Practical Guide to International Commercial Agency Contracts

  • Austria
  • Brazil
  • China
  • France
  • Germany
  • Greece
  • Israel
  • Italy
  • Mexico
  • Netherlands
  • Poland
  • Romania
  • Russia
  • Spain
  • Switzerland
  • USA

The contract of commercial Agency is one of the most used agreements in international trade. In the European Union the legal framework is set by the Council Directive 86/653/EEC, but there are still significant differences among national regulations and jurisprudence of the Member States. Outside the EU, commercial Agency is often not regulated by a specific law or can be subject to laws at the federal or state level. In most countries even if the Parties are free to choose the law applicable to an international Agency agreement and the dispute settlement method, certain provisions provided by local laws cannot be opted out. And while the Agent is usually entitled to a goodwill (clientele) indemnity upon termination of the contract, such indemnity in some countries can be excluded. When negotiating an international Agency contract, therefore, it is very important to know what the available options are, which law is most favorable for the interests of the Principal or the Agent, what provisions cannot be derogated, which is the best jurisdiction for dispute resolution, and so on. In this Guide our legal experts provide some practical answers and advice.

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Greece

How are agency agreements regulated in Greece?

In Greece, commercial agency agreements are mainly regulated by the repeatedly amended Presidential Decree 219/1991, which has been enacted in compliance with Directive 86/653/EEC. The agreements in question are supplementarily regulated by articles 211 to 235 (general rules on representation) and 713 to 729 (general rules on agency) of the Greek Civil Code.

The aforementioned Presidential Decree, which applies to commercial agency agreements, relating to both, the sale of goods and the provision of services, includes provisions regarding the duty of the parties to act in good faith (art.4), the agent’s entitlement to a fee and or a commission (art.5-7) as well as the agent’s right to indemnification/compensation (art.9), the conclusion and termination of the contract (art.8) and the restraint of trade clause (art.10).

What are the differences from other intermediaries?

According to the applicable Greek legislation, the commercial agent is a self-employed intermediary that has the authority to negotiate/promote/sign contracts regarding the sale of goods or the provision of services in the name and on behalf of a third party (the principal), in exchange for an appropriate fee and/or commission.

Hence, the commercial agent differs from other intermediaries in multiple ways. First of all, the commercial agent acts as an independent entity and as such should not be confused with a sales representative, who is an employee entrusted to promote sales on behalf of his employer. Moreover, the commercial agent is distinguished from an occasional business finder because of the permanency of the relationship between the commercial agent and the principal. Last but not least, the commercial agent acts in the name and on behalf of the principal in contrast with a distributor, who having already purchased the goods/services from the principal, acts in his own name and on his own behalf and thus bears the business risk.
What is also worth noting is, that no other intermediary agreement other than commercial agency is directly regulated by law. However, according to two Supreme Court Decisions of 2013 (Arios Pagos 15 & 16/2013), it was found that the aforementioned Presidential Decree applies to every intermediary, to the extent that the criteria of this law are met by each and every agreement in question.

How to appoint an agent in Greece

According the applicable provisions, there is no a requirement for the commercial agency agreement to be formed in writing. To the contrary, this may be concluded orally or even tacitly.

As to foreign principals, there are no specific restrictions applicable, for entering the domestic market other than the general requirements that are applicable to the free movement of goods and services within the EU.
On the other hand, consideration should be given to certain formalities that apply to local commercial agents. In particular,

  • as with anyone who wishes to start a business in Greece, the commercial agent needs to enroll himself to the competent Public Fiscal Service and obtain a Tax Identification Number.
  • the agent must also be registered as a commercial agent with the competent Chamber of Commerce, unless the agent is based in another Member State.
  • where the agent is a recognized agent in another EU Member State or the EEA, then, as with every person that carries out commercial transactions through a main establishment or a branch in Greece, he will have to register with the General Commercial Register.
Is it possible to apply a foreign law?

Generally speaking, the applicable law, will usually be Greek Law, unless the parties have chosen to submit their agreement to a different law.

In Greece, it is indeed possible for the parties of a commercial agency agreement to choose a foreign law (even the law of a third non-EU country) to partly or wholly govern the contract. However, this needs to be in accordance with the conditions set forth in Article 3 of Regulation (EC) 593/2008 (“Rome I” Regulation). More specifically, the choice of law shall be made expressly or must be clearly demonstrated by the terms of the contract or the circumstances of the case respectively. In the absence of any choice of law, the agreement is governed by the law of the country, where the agent has its “habitual residence” in accordance with Article 4 of the “Rome I” Regulation.

Nevertheless, the freedom of the parties to choose the governing law, is not unlimited. In case the parties choose the law of a third country (non-EU MS), this will govern the agreement, only under the condition that, it does not evade the provisions of articles 17 to 19 of Directive 86/653 (art. 9 of the Presidential Decree), which are of mandatory nature such as, the protection of the freedom of establishment and the operation of undistorted competition in the internal market (Ingmar, C-381/98). But even in case the parties choose the law of another EU MS that meets the minimum protection requirements, the domestic Court can reject the chosen law in favor of the law of the forum, if it can justify in detail, that the agent needs the even stronger protection granted by the provisions of mandatory nature of the applicable Greek legislation (Unamar, C‑184/12).

The same rules apply also in the case that foreign law is applicable, regardless of whether or not the parties chose it (i.e. where the agent’s “habitual residence” is in a country other than Greece).

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

As regards the submission of disputes arising from an international agency agreement to a foreign jurisdiction, this is possible even in absence of an explicit choice of the parties. More specifically in accordance with Art.4 and 7 of EU Regulation n.1215/2012 (“Brussels 1” Regulation), when both parties are established within the EU and the dispute in question (arising from the agency agreement) is of financial nature, the competent Courts are those of the MS, where the defendant has its domicile or where the performance of the agency contract takes place. In contrary, when the defendant is commercially active in Greece, but is based outside the EU, the aforementioned “Brussels 1” Regulation does not apply and according to Greek Civil Procedure Code, the Greek Courts are competent to judge on the dispute. 


However, under the Greek Law (in case one of the parties is not established in an EU MS) and compliant to Art.25 of “Brussels 1” Regulation (in case both parties are established in the EU) it is also allowed and probably more common, for the parties to conclude in writing a clear choice of the competent Courts, specifying at least the country of jurisdiction (prorogation of jurisdiction). Regardless of any choice of jurisdiction, the parties may, in any event, seek provisional protection before the Courts of the MS, where the applicant is established.

As for the submission of disputes arising from an international agency agreement to foreign arbitrators, this is allowed, provided that such agreement has been, or will be concluded in writing.

The aforementioned “Brussels 1” Regulation does not apply, where the parties have already chosen foreign Arbitrators. Greek Law 2735/1999 that incorporated the UNCITRAL Model Law in the Greek legal system regulates international commercial arbitration proceedings.

Agency agreement termination

Agency agreements may be agreed as open ended or for a limited time-period. In the latter case the agreement is terminated upon expiry of its duration,under the condition that the parties cease their cooperation. If the agreement continues, the agreement is automatically converted to an open-ended agreement.

Open-ended agency agreements, may be terminated at any time by either party unilaterally, by giving notice to the other side. The notice period is provided for by Law and is tiered according to the duration of the agreement.

More particularly, the notice period is:

  • one month, for the first year of the agreement;
  • two months for the second year;
  • three months for the third year;
  • four months for the fourth year;
  • five months for the fifth year and
  • six months for the sixth year of for any of the following years of the agreement.

It is not allowed for the parties to agree on shorter periods of notice. However, there is always the possibility for an agreement to be terminated at any time immediately (without any notice), on the basis of serious grounds for termination, such as the failure of
either party to carry out all or part of his obligations and/or in case of exceptional circumstances.

As a general rule that is to be applied per se, Greek Courts have found, that based on the conditions of good will and fairness, any reason that makes the continuation of the agreement impossible or/and any substantial breach of the contract can serve as a serious ground. Therefore, it is recommended for the parties to include beforehand a term in the contract about what could constitute a serious ground for immediate termination. In general, exceptional circumstances are to be construed restrictively, so that they include only cases of force majeure such as unusual and unforeseeable circumstances beyond the control of the party by which these are invoked.

The death of the commercial agent always constitutes a due cause for the automatic termination of the contract.

Termination indemnity

Following the termination of an agency agreement the agent – regardless of the way and the reasons of the termination- has the right to be indemnified, provided that both of the following conditions are met:

  • he has contributed to the addition of new customers to the clientele of the principal or has significantly advanced the business, of the latter with existing customers; and
  • the principal continues to derive substantial benefits from the business with such customers.

The amount of the indemnification, which is labeled clientele compensation, must be equitable to the commission (profits) lost by the agent on the business transacted with such customers. This entitlement to an indemnity does not constitute a regular compensation based on fault or negligence of the principal but rather a sui generis claim. For the calculation of the indemnity all the relative circumstances are to be taken into consideration, including the existence of a non-competition clause in the contract, the total amount of the principal’s financial benefits and the agent’s loss of future commissions. However, the total amount of the indemnity cannot exceed the annual average of the annual fees and/or commission collected by the agent over the past five years. In cases where the duration of the
contract is less than five years the indemnity shall be calculated on the average for the respective period.

In order for the agent to seek the indemnity, he must notify the principal within one year following the termination of the agreement about his intention to pursue this entitlement. Such a notification does not need to be formal nor does it need to mention the total amount of the compensation sought. If the agent does notify the principal of his intention, then his claim is subject to a five-year statute of limitation.

In addition to the aforementioned indemnity, the agent is additionally entitled to compensation for any damage suffered by him by the termination of the agency agreement, pursuant to the general provisions of the Greek Civil Code. More particularly, the agent has the right to receive appropriate compensation in the event of an illegal termination of the agreement on behalf of the principal or in case the agent terminated the contract due to a substantial breach of its provisions by the principal. This compensation includes any expenses incurred for the performance of the contract but not amortized yet and any loss of profit for the whole period the agency agreement was supposed to last.

The aforementioned indemnity or compensation is not payable:

  • where the principal terminates the agency contract because of a default attributable to the commercial agent which would justify the immediate termination of the contract under Greek law; or
  • where the commercial agent terminates the agency contract on his own initiative, unless such termination is justified by circumstances attributable to the principal or on grounds of relating to the agent such as old age, infirmity or illness in consequence of which the agent can no longer, reasonably be required to continue his activities; or
  • where, with the agreement of the principal, the commercial agent assigns his rights and duties under the agency contract to a third person.

The parties may not derogate from the indemnity and/or compensation provisions to the detriment of the commercial agent before the agency contract expires. Thus, although such a waiver clause included in the agency agreement would be declared null and void by the courts, this would not be the situation where the parties enter into a subsequent agreement, which partially or in whole derogates from the agent’s entitlements or includes a clause that determines the exact amount of the indemnity, under the condition that this is fair and does not interfere with the ratio of the provision.

Other peculiarities

There are several aspects to be considered when considering the conclusion of a commercial agency agreement in Greece.

  • First of all, the principal has the right to impose upon the agent a non-competition obligation. Considering, that such a clause is a restraint of trade, it has to be concluded in writing and must be restricted only to the geographical area entrusted to the commercial agent and must cover, only the goods which are the subject matter of the respective agency agreement. The term of duration of such a clause cannot exceed one year, following the termination of the commercial agency agreement. However, it is at the national Courts’ discretion to reduce the obligations on the parties resulting from such an agreement, i.e. find that the non-competition clause should apply for a smaller term.

  • In relation to the agent’s commission, the commercial agent is entitled such a fee on commercial transactions concluded during the period covered by the agency agreement:
    1. where the transaction has been concluded as a result of his action; or
    2. where the transaction is concluded with a third party whom the agent previously acquired as a customer for transactions of the same kind.
    3. where he is entrusted with a specific geographical area or group of customers and the transaction has been entered into, with a customer belonging to that area or group.

The commercial agent is also entitled to commission on commercial transactions concluded after the termination of the agreement, provided that the transactions in question are mainly attributable to his efforts during the period of the contract and this transaction was entered into within a reasonable period after the termination of the contract as well as in the case the order for the transaction reached the principal or the agent before the termination of the agreement.

The commission shall become due as soon as and to the extent that one of the following circumstances applies: the principal has executed the transaction (i) or the principal should have executed the transaction, according to his agreement with the third party (ii) or the third party has executed the transaction (iii)

  • As to tax-related aspects, a foreign principal might be subject to corporate income tax in Greece for income generated within Greece in the context of a commercial agency agreement. Bilateral tax treaties may apply depending the country, where the foreign principal is established. Furthermore, any commission paid to the agent is subject to the Value Added Tax (VAT).

  • Finally, the overarching principals of Civil Law, state that a principal must generally act dutifully and in good faith towards the commercial agent.