Newsletter

Advisory opinion from the EFTA court clarifying the conditions for being deemed a commercial agent

by Inge K. Brodersen and Kaare M. Risung

Published:

Court room.

On 14 December 2021 the EFTA Court rendered an advisory opinion providing clarification of the conditions for being deemed a commercial agent under the EU agency directive and Norwegian agency act. The opinion followed are quest from the Norwegian Supreme Court in relation to an ongoing contract dispute between two companies in the grocery business. The EFTA Court's clarification of the conditions may lead the Supreme Court to reverse the lower court judgements as well as being of general interest to many companies with commercial agency relationships across various sectors.

The dispute between Norep AS and Haugen Gruppen AS


Haugen Gruppen AS ("HG") is an importer of products of international grocery brands, and since the 1980s has served the three largest Norwegian grocery wholesaling groups Coop, NorgesGruppen and Rema. In 1991 HG and Norep AS ("Norep") entered into a "cooperation agreement". The 1991 agreement was in 2008 "revised and replaced" by a new "cooperation agreement". In both the 1991-agreement and the 2008-agreement, Norep was explicitly referred to as HG's "exclusive agent".


In November 2018 HG terminated the 2008-agreement on the basis that Coop, NorgesGruppen and Rema had decided to perform all physical handling of the products in their stores by themselves. According to HG, that decision made the services from Norep redundant.


Norep claimed compensation under the Norwegian Act of 19 June 1992 on commercial agents and commercial travellers (lov om handelsagenter og handelsreisende (agenturloven) 19. juni 1992) ("the Agency act"). The amount claimed was one year's commission based on a calculated average revenue of the previous five years. HG rejected the claim on the basis that the cooperation between the parties was not subject to the Agency Act. Norep then brought the matter to court.


Both the District Court and the Court of Appeal found that the Agency Act did not apply to the parties' relationship[1]. The reason was that Norep could not be deemed a "commercial agent" as defined in the Agency Act Section 1, paragraph 1 (translation used in the opinion - our underlining):


"For the purposes of this Act, 'commercial agent' shall mean a person who, in the course of business operations under agreement with another party (the principal) has undertaken, on a continuing self-employed basis, to work to achieve the sale or purchase of goods on behalf of the principal by obtaining orders for the principal or by concluding agreements in the principal's name."


The Court of Appeal found that there was no doubt that Norep had "undertaken, on a continuing self-employed basis, to work to achieve the sale or purchase of goods on behalf of the principal". HG used Norep as its sales promoter, with Norep having direct involvement and meetings with retailers and wholesalers.


However, the Court of Appeal could not see that the criterion in the last part of the definition was fulfilled, i.e. "by obtaining orders for the principal or by concluding agreements in the principal's name". Firstly, the Court of Appeal found it most probable that orders from stores to wholesalers and from wholesalers to HG went electronically and directly to HG, without Norep as an intermediary. Secondly, the Court of Appeal did not find it probable that Norep concluded agreements in HG's name, as no documentation of written power of attorney, or agreements demonstrating that Norep did so, were submitted to the court.


Consequently, Norep was not deemed a "commercial agent" and therefore was not entitled to claim compensation upon termination of an agency agreement in accordance with the Agency act section 28.


Norep appealed to the Norwegian Supreme Court and leave to appeal was granted on 21 January 2021.


The Advisory Opinion from the EFTA Court of 14 December 2021


On 26 May 2021, the Supreme Court stayed the proceedings and requested an advisory opinion from the EFTA Court concerning the conditions for being deemed a commercial agent under the 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").


The Supreme Court's reason for the request was that the definition contained in the Agency act section 1 as quoted above differs slightly from the definition in the Directive article 1 (2) (our underlining):


"For the purposes of this Directive, '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."


On this basis, the Supreme Court referred the following two questions to the EFTA Court:


In its opinion of 14 December 2021, the EFTA Court provided concise answers to both questions.


On Question 1, the EFTA Court stated that "the term «negotiate», should be interpreted as not necessarily presupposing the agent's direct involvement with the placing of orders by customers with the principal, or excluding a scenario in which orders go directly from customers to the principal." The EFTA Court noted that the term "negotiate" is not defined in the Directive and that it should be regarded as an "autonomous concept of EEA law which must be interpreted in a uniform manner throughout the EEA." It went on to note that the main tasks of a commercial agent are "to bring the principal new customers and to increase the volume of business with existing customers", and that those main tasks are not prevented from being carried out even though the commercial agent may not have a role in the placing of orders as such. The EFTA Court considered a requirement for direct involvement of the commercial agent in taking or finalizing orders to be an additional condition which would "jeopardise the achievement of the objective pursued by the Directive". As one may expect, the EFTA Court reiterated that national law made pursuant to the EEA Agreement shall be interpreted in conformity with EEA law, and that when national courts apply domestic law "they are bound to interpret that law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive, favouring the interpretation of the national rules which is the most consistent with that purpose".


On Question 2, the EFTA Court stated that "Sales-related activity should be deemed to be negotiation (…)  if it is specifically undertaken with a view to achieving the conclusion of contracts of sale or purchase of goods by the principal, and if the agent acts as an intermediary between the principal and his customers". The EFTA Court emphasized that determining which factors that are relevant requires a specific assessment of the contract and applicable obligations of the parties, the activities performed and other factual circumstances.


Conclusion


It never ceases to surprise us how often we see imprecise implementations of EU/EEA law in national law, creating ambiguities and legal challenges in the final text even though the preparatory works firmly state that the objective is to implement EU/EEA law. In this specific case, the preparatory works (Ot.prp.nr.49 (1991–1992) page 13) explicitly state that it is assumed that anyone deemed to be a commercial agent for the purposes of the Directive will also come within the scope of the definition in the Agency act.


More generally, the EFTA Court's opinion coincides with another recent interpretation providing for a wider applicability of the Directive than has traditionally been assumed, namely CJEU's ruling of 16 September 2021 in case C-410/19 "The Software Incubator Ltd v Computer Associates (UK) Ltd.". In that matter, the CJEU concluded that supply of software by electronic means to the customer where the use of that software is governed by a perpetual license may constitute a "sale of goods" under the Directive article 1 (2). (See our previous article on that case here.)


The Supreme Court is of course not bound to follow the advisory opinion by the EFTA Court, but it seems likely they will do so in this case. Regardless of what happens, it is yet another reminder of the importance of taking into account the wording of the Directive and EU/EEA case law when determining and assessing the conditions for being deemed a commercial agent.


[1] Salten tingrett TSALT-2019-149946 and Hålogaland lagmannsrett LH-2020-64762.

Do you have any questions?