European Union: ECJ Holds That Commercial Agents May Work From Principal's Business Premises And Perform Other Activities For Same Principal

Last Updated: 5 March 2019
Article by Koen T’Syen

Most Read Contributor in Belgium, February 2019

On 21 November 2018, the Court of Justice of the European Union ("ECJ") delivered a judgment on a request for a preliminary ruling from the Liège Commercial Court (the "Commercial Court") regarding the interpretation of Article 1(2) of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents (the "Directive") (ECJ, Case C-452/17, Zako SPRL v. Sanidel SA). The ECJ held that a person will not lose the legal status of a "commercial agent" if (s)he works from his/her principal's business premises and performs, for the same principal, activities other than the negotiation and conclusion of contracts for the sale or purchase of goods, on condition that these circumstances do not prevent him/her from performing his/her activities as a commercial agent in an independent manner.

The dispute at issue related to the termination by Sanidel SA ("Sanidel"), a company selling bathrooms and fitted kitchens, of its agreement with Zako SPRL ("Zako"). Zako had been responsible for the fitted kitchen department of Sanidel. In this capacity, Zako negotiated and concluded contracts with customers on behalf of Sanidel. Zako carried out this task exclusively from Sanidel's business premises, where it had a permanent work station with a direct telephone line and e-mail address. In addition, it also performed assignments other than the negotiation and conclusion of contracts on behalf of Sanidel, such as the management of staff in the fitted kitchens department, contacts with suppliers and contractors of Sanidel and the preparation of both purchase orders and plans and price quotes, as well as the measurement of kitchens. Zako received a monthly lump sum and an annual commission, calculated for all services performed for Sanidel. No distinction was made between its activities as a commercial agent and its other activities. It was common ground that Zako performed all of its tasks completely autonomously.

Following the termination of its agreement with Sanidel, Zako claimed in court compensation and commission arrears from Sanidel. To rule on the claim, the court had to decide whether the agreement between Zako and Sanidel constituted: (i) a contract for services as a sales representative (handelsvertegenwoordigingsovereenkomst/contrat de représentant de commerce); (ii) a contract for work (aannemingsovereenkomst/contrat d'entreprise); or (iii) a commercial agency contract (handelsagentuurovereenkomst/contrat d'agence commerciale).

The Commercial Court considered whether Zako could be considered a commercial agent within the meaning of Article 1(2) of the Directive. This provision defines the term "commercial agent" as "a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, [...] the 'principal', or to negotiate and conclude such transactions on behalf of and in the name of that principal".

The Commercial Court was uncertain whether Zako would fall under this definition, since Zako (i) performed its assignments from Sanidel's business premises; and (ii) carried out tasks other than the negotiation and conclusion of contracts on behalf of Sanidel. It therefore decided to stay the proceedings and question the ECJ on the interpretation of the term "commercial agent" within the meaning of Article 1(2) of the Directive.

The Commercial Court requested the ECJ to clarify whether Article 1(2) of the Directive must be interpreted as (i) requiring commercial agents to seek and visit customers or suppliers outside the business premises of the principal; and (ii) preventing commercial agents from carrying out tasks other than those listed in Article 1(2) of the Directive, i.e., negotiating and concluding contracts for the sale or purchase of goods, and if not, whether these other tasks should be carried out only secondarily.

The ECJ held that a person may be a commercial agent within the meaning of Article 1(2) of the Directive even if (s)he performs his/her activities from the principal's business premises and even if (s)he also performs, whether subsidiarily or not, activities for the same principal other than the negotiation and conclusion of contracts for the sale or purchase of goods, on condition that these circumstances do not prevent that person from performing his/her activities as commercial agent in an independent manner.

In its response to both questions, the ECJ referred to both the text of Article 1(2) of the Directive and the objectives of the Directive. The ECJ explained that Article 1(2) of the Directive lays down three necessary and sufficient conditions for a person to be classified as a commercial agent: (i) the person must be a self-employed intermediary; (ii) the contractual relationship must have a continuing character; and (iii) the person must exercise, on behalf of and in the name of the principal, an activity which may consist either simply in being an intermediary for the sale or purchase of goods or in both acting as an intermediary and concluding sales or purchases of goods. The place of performance of the activities is irrelevant. Nor does it follow from these conditions that commercial agents would not be allowed to perform other tasks than those expressly referred to in Article 1(2) of the Directive as well.

Furthermore, the ECJ considered that making the classification of "commercial agent" subject to any additional conditions would jeopardise the achievement of the objective pursued by the Directive, i.e., to protect commercial agents in their relations with their principals. As regards the first question, the ECJ specifically pointed out that any interpretation to the contrary would deprive persons of the benefit of the Directive where those persons perform, from the principal's business premises and with the help of modern technology, tasks comparable to those performed by commercial agents who travel around, in particular, for the purposes of client acquisition and direct marketing. As regards the second question, the ECJ noted that a contrary interpretation would allow the principal to circumvent the mandatory provisions of the Directive by providing in the contract for tasks other than those related to the activities of commercial agents.

However, the ECJ emphasised that the fact that the commercial agent performs his/her activities from the principal's business premises or performs, for the same person, his/her activities as a commercial agent together with activities of another nature must not prevent the agent from performing his/her activities as a commercial agent in an independent manner.

As regards the commercial agent's presence at the principal's business premises, the ECJ explained that the commercial agent's status as independent intermediary may be affected if his/her close proximity to the principal makes the agent subject to the principal's instructions or if the material advantages resulting from working at the principal's business premises, such as the provision of a work station or access to the organisational facilities of that establishment, prevent the agent from pursuing his/her activities independently, whether as regards the organisation of his/her activities or with respect to the economic risks associated with it.

As regards the combination of activities as commercial agent and other activities, the ECJ held that the Commercial Court, in its assessment of the independence of the commercial agent, must take account of all circumstances of the case, including the nature of the tasks performed, the manner in which they are carried out, the proportion those tasks represent with regard to the overall activities of the person concerned, the method of calculating the remuneration and the reality of the financial risk incurred.

On the facts of the case, it was common ground that Zako performed all of its tasks in complete independence. It therefore seems likely that the Commercial Court will confirm Zako's status as a "commercial agent". Such a classification would be beneficial to Zako since the rules on commercial agency agreements provide for specific indemnities if the agreement is terminated. No such protective rules exist with respect to contracts for work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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