Practical Guide to International Commercial Agency Contracts in France

Practical Guide

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How are agency agreements regulated in France?

In France, to master the rules applicable to commercial agent contracts, it is necessary to know that the activity of agent can fall under two distinct regulations, one rather protective of the agent, and the other more flexible.

On the one hand, there is the commercial agent stricto sensu (“agent commercial"), or statutory commercial agent, who has to meet a precise legal definition in order to benefit from a protective regime set by articles L 134-1 to L 134-17 of the French code of commerce. These articles result from the law of June 25, 1991 transposing the provisions of the EU directive n°86/653 of December 18, 1986 on commercial agents. These articles provide a fairly well-defined legal framework. In French domestic law, many provisions are of internal public order, in the sense that the principal and the agent cannot derogate from it; the question is more delicate in the case of an international contract (see § 4. below).
On the other hand, there is the so-called agent of common interest (“mandataire d’interêt commun”) which essentially falls under the provisions of the Civil Code applicable to the mandate (art. 1984 and seq. of the Civil Code) complemented by case-law. The legal framework for the activity of agents of common interest is much more flexible, even vague, because it refers to general rules. In addition, most of these rules are not of public order; consequently, the contract of agent of common interest may derogate therefrom.

The common point between these two forms of legal scheme lies in the fact that the commercial agent and the agent of common interest are both agents (“mandataire”). They represent their co-contractors (the principal). They both act on behalf of the principal insofar as they officially present themselves as the representative of the principal and they both act on behalf of the principal in the sense that their actions are binding upon the principal.

Generally speaking, when an agent acts on behalf of a company and its contract or activity cannot be analyzed as a commercial agent because it does not meet the conditions laid down by law and case law, judges recognize him as, at least, an agent of common interest (unless falling within another legal category set out in § 2 below).
The following presentation will distinguish, where necessary, the rules applicable to the agent of common interest and to the commercial agent. It should also be known that the English word "agent" covers both a generic term which refers to the general category of mandate (“mandataire”) and also a specific status (“agent commercial”); foreign traders should be therefore cautious with the use of this word.

What are the differences from other intermediaries?

It is possible to contract with a broker, a commissionary agent, an employee or a service provider. These four categories are more particularly discussed below because they can fulfil, economically or practically, close missions and thus create confusion as to the application of a particular status. There is less risk of confusion with distribution or franchise agreements as the former clearly implies the purchase and resale of products and the latter generally implies the provision of a fairly formalized know-how and distinctive signs under license terms.

The broker also referred to as a go-between (“courtier” or “apporteur d’affaires”) is not an agent in the sense that it does not represent his co-contractor. Its role is mainly to connect a seller and a buyer, leaving them negotiating all the terms of their potential contract. The broker does not intervene, in principle, in the negotiation (but it is not prohibited) and it is usually paid not on the result of the negotiation but on the entry into negotiations. The brokerage contract is very little regulated by law (except in certain very specific economic sectors).
The commission agent (“commissionaire”) is not a true agent in the sense that if he acts on behalf of his principal, he acts with regard to third parties under its own name. In other words, upstream, it is considered as an agent in its relations with its principal, and as such he must respect the instructions of the latter and he does not buy the products that are simply entrusted to him, and downstream, to the market, he claims to be a distributor selling products under his own name (but in fact according to the instructions and prices communicated by his principal).
The promotion of products and services of a commercial operator may also be done through an employee of this operator. The latter can then conclude either a standard employment contract with an employee who will be itinerant (e.g. in charge of a region) or a specific employment contract dedicated to canvassing customers (called “VRP”). In both cases, the employee will be protected by the French labour law, the provisions of which are very largely of public order.
In some cases, the content of the promotional mission is covered by a service contract. Thus, for example, when a pharmaceutical laboratory uses an outsourced sales force (managed by another company) to promote its pharmaceutical specialities to doctors, the mission of highlighting the products to third parties, who are not potential buyers but prescribers, is not a commercial agency contract but a contract for the provision of promotional services.

The commercial agent is defined in French law as "an agent who, as an independent profession, without being bound by an employment contract, is permanently responsible for negotiating, and possibly concluding, contracts of sale, or services on behalf of and for the account of producers, industrials, traders or other commercial agents "(art. L 134.1).

  • First, the commercial agent is independent. He masters his organization and the technical and human means that he implements. He organizes as he wishes his working time and chooses as he wishes his clients, who are his principals (subject to respect its non-competition commitments).
  • Second, the commercial agent is also an agent entrusted with a mandate, but a rather special agent. Like any agent, he acts in the name and on behalf of his principal. But as a statutory commercial agent, he has to actively seek out clients and negotiate with them and, possibly, conclude contracts with them. However, French case-law has been excluding, for ten years, from the status of commercial agents, any agent who merely presents tariffs and products of his principal but who do not have the capacity to negotiate prices and the main terms of sale contracts and/or freely conclude contracts.
    Finally, it should be added that certain activities are excluded from the status of commercial agents, such as insurance agents, real estate agent and travel agents. But real estate salesforce working for a real estate agent on an independent basis can benefit from the status of commercial agent.

