Practical Guide to International Commercial Agency Contracts in Slovenia

Practical Guide

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Slovenia

How are agency agreements regulated in Slovenia?

In Slovenia, commercial agency agreements are governed under Articles 807 through 836 of the Obligations Code (in Slovenian: Obligacijski zakonik, Official Gazette of the Republic of Slovenia No. 83/01 as amended, “OZ”). Those provisions of the OZ implement the relevant provisions of 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 (“EU Agency Directive”) into Slovenian law.

In addition, provisions of law governing contracts in general shall apply with respect to the matters where there are no specific rules under the agency provisions. Special attention shall in particularly be paid to the provisions on general terms and conditions which shall apply also in B2B relations. Namely, Slovenian law provides specific rules in the event the contract is prepared or otherwise proposed by one party or the agreement is using content printed in advance by one party or if the general terms and conditions prepared by one contracting party apply.

Antitrust laws of any affected market might also apply to agency agreements in case of the agents bearing financial or commercial risk in relation to the activities for which they have been engaged by the principals (due to which the agents may not be considered as a genuine commercial agents). Assessment whether the antitrust laws shall apply shall be made in accordance with and using the criteria set forth under the EU competition rules (including Guidelines on Vertical Restraints (Text with EEA relevance) 2010/C 130/01). In case the conditions for application of antitrust laws are fulfilled, the relevant Slovenian law would be the Prevention of Restriction of Competition Act (in Slovenian: Zakon o preprečevanju omejevanja konkurence, Official Gazette of the Republic of Slovenia, No. 36/08 as amended; “ZPOmK-1”). The prohibitions laid down under the ZPOmK-1 are substantially the same as under the Article 101 TFEU. The same applies for the possibility and conditions for exemption in line with Article 101(3). Accordingly, an agreement may benefit from the exemption under the Article 101(3) TFEU and the Vertical Block Exemption Regulation (Commission Regulation (EU) No. 330/2010 of 20 April 2010). In relation to vertical restraints, Slovenian legislation explicitly refers to EU legislation which shall apply even if there is no indication of an effect on a trade between EU Member States.

What are the differences from other intermediaries?

According to Article 807 of the OZ commercial agent is a legal or natural person that independently and with a purpose of gaining profit performs agency activities as its registered activities (OZ does not use the term “self-employed agent” used in the EU Agency Directive). Commercial agent shall make proper efforts to negotiate agreements between the principal and third parties and to mediate between them. In principle, the agent may not enter into agreements in the name and on behalf of the principal unless the principal grants an authorization (either general or special) to an agent empowering the agent to enter into agreements in the name and on behalf of the principal. The agent’s remuneration (‘commission’) is according to the law success-based, except in case of exclusive agreements (where the agent is entitled to commission regardless of his efforts). The agent must act honestly, in good faith and with care for the principal’s interests. Without the principal’s consent the agent is prohibited to work for another principal in the same territory and for the same types of transaction or for the same circle of clients. The principal may appoint several agents for the same territory or for the same types of transaction, unless agreed otherwise between the parties.

The agent has to be distinguished from the following sales intermediaries:

Employed