Law & Q&A

Art. 1.

The Regulation of Commercial Agent and Principal Relations 1992 and the Regulation of Commercial Agent and Principal Relations (Amendment) 2000 shall be referred together  as the Regulation of Commercial Agent and Principal Relations 1992 and 2000.

Part 1 - Introductory Provisions

Interpretation

Art. 2.

In this Act, unless the text indicates otherwise: ‘commercial agent’ shall mean a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, hereinafter called the ‘principal’, or to negotiate and conclude such transactions on behalf of and in the name of that principal.

The following categories shall not be understood as commercial agents within the meaning of this Regulation: 

• a person who in his capacity as an officer is empowered to enter into commitments binding on a company or association,
• partners who are lawfully authorized to enter into commitments binding on other partners, 
• receivers that are appointed by the court, liquidators or trustees in bankruptcy. 

Part 2 - Rights and obligations of the parties

Commercial agent duties

Art. 3.

(1) In performing his activities a commercial agent must act in accordance with the law and in good faith against his principal and ensure his principal's interests.

(2) In particular, every commercial agent must:
(a) make proper efforts to negotiate and where appropriate conclude the transactions he is instructed to take care of,
(b) communicate to his principal all the necessary information available to him,
(c) comply with reasonable instructions given by his principal

Principal duties

Art. 4.

(1) In his relations with his commercial agent a  principal must act in accordance with the law and in good faith.

(2) A principal must in particular:
(a) provide his commercial agent with the necessary documentation relating to the goods concerned,
(b) provide to his commercial agent the information necessary for the performance of the agency agreement, and in particular notify the commercial agent within a reasonable period of time once he anticipates that the volume of commercial transactions will be significantly lower than that which the commercial agent could normally have expected,
(c) inform the commercial agent within a reasonable period of time his acceptance, refusal, and of any non-execution of a commercial transaction which the commercial agent has procured for the principal.

Part 3 - Remuneration

Commercial agent remuneration

Art. 5.

(1) In the absence of any agreement on this matter between the parties, a commercial agent shall be entitled to the remuneration that commercial agents appointed for the goods forming the subject of his agency agreement are customarily allowed in the place where he carries on his activities. 

(2) If there is no such customary practice a commercial agent shall be entitled to reasonable remuneration taking into account all the aspects of the transaction.

Commission

Art. 6.

Any part of the remuneration which varies with the number or value of business transactions shall be considered as commission according to this article.

Remuneration in the form of a commission or a fixed amount

Art. 7.

The remuneration may be in the form of a commission or a fixed amount or both. In the case of remuneration in the form of a commission, the provisions of Articles 8 to 13 shall apply.

Commission of a commercial agent for transactions during the term of the commercial agency agreement

Art. 8.

A commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency agreement:
(a) where the transaction has been concluded through the commercial agent; or
(b) where the transaction is concluded with a third party whom the commercial agent has previously secured as a customer for transactions of the same kind; or
(c) where the commercial agent is entrusted with a specific geographical area and/or specific group of customers, and where the transaction has been entered into with a customer belonging to that specific area or with a customer belonging to that group even if the transaction was negotiated by a person other than the commercial agent or a different agreement was reached by the commercial agent.

Commission of a commercial agent for transactions after the termination of the agency agreement

Art. 9.

A commercial agent shall be entitled to commission on commercial transactions concluded after the agency agreement has terminated: 
(a) if the transaction is mainly attributable to the commercial agent's efforts during the period covered by the agency agreement and if the transaction was entered into within a reasonable period after that contract terminated; or 
(b) if, in accordance with the conditions mentioned in Article 8, the order of the third party reached the principal or the commercial agent before the agency agreement was terminated.

Commission due to a previous commercial agent

Art. 10.

A commercial agent shall not be entitled to the commission referred to in Article 8, if that commission is payable, pursuant to Article 9, to the previous commercial agent, unless it is equitable under the circumstances for the commission to be shared between the commercial agents. 

When the commission right is due

Art. 11.

(1) Right for commission shall become due as soon as and to the extent that one of the following circumstances occurs: 
(a) the principal has executed the transaction; or 
(b) the principal should, according to his agreement with the third party, have executed the transaction; or 
(c) the third party has executed the transaction. 

(2) The commission shall become due at the latest when the third party has executed his part of the transaction or should have done so if the principal had executed his part of the transaction, as he should have.

(3) The commission shall be paid not later than on the last day of the month following the quarter during which the right for commission occurred. 

(4) Agreements to derogate from paragraphs 2 and 3 to the detriment of the commercial agent are not permitted. 

When the commission right is extinguished

Art. 12.

(1) The right to commission can be extinguished only if:
(a) it is established that the contract between the third party and the principal will not be executed, and
(b) the non-execution is not due to events for which the principal is responsible.

(2) Any commission which the commercial agent has already received shall be refunded if the relevant right to commission has been extinguished.

(3) Agreements to derogate from paragraph (1) of this Article to the detriment of the commercial agent are not permitted.

Supply of information by principal etc. in respect to due commissions 

Art. 13.

(1) The principal shall supply his commercial agent with a statement of the commissions due, not later than the last day of the month following the quarter in which the commissions in question occurred. This statement shall set out the main components used in calculating the amounts of commissions.

(2) The commercial agent shall be entitled to demand that he is provided with all the information, and in particular extracts from the books, which are available to the principal and which he needs in order to check the amounts of the commissions due.

(3) Agreements to derogate from paragraphs (1) and (2) of this Article to the detriment of the commercial agent are not permitted.

Part 4 - Conclusion and termination of the agency agreement

Written commercial agency agreement

Art. 14.

Both parties are obliged to enter into and sign a written contract which sets out the terms of the commercial agency agreement and any other terms subsequently agreed.

In cases of commercial agency agreements that were concluded before the entry into force of this Act and for which no written contract was signed, the provisions of this Act shall apply..

When a fixed-term contract becomes a commercial agency agreement of indefinite duration

Art. 15.

A commercial agency agreement for a fixed period which continues to be performed by both parties after that period has expired shall be deemed to be converted into an agency agreement for an indefinite period.

Method of termination of a commercial agency agreement of indefinite duration

Art. 16.

(1) Where a commercial agency agreement is entered into for an indefinite period, either party may terminate it by giving written notice. The period of notice shall be the same for both parties.

(2) The period of notice of termination shall be one month for the first year of the contract, two months for the second year, three months for the third, four months for the fourth, five months for the fifth, and six months for the sixth and subsequent years. The parties may not agree on shorter periods of notice.

Method of termination of a commercial agency agreement of indefinite duration

Art. 16.

(1) Where a commercial agency agreement is entered into for an indefinite period, either party may terminate it by giving written notice. The period of notice shall be the same for both parties.

(2) The period of notice of termination shall be one month for the first year of the contract, two months for the second year, three months for the third, four months for the fourth, five months for the fifth, and six months for the sixth and subsequent years. The parties may not agree on shorter periods of notice.

(3) If the parties set longer notice periods for termination than those laid down in paragraph (2) of this Article, the period of notice for termination to be observed by the principal may not be shorter than that applicable to the commercial agent.

(4) Unless otherwise agreed by the parties, the end of the termination notice period must coincide with the end of a calendar month.

(5) The provisions of this Article shall apply to a commercial agency agreement for a fixed period where it is converted under Article 15 into a commercial agency agreement for an indefinite period. In this case, the earlier fixed period must be taken into account in the calculation of the period of notice of termination.

Right to terminate the commercial agency agreement

Art. 17.

Either party may terminate the commercial agency agreement at any time due to the failure of one of the parties to perform all or part of its obligations or due to exceptional circumstances that have arisen.

Right to indemnity or compensation for damage

Art. 18.

(1) The commercial agent, upon termination of the agency agreement, shall be entitled to indemnity in accordance with paragraph (2), or compensation for damage in accordance with paragraph (3) of this Article.

(2)(a) The commercial agent shall be entitled to an indemnity if and to the extent that:
(i) he has brought new customers to the principal or significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from business with such customers, and
(ii) the payment of this indemnity is equitable, having regard to all the circumstances and, in particular, the commission lost by the commercial agent on the business transacted with such customers. Such circumstances shall also include the application or otherwise of a non-compete clause, within the meaning of Article 20.

(2)(b) The amount of such indemnity may not exceed a figure equivalent to an indemnity for one year calculated from the commercial agent’s average annual remuneration over the preceding five years and if the contract lasted less than five years the indemnity shall be calculated on the average for the period in question.

(2)(c) The grant of such an indemnity shall not prevent the commercial agent from seeking damages for the loss suffered.

(3) The commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with the principal.
Such damage shall be deemed to occur particularly when the termination of the commercial agency agreement take places in circumstances:
(i) depriving the commercial agent of the commissions which occurred following the smooth performance of the commercial agency agreement whilst providing the principal with substantial benefits linked to the commercial agent’s activities,
(ii) and/or which have not enabled the commercial agent to amortize the costs and expenses that he had incurred for the performance of the commercial agency agreement at the principal’s request. 

(4) Entitlement to the indemnity as provided for in paragraph (2) or to compensation for damage as provided for under paragraph (3) of this Article, shall also arise where the commercial agency agreement is terminated as a result of the commercial agent’s death.

(5) The commercial agent shall lose his entitlement to indemnity in the instances provided for in paragraph (2) or to compensation for damage in the instances provided for in paragraph (3) of this Article, if within one year following termination of the commercial agency agreement he has not notified the principal that he intends pursuing his entitlement.

(6) A derogation from the provisions of this Article to the detriment of the commercial agent is not allowed.

When no indemnity or compensation is due

Art. 19.

(1) The indemnity or compensation referred to in Article 18 shall not be payable:
(i) where the principal terminates the commercial agency agreement because of a breach attributable to the commercial agent which would justify immediate termination of the commercial agency agreement under the applicable law, or
(ii) where the commercial agent terminates the commercial agency agreement, unless such termination is justified by circumstances attributable to the principal or on grounds of age, physical impossibility or illness of the commercial agent in consequence of which the commercial agent cannot reasonably be required to continue his activities, or
(iii) where, following an agreement with the principal, the commercial agent assigns his rights and duties under the commercial agency agreement to a third person.

(2) A derogation from the provisions of this Article to the detriment of the commercial agent is not allowed.

Non Compete Clause

Art. 20.

(1) For the purposes of this Law, an agreement restricting the business activities of a commercial agent following termination of the commercial agency agreement shall be hereinafter referred to as a "non compete clause".

(2) A "non compete clause" shall be valid only if and to the extent that:
(i) it is concluded in writing; and
(ii) it relates to the geographical area or the group of customers and the geographical area entrusted to the commercial agent and to the kinds of goods covered by the commercial agent under the commercial agency agreement.

(3) A " non compete clause" shall be valid for not more than two years after termination of the commercial agency agreement.

(4) The provisions of this Article shall not affect the provisions of any law or regulation which regulates or imposes other restrictions on the validity or enforceability of non compete clauses or which enable the courts to reduce the obligations of the parties resulting from such an agreement.