How to appoint an agent in France

The contract

The commercial agent contract or the contract of common interest is a consensual contract. It can be formed in writing or orally. The contract can be formalized by a simple exchange of letters. In the absence of writing, proof of an agreement is admissible by any means, in particular by commission invoices or by third party statements. Contrary to what is often claimed, Article L 134-2 of the Commercial Code does not impose a written form regarding the commercial agent contract but merely provides that each party may require the other to have a written formalizing of their relationship. The absence of writing does not prevent the application of the status of commercial agent and the protection provided for in Articles L 134-1 et seq. of the Commerce Code.
The commercial agent contract or the common interest mandate contract does not need to be registered.

The agent

The commercial agent is obliged to register with the special register of commercial agents (“RSAC”) held at the registry of the commercial court. This obligation is binding on commercial agents domiciled in France, both a natural person or a legal person, of French or foreign nationality. This obligation is not binding on commercial agents established outside France who have a temporary or occasional assignment in France.
The registration requirement is irrelevant to the validity of the commercial agent's contract. In other words, a commercial agent not registered with the RSAC can still claim the benefit of the protective status of commercial agents. On the other hand, the principal may stipulate that the registration is a condition precedent to the effectiveness of the commercial agent contract. The lack of registration is not sanctioned civilly but can be merely subject to a criminal fine. The commercial agent has the obligation to mention his registration number to the RSAC on all his commercial documents (also subject to a fine).
The agent of common interest has no duty to register to the RSAC.

Is it possible to apply a foreign law?

A commercial agency contract may be subject to foreign law if the contract is international. This situation will be characterized either when one of the two parties is established abroad or when the contract is executed abroad, even if both parties are established in France.
In case the competent court is in France, the French judge will apply the principles deriving from the Rome I Regulation on the law applicable to contracts (17 June 2008, No. 593/2008, see EU part of this Guide) and also the provisions of the The Hague Convention on the law applicable to intermediary contracts (14 March 1978).
Whether under the The Hague Convention (art. 5) or the Rome I Regulation (art. 3), French judges must respect the choice of law made by the parties, whether express or implied.

In the absence of choice by the parties, the judge will apply the following rules:

  • According to the The Hague Convention (art. 6): in the absence of choice of the parties, the law determined by the judge will be the law of the State in which the agent is established when the contract is concluded, but it will be the law of the country in which the mission is to be performed if the principal has his domicile in that country.
  • According to the Rome I Regulation: in the absence of choice of the parties, the law determined by the judge will be the law of the State in which the agent has his domicile or his habitual residence, whether under art. 4 § 2 (general rule) or art. 4, § 1.b (special rule if the contract of agent is treated as a service contract for the purpose of the Rome I Regulation).

Even if the French judge is obliged to apply foreign law determined under the rules of conflict of laws, he must also apply the French overriding mandatory rules (OMR). In general, OMRs consist of the hard core of internal public policy rules. In other words, not all internal public policy rules are OMRs at the international level. This question arises seriously for commercial agent contracts (and not for common interest mandate contracts), where French courts and the ECJ do not have the same position on this point.
The French Court of Cassation has held for 20 years that the French regulation on commercial agents (art. L 134-1 and seq) is not an OMR. This solution applies to foreign principal established outside the EU and to principals established in the EU as well.

As regards the ECJ in the case of a relationship between an agent established in the EU and a principal established outside the EU, the ECJ held that the commercial agent who had seized an EU member court may apply for the protection of the 1986 Directive, even though the contract is subject to a non-EU State law (ECJ, 9/11/2000, case C 381/98, Ingmar).

As regards a relationship between an EU-based agent and a principal established in another EU Member State, the ECJ has held that the law of a Member State which implements the 1986 Directive, chosen by the parties, may be set aside by OMR of the country of the judge seized. But it is necessary that this judge finds that the legislator of his state considered crucial to grant to commercial agent protection going beyond that sought by that directive, taking into account the nature and purpose of such mandatory provisions (ECJ, 17/11/13, case C 184/12, Unamar). It seems clear that for French courts, French law which transposed the 1986 Directive does not require protection going beyond those provided by the Directive and cannot, therefore, disregard another European law transposing the same Directive. However, the foreign principal should, to avoid any risk of application of the French OMR, not only submit the contract to a foreign law but also choose a foreign judge with a jurisdiction clause or stipulate an arbitration clause.

