When should an agency agreement be considered “international”?
Pursuant to the international private rules applicable in Italy (Art.1 Reg. 593/08 “Rome I”) an agreement is deemed “international” in the presence of “situations involving a conflict of laws”.
The situations which more often involve a conflict of laws in agency agreements– making them “international” – are (i) the principal’s seat being located in a country different from the agent’s seat country; or (ii) the agreement being performed abroad, even when the principal’s and the agent’s seats are both located in the same country.
When does Italian law apply to an agency agreement?
Under the “Rome I” Regulation, in principle Italian law may apply to an international agency agreement (i) if it is chosen by the parties as the law governing the agreement (either expressly, or as otherwise allowed by Art.3); or (ii) absent any choice of law, when the agent has its residence or seat in Italy (according to the “residence” concept under Article 19).
What are the main regulations of agency agreements in Italy?
The substantial regulations of agency agreements in Italy, with particular regard to the principal-agent relationship, can be found mainly in articles from 1742 to 1753 of the Civil Code. Such rules have been repeatedly modified following the adoption of the Directive 653/86/EC.
What is the role of the collective bargaining agreements?
Since many years, collective bargaining agreements (CBAs) have also been regulating agency agreements. These are agreements made on a regular basis between the associations representing principals and agents in different sectors (manufacture, trade and several others).
From a legal effectiveness perspective, a distinction can be drawn between two types of CBAs, i.e. CBAs having the force of law (effective “erga omnes”) – whose rules are however quite broad and thus have a limited scope of application – and CBAs of a contractual nature (“di diritto comune”) that have been signed from time to time over the years, and are meant to bind only those principals and agents which are members of those associations.
In general, CBAs intend to implement the Civil Code rules and those of the Directive 653/86. However, contractual CBAs often deviate from those rules, and some deviations are substantial. For example, CBAs allow a principal to unilaterally modify the agent’s territory, the contractual products, the range of customers, the commission. CBAs determine in a partially different manner the duration of the notice period when indefinite term agreements are terminated. CBAs have their own calculation of the agent’s remuneration for the post-contractual non-competition covenant. CBAs have peculiar regulations concerning the termination indemnity.
With particular regard to the contract termination indemnity, there have been serious issues of compliance between the CBAs and the Directive 653/86/CE. Indeed, such issues still remain unsolved despite some rulings from the EUCJ, because the Italian courts’ constant jurisprudence keeps the CBAs’ indemnity provisions in force.
According to the majority of scholarly opinions and case law, CBAs’ geographical scope of application is limited to the Italian territory.
Therefore, CBAs automatically apply to agency agreements which are governed by Italian law and are performed by the agent in Italy; but – in case of contractual CBAs – subject to the further condition that both parties are members to associations that entered into such Agreements. According to some scholars, it is sufficient that the principal alone is a member of such an association.
Even in the absence of such cumulative conditions, however, contractual CBAs may nonetheless apply if they are expressly referred to in the agency agreement, or their provisions are constantly complied with by the parties.
What are the other main requirements in agency agreements?
Enasarco is a private law Foundation with which agents in Italy must be registered by law.
The Enasarco Foundation mainly administers a supplementary pension fund for agents, and a termination indemnity fund, called “FIRR” (referring to the termination indemnity as calculated in accordance with the criteria set forth by the CBAs in the different sectors).
Typically, a principal in a “domestic” agency agreement registers the agent with the Enasarco and pays contributions to both the above funds on a regular basis throughout the whole term of the agency agreement.
However, while registration and contribution to the pension fund are always mandatory as they are provided for by the law, contributions to the FIRR are instead mandatory only for those agency agreements which are governed by contractual CBAs.
Which rules apply to international agency agreements?
As far as registration with the Enasarco is concerned, the law and regulatory provisions are not so clear. However, important clarifications were provided by the Ministry of Labor in 2013 answering to a specific question (19.11.13 n.32).
Making reference to the European legislation (EC Regulation n.883/2004 as amended by Regulation n. 987/2009) the Ministry stated that registration with the Enasarco is mandatory in the following cases:
- agents operating in the Italian territory, in the name and on behalf of Italian or foreign principals having a seat or an office in Italy;
- Italian or foreign agents operating in Italy in the name and/or on behalf of Italian or foreign principals with or without a seat or office in Italy;
- agents residing in Italy and performing a substantial part of their activities in Italy;
- agents not residing in Italy, but having their main center of interest in Italy;
- agents habitually operating in Italy, but performing their activity exclusively abroad for a period not exceeding 24 months.
The above-mentioned Regulations obviously do not apply to those agency agreements that are to be performed outside the EU. Therefore, it should be checked case by case whether any international treaties binding the parties’ countries provide for the application of the Italian social security legislation.
Chamber of Commerce and Register of Businesses
Anyone wanting to start a business as a commercial agent in Italy, must file a “SCIA” (Certified Notice of Business Start) with the Chamber of Commerce having local jurisdiction. The Chamber of Commerce then registers the agent with the Register of Businesses if the agent is organized as a business entity, otherwise it registers the agent with a special section of the “REA” (List of Business and Administrative Information) of the same Chamber (see Legislative Decree n.59 dated 26.3.2010, implementing the Directive 2006/123/EC “Services Directive”).
Such formalities have replaced the former registration to the agents’ roll (“ruolo agenti”) which was abolished by said law. The new law also provides for a number of other mandatory requirements for agents wishing to start an activity. Such requirements concern education, experience, clean criminal records, etc.
Although failure to comply with the new registration requirements does not affect the validity of the agency agreement, a principal should nevertheless check that the Italian agent is registered before appointing him, as this is a mandatory requirement anyway.
