completely omits certain aspects (such as, for example, the discipline of the star of believing, rendered in practice inactive by our legal system due to its current wording contained in Article 1746 of the Civil Code but still in force in other countries) and, on the other, as it gives Member States wide discretion by providing alternative solutions for them to choose from (see, for example, the choice of the type of allowance between French and German as referred to in Article 17 of the Directive).

From a practical point of view, the consequence is that there are still significant differences between the internal regulations governing the agency of the various States of the European Union.

For this reason, it is advisable to organize relations with agents who carry out their activities in the EU through a well-regulated and self-complete agency contract, taking care to choose the applicable law to the contract in conjunction with an appropriate competent court, that is, not the result of hasty negotiations.

The choice of the law governing the contract must be made after examination of the peculiarities of the legislation paying particular attention, among other things, to the provisions of this law as to the type of severance pay, the presence or absence of exclusivity and non-competition obligations operating by law or otherwise, and withdrawal timeframes to be observed in the case of indefinite contract duration.

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Marcello

Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli

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Aurelia

I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?

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