Is it possible to submit any disputes to a foreign jurisdiction or to foreign arbitrators?

An international agency contract may stipulate a jurisdiction clause in favour of a foreign court and, whatever the choice made by the parties (maybe that of a third State to the countries of both parties). In international law, the jurisdiction clause is valid even with a natural person who does not have the status of a trader.
At the formal level, the jurisdiction clause must have been concluded in the form provided for by the Brussels I recast Regulation. International commercial agency contracts stipulating a jurisdiction clause must therefore expressly stipulate such a clause. It is also possible to stipulate a clause conferring asymmetrical jurisdiction whereby a court is determined to be exclusive to both parties but where one party reserves the right to bring the case to another court (this clause is valid provided that the option is mentioned in favour of a specific court). Although, in accordance with the Brussels I recast Regulation, clauses attributing jurisdiction are exclusive by nature, it is better to expressly state that jurisdiction is granted on an exclusive basis. It is advisable to include in the scope of the clause disputes based on tort liability and in the area of competition law and also hypotheses of a plurality of defendants, call for guarantee and injunction and interim relief.
French judges respect the jurisdiction clause stipulated in favour of foreign courts, even if French OMRs are potentially involved.

It should be made clear that the jurisdictional rules of the Brussels I recast Regulation also apply, for this specific issue, to contracts concluded with contractors established outside the European Union.
If the parties do not stipulate jurisdiction clause to the benefit of a specific court, the jurisdiction of the judge to which the case is referred will be assessed in the light of the rules of jurisdiction of the country of this judge. As far as the jurisdiction of French judge is concerned, the rules of international jurisdiction differ according to the place of establishment of the parties: providing that the agent is based in France, for an EU-based principal, it will be according to the EU Regulation Brussels I recast and for a non-EU-based principal, according to bilateral convention signed by France and, failing that, according to the French standard rules of international jurisdiction. But basically, rules of jurisdiction are more or less the same: (i) the place of domicile/seat of the defendant and alternatively (ii) the place of performance of the agency contract.
An international agency contract may also provide for an arbitration clause, which will be valid even if the agent is a natural person, not a trader. French judges recognize the principle of validity of arbitration clauses and decline their jurisdiction (unless the arbitration clause is blatantly null or inapplicable), but may still grant interim or protective measures, including a partial payment on a claim invoked by one of the parties (“référé provision”), as long as the arbitration has not started. In practice, agency contracts hardly ever provide for arbitration clauses, whether ad hoc or referring to an arbitration centre, such as the ICC.

Agency agreement termination

A commercial agent contract may be concluded for an indefinite period of time or for a fixed term. If the parties pursue a fixed-term contract that does not have a tacit renewal clause, this contract will continue for an indefinite period.

A commercial agency contract of indefinite duration may be terminated at any time, without any particular reason or cause. However, a minimum notice period must be respected: one month for a termination in the first year, two months in the second year and three months in the third year and the following years. The same minimum notice should be respected if one of the parties to a fixed-term contract notifies his opposition to the automatic renewal. It should be noted that Article 442-1. II (ex 442-6.I 5 °) of the Commercial Code on the so-called brutal termination does not apply to the commercial agency contract but applies to the contract of mandate of common interest insofar as there is no special notice rule applicable to this contract.

Failure to comply with a notice exposes the party who terminates to pay damages on the basis of the length of the notice period that has not been granted.

The early termination of a fixed-term contract that is not in accordance with the terms of the contract or that is not justified by a failure of the other party, will allow the damaged part to seek a redress calculated on the basis of the time remaining until the end of the contract.

Termination indemnity

The commercial agent

If the contract is subject to French law, compensation will be ruled by Article L 134-12 of the Commercial Code (and art. 17.3 of the 1986 Directive). No provision to the contrary may preclude the principle of such compensation or limit in advance its amount. The indemnity is due upon the end of the contract.

The compensation is not due in the following limited cases:

  • The commercial agent has terminated his contract, unless this purpose is justified by a prior fault of the principal (e.g. non-payment of commissions) or is due to age, infirmity, illness or death of the agent;
  • The end of the contract is caused by the serious fault of the commercial agent;
  • The commercial agent has assigned his contract-with the consent of the principal to a third party.

