The Alerion Distribution Series by Catherine Robin and Johanna Guerrero – Commercial agent (episode 4)

24 March 2023

Alerion invites you to follow the news on distribution law.  To start this Serie, focus on the status of commercial agent. Inaugurated in 1958 in France, the status followed the European harmonization in 1986 and continues to evolve under the influence of the Court of Justice.

Episode 1 – Commercial agent status does not require the power to modify prices

Episode 2 – The possibility to derogate from the right to commission

Episode 3 – Compensation and serious misconduct of the agent

Episode 4 – Commercial agent operating outside the EU and French law

Episode 4

Commercial agent operating outside the EU and French law

For the first time, the French Cour de cassation rules that the status of commercial agent applies to the intermediary established and operating outside the European Union, when the contract is submitted to French law.

As previously mentioned in the Alerion Distribution Serie on Commercial agency, the status of commercial agent has been harmonized in the European Union (Directive 86/653/EEC of 18 December 1986, French Code de commerce).  At the end of the contract, the agent loses the fruits of his work but the status enables him to obtain compensation.  In France, according to French case law, this compensation is most often equal to two years’ commission calculated over the last three years of the contract.

In this case[1], a French producer had granted the distribution of wines and spirits in Canada to a Canadian agent.  The contract was governed by French law.  At the end of the relationship, the producer had refused to compensate the agent arguing that, without the ability to modify the price of the goods and due to the specificity of the importation of alcoholic beverage in Canada, the agent could not be qualified as a commercial agent.

During the proceedings, and before the judgment of the Cour d’appel, Court of Justice of the European Union ruled that a person who sells goods in the name and on behalf of his principal does not necessarily need to be empowered to change prices to be granted the legal status of commercial agent(Trendsetteuse case[2]) (cf. Episode 1).

It is within this context that the Cour d’appel of Paris granted the Canadian agent the status of commercial agent and the producer was sentenced to pay a termination compensation equal to two years of commissions.

The French producer then initiated an action in cassation, arguing in particular that:

  • French law, as interpreted by the European Court, could not apply to a Canadian agent operating outside the European Union;
  • The contractual relationship had been formed, performed and terminated prior to the judgment of the Court of Justice, which therefore had no application.

These arguments are rejected by the Cour de cassation, which rules that, pursuant to the Hague Convention of March 14, 1978, the parties had validly chosen to submit their contract to French law. Consequently, it is in the light of French law, as derived from the 1986 Directive and interpreted by European case law, that the criteria for qualifying as a commercial agent must be assessed.

The French law designated in the contract applies even if the commercial agent was established and exercised his activity outside the territory of the European Union.

In this respect, it should be noted that the 1986 Directive does not limit its scope of application to the territory of the European Union.  Each Member State was free to extend the protection of the status of commercial agent to intermediaries carrying out their mission in a third country.  The French legislator having chosen not to provide for any limitation as to the spatial scope of application of the text, the status applies in all its provisions, regardless of the place of establishment of the intermediary and the territory in which he carries out his mission.

The Cour de cassation also recalls that legal security does not consecrate an acquired right to a frozen case law.  Even if the entire relationship had taken place before the reversal of the Trendsetteuse case, at a time when the case law of the Cour de cassation and the Cour d’appel of Paris was more strict in granting the benefit of the status of commercial agent, since it required proof of the agent’s power to modify the price, the parties “cannot rely, in the event of a subsequent dispute, on the law as interpreted on the date of the conclusion of the contract.”  The reversal effected by the Trendsetteuse case is applicable even after the relationship has ended.

The Cour de cassation therefore dismissed the action.  The appeal decision[3] is confirmed in the sense that it had granted the Canadian agent the status of commercial agent after having noted that he was performing a negotiation activity, specific to this status, and the agent is enabled to the termination compensation, which, in this case, amounted to almost three million euros.

The Alerion Team in charge of Distribution and Commercial Contracts, Catherine Robin and Johanna Guerrero, is at the disposal of the French and foreign companies to draft and organise their commercial relationships. This case was followed by Alerion (first instance and appeal proceedings) and by SCP Matuchansky, Poupot et Valdelièvre (cassation).

[1] Cass. civ. 1ère 11 January 2023, n°21-18.683

[2] CJUE 4 June 2020, aff. C-828/18, Trendsetteuse

[3] CA Paris, 20 May 2021, n°19/05011