SEPTEMBER 2014
Legal Focus
41
Agency and Distribution Law
In this edition of Lawyer Monthly, we take a look at Agency and Distribution law, as well as the legal implications surrounding it. We speak to Mr Toffoletto, the Chairman and Managing Partner of the law firm, Toffoletto De Luca Tamajo e Soci, and a founder of Ius Laboris, the world’s largest alliance of Labour, Employment & Pensions law firms, of which he has twice been Chairman. The firm is the largest niche employment law firm in Italy with 17 partners, 70 lawyers and 20 employees in four offices: Rome, Milan, Naples and Bergamo.
What are the main legal challenges raised when working on agency and distribution agreements?
The main challenge relates to the payment due to commercial agents in case of termination of the agency contract.
Under the Italian laws which implemented the European Directive 86/653, commercial agents are only entitled to a payment in case of termination of the agency contract if the following conditions are met: • new customers have been brought to the principal by the agent or the volume of business with existing customers has been significantly increased by the agent and the principal continues to derive substantial benefits from such business even after the termination of the agency contract and
• the payment of the indemnity is equitable having regard to all circumstances and, in particular, the commissions lost by the commercial agent on the business transacted with such customers.
Thus, if one of the above conditions is not met, the agent will have no right to such indemnity: in other words, the indemnity represents consideration for the continuing benefits received by the principal due to the agent’s efforts.
Italian law also specifies that the parties cannot agree terms that are contrary to this law if they are to the detriment of the commercial agent.
Notwithstanding the above, the relevant collective bargaining agreements provide for a different way of calculating such payment, mainly based on the commissions received during the entire agency contract.
From the above, it is clear that the system provided for in the collective bargaining agreements is inconsistent with the Italian legal system and the European Directive.
This contrast has created a lot of debate in Italy as to which of the two sources (collective bargaining agreement or law) is more favourable to the agent. This contrast was definitively settled by the European Court of Justice with the decision C-465/04 of 23 March 2006 (which regarded an Italian case on which I had worked). According to this decision, Italian collective bargaining agreements should not be valid because the indemnity for the termination of the contract, which results from the application of the Directive, cannot be replaced by a payment determined in accordance with criteria other than those prescribed by the European Directive, unless it is established that the application of such an agreement guarantees the commercial agent, from the beginning (ex ante), an indemnity equal to or greater than that which results from the application of the European Directive.
This is a condition which is not met by the current collective bargaining agreements. Court decisions on the matter have been fairly inconsistent with each other.
How do you navigate these challenges?
Considering the above, my advice is against applying the collective bargaining agreement to a commercial agency contract. Indeed, the legal provisions contained in the Civil Code provide for comprehensive regulation of the commercial agency contract and there is no need to apply any further regulation.
Can you tell me about any recent cases you have been involved in?
At the moment, I am working on big cases in which ENASARCO, the social security body, is claiming for contributions with regard to some relationships, which they consider to be commercial agency contracts.
What Cross-border issues regularly arise?
When Italian clients negotiate a commercial agency contract to be performed abroad,
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the choice of the law and the avoidance of the application of any collective bargaining agreement are both crucial.
Have there been any recent legislative changes that are relevant to your work within this sector?
No, but a new collective bargaining agreement for the industrial sector was recently signed on 30th July 2014.
Do you see the need for any? If so, what changes would you like?
In my opinion there is the need for a legislative change in the current legal rule regarding the termination of the agency contract (Art. 1751 of the Italian Civil Code): in spite of what is stated by the European Directive, the Italian rule does not specify that the two conditions mentioned therein must also be used for the calculation of any indemnity due. Indeed, while Art. 17 of the European Directive introduces the two conditions using the words «if and to the extent that», the Italian legal rule only uses the word «if».
Therefore, the missing words «and to the extent that» must also be added to the Italian rule. LM
Contact: Franco Toffoletto
Toffoletto De Luca Tamajo e Soci Via Rovello 12 20121 - Milan
Tel: +39 02 721 441 Fax: +39 02 721 44500 E-mail:
sft@toffolettodeluca.it
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