LEGAL SURGERY From
ISSUE 208 APRIL 2013
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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