The Commercial Agents (Council Directive) Regulations 1993 entitle commercial agents to an indemnity or compensation on termination of their agency contract, and the right cannot be excluded. This can come as a surprise to principals outside the EU who are unfamiliar with the concept.
In a landmark case, in which Fladgate acted for the claimant, the European Court of Justice held that a US state choice of law clause could not be used to evade liabilities under the Regulations, as any clause that sought to derogate from the regulations would be unenforceable. (Ingmar GB Limited v Eaton Leonard Technologies Limited (Case C 381/98)  EUECJ). However, in the recent case of Fern Computer Consultancy Limited v Intergraph Cadworx  EWHC 2908 (Ch) a Texan choice of law and jurisdiction clause managed to obstruct an agent’s claim.
In order for the English court to exercise jurisdiction against an overseas defendant outside Europe, the claimant has to show that the matter falls within at least one of the “gateways” for which the court will allow proceedings to be served overseas. The claimant argued that despite the choice of law clause, English law governed the contract, insofar as it was affected by the Regulations, which would be an appropriate gateway.
The High Court did not agree. It held that the Regulations did not affect the proper law of the contract. English law governed the obligations under the Regulations but it did not “infect express contractual terms so as to override the choice of law clause”. Furthermore, the regulations did not create an implied term. Accordingly, that gateway for jurisdiction was not available.
The judge suggested that it was possible that failure to pay sums due under the Regulations amounted to a breach of statutory duty equivalent to tort, with damages resulting within the jurisdiction which would open another gateway. However, as the point had not been argued before him, he adjourned so that the matter could be addressed at a later hearing.
An obvious solution to the problem would be to amend the Court Rules to allow for service out of the jurisdiction in matters relating to commercial agents regulations. In the meantime, it is difficult to envisage that a principal will be allowed to avoid jurisdiction by being overseas and having an agency agreement that is governed by a non European law. If the matter was to reach the European Court of Justice, it would certainly not allow English laws on jurisdiction to undermine the workings of the Regulations.
Paul Howcroft, Partner, Fladgate LLP