The exception of infirmity, age, sickness or death concerns only the commercial being a natural person and having entered into a contract with the principal. If the commercial agent refuses to renew his contract when the principal proposes it to him, the end-of-contract indemnity will not be due.
Serious misconduct is strictly interpreted by case-law as a fault of such gravity which prevents the maintenance of the contractual relationship. Thus, all violations of a contract are not automatically considered to be serious misconducts. For example, non-compliance with a turnover objective generated by the agent is not in itself a serious fault, but it is the case of a violation of a non-competition commitment, abandon of the mission or disparagement of the principal. Even if courts hold that they are not bound by a contractual definition of serious misconduct, it could be useful to specify what breach could authorize the principal to terminate the contract for a so-called serious fault. Termination for serious misconduct entails a right to terminate without notice.
French case-law sets the quantum of the compensation very broadly, at a quasi-lump sum of two years of gross remuneration paid to the agent calculated on the average of the last 36 months preceding the actual end of the contract. If the contract lasted less than two years, the compensation will be pro rata temporis. The basis of compensation is, in fact, all the sums paid to the agent, including the remuneration for ancillary services (and even reimbursement of expenses). Case-law also does not distinguish between commissions paid for transactions with pre-existing clients and those that did not exist; but it could be advisable to attach to the contract the list of pre-existing customers and their turnover to characterize a possible failure of the agent.
If the fault of the agent is not considered to be serious misconduct, it may, however, constitute a fault incurring the responsibility of the agent and authorizing the principal to claim for damages which can then be offset with the end of contract compensation.
If the principal cannot validly limit the amount of compensation in advance, the contract may stipulate that the provision by the principal of his own clients database for the benefit of the commercial agent, will give rise to a remuneration which is not payable at the time of the conclusion of the contract but which is postponed at the end of the contract. In this case, this sum will partially offset the amount of end-of-contract compensation.
The commercial agent's right to compensation becomes void if he does not claim it by any means (usually by registered letter with acknowledgement of receipt) within one year of the end of his contract. This period of foreclosure is independent, under French law, of the stature of the limitation period which is five years from the end of the contract and which is interrupted by any legal action.

The agent of common interest

The agent of common interest is also entitled to compensation but his rights are more limited or even precarious. Above all, this right to compensation is not of public policy and can, therefore, be excluded or modified by the contract. The end-of-contract compensation will not be due to this agent if the contract is terminated for a just cause. The concept of serious fault is not required here. The amount of compensation is generally calculated in the same way as for the commercial agent.

Other peculiarities

The agent's contract must, of course, anticipate the nature and content of the agent's mission, the rights and obligations of both parties as well as certain obligations allowing a fair balance between the parties, such as, for example, turnover commitments, reporting requirements and collection and transfer of personal data. In principle, the parties are free to organize their relation, subject however to the provisions in the Commercial Code or in the Civil Code. The most sensitive provisions to anticipate under French law are the ones below.

  • Although the contract does not expressly stipulate it, the commercial agent has the obligation to obtain the prior consent of the principal to represent a competitor. That being said, it is highly preferable to define what the competitors are or what the competing products are (principle of functional substitutability). The commercial agent has an obligation of accountability which, in international relations, must lead him to scrupulously inform his foreign principal. It is therefore advisable to clearly outline the headings of an information report and the periodicity of it.

  • The Civil Code has introduced since 2016 (art. 1195) the possibility for the parties to a contract to renegotiate it, if for a party the performance of its obligations became excessively expensive and when it had not accepted to assume the risks of such a unforeseeable change in circumstances.

  • Subject to adjustment of the contract, the basic rule is that the commercial agent is entitled to a commission when the commercial transaction has been concluded thanks to his intervention. But article L 134-6 states that when the commercial agent is in charge of a particular geographical area or group of persons, he is also entitled to a commission for any transaction concluded with a client belonging to that group or geographical area, without having to provide proof of his intervention. This provision applies even if no territorial exclusivity has been granted. But this rule can be ruled out because it is not public policy.

  • French law requires the principal to pay a commission no later than the last day of the month following the quarter in which the commission was accrued. According to the Commercial Code, the commission is accrued as soon as the principal has delivered or as soon as the customer has executed his part of the operation (which is to pay). Even if these provisions are of public order, the contract may specify that the right to commission is acquired only at the time of payment of the price and pro-rata.

  • The commercial agent contract may stipulate a post-contractual non-competition clause but this one, to be valid, must be limited to the very same geographical area (or the group of persons) entrusted with the agent as well as the type of goods and services provided for in the contract. It is therefore not possible to stipulate a post-contractual non-competition clause with a wider scope than the commercial agent contract. But even within these maximum limits, French courts apply the principle of proportionality to check whether this clause does not have the effect of preventing an ex-agent from exercising any professional activity. No financial compensation is required by law.

  • Article L 134-7 of the Commercial Code provides that the commercial agent will be entitled to commissions after the end of his contract in the two following cases:
    • where the third party's order has been received by the principal before the end of the agent's contract, regardless of the date on which the sale is made and the price paid.
    • when the transaction is concluded between the principal and his client within a “reasonable” time after the end of the agent's contract and provided that the transaction is mainly due to his activity during the contract (which can be presumed when he was exclusive).

However, article L 134-7 is not of public order, so the provision may be amended or excluded by the contract.

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