Venue for disputes (art.409 and following of the Civil Procedure Code)
Pursuant to Article 409 and following of the Civil Procedure Code, if the agent mainly performs its contractual duties as an individual even if independently (so-called “parasubordinato” i.e. “semi-subordinate” agent) – provided the agency agreement is governed by Italian laws and Italian courts have jurisdiction – any disputes arising from the agency agreement shall be submitted to the Labor Court in the district where the agent is domiciled (see article 413 of the CPC) and the court proceedings shall be conducted according to procedural rules similar to those applicable to employment-related disputes.
In principle, said rules shall apply when the agent enters into the agreement as an individual or sole entrepreneur, while according to the majority of scholars and jurisprudence they do not apply when the agent is a company.
Applying the rules above to the most common situations in international agency agreements
Let’s now try to apply the rules described until now to the most frequent situations in international agency agreements, keeping in mind that those below are simple examples, while in the “real world” one should carefully check the circumstances of each specific case.
- Italian principal and foreign agent – agreement to be performed abroad
Italian law: it governs the agreement if chosen by the parties, without prejudice to any public policy (internationally mandatory) rules in the country where the agent has its residence and performs, pursuant to the Rome I Regulation.
CBAs: they do not govern the agreement automatically (because the agent performs abroad) but only when they have been expressly referred to in the agreement, or de facto applied. This could happen more or less intentionally, for example when an Italian principal uses with foreign agents the same contract forms as with Italian agents, which usually include many references to the CBAs.
Enasarco: typically, there are no registration or contribution obligations in favor of a non-Italian agent whose residence is abroad and performing his contractual duties only abroad.
Chamber of Commerce: there is no obligation to register in the above circumstances.
Procedural rules (article 409 and following, CPC): if Italian courts are properly chosen as the jurisdiction for all disputes, a foreign agent even if being an individual or sole entrepreneur may not take advantage of this provision to move the case to the courts of his own country. This is because art.413 cpc is a domestic provision on venue which presupposes the agent’s seat to be in Italy. Further, the jurisdiction rules set forth by the EU legislation should prevail, as was ruled by the Italian Court of Cassation and stated by important scholars.
- Foreign principal and Italian agent – agreement to be performed in Italy
Italian law: it governs the agreement if chosen by the parties or, even in the absence of any choice, as an effect of the agent having his residence or seat in Italy.
CBAs: those having force of law (“erga omnes”) govern the agreement, whereas those having contractual nature are unlikely to apply automatically, as the foreign principal typically would not be a member to any of the Italian associations having signed a CBA. However, they might apply if referred to in the agreement or de facto applied.
Enasarco: a foreign principal shall register the Italian agent to the Enasarco. Failure to do so might imply penalties and/or damages claims from the agent. As a consequence of such registration, the principal will have to contribute to the social security fund, while he should not be obliged to contribute to the FIRR (fund for termination indemnity). However, a principal who makes regular contributions to the FIRR even when not due, might be considered as having impliedly accepted the CBAs as applicable to the agency agreement.
Chamber of Commerce: the Italian agent has to be registered with the Chamber of Commerce and therefore the principal should make sure that the agent has complied with this requirement before entering into the agreement.
Procedural rules (art.409 and following, CPC): if Italian courts have jurisdiction (whether by the parties’ choice or as the place of performance of the services pursuant to Regulation 1215/12) and the agent is an individual or a sole entrepreneur with a seat in Italy, these rules should apply.
- Italian principal and Italian agent– agreement to be performed abroad
Italian law: it governs the agreement if chosen by the parties, or, in the absence of any choice, if the agent has his residence or seat in Italy.
CBAs: they would not apply (as the agent performs abroad) unless expressly referred to in the agreement, or de facto applied.
Enasarco: according to the Ministry of Labor’s opinion, registration is mandatory when the agent, although being engaged to work abroad, has his residence and performs a substantial part of his business in Italy, or has in Italy his center of interest, or performs abroad for a period not exceeding 24 months, provided the EU Regulations apply. In case the agency agreement is to be performed in a non-EU country, it has to assessed from time to time whether registration is mandatory.
Chamber of Commerce: an agent having started his business and established as an entity in Italy is in principle obliged to register with the Chamber of Commerce.
Procedural Rules (articles 409 and following of the CPC): the rules apply if the agent is an Italian based individual or sole entrepreneur and the Italian jurisdiction is agreed upon.
- Foreign principal and foreign agent – agreement to be performed in Italy
Italian law: in principle, it governs the agreement only if chosen by the parties.
CBAs: if the agreement is governed by Italian law, the CBAs having force of law apply, while those having contractual value will not apply unless expressly referred to, or de facto applied.
Enasarco: according to the Ministry of Labor’s opinion, when EU Regulations apply, registration may be required from a foreign principal in favor of an agent residing abroad, if such agent operates in Italy or has his center of interest in Italy. Otherwise, a case by case analysis will be needed under the applicable laws.
Chamber of Commerce: in principle, an agent established as an entity abroad is not obliged to register in Italy. However, the issue could be more complex if the agent has a seat and performs his activity mainly in Italy. Such circumstances may also affect the determination of the law governing the agency agreement.
Procedural Rules (articles 409 and following of the CPC): absent any different choice, Italian courts might have jurisdiction as Italy is the place of performance of the services. However, the above-mentioned rules should not apply if the agent has no seat or residence in Italy.
Hopefully this analysis, though not exhaustive, can help understanding the possible consequences of applying Italian law to an international agency agreement, and to make prudent choices when drafting the agreement. As always, we recommend not to rely on standard contract forms or precedents without having paid due attention to all the circumstances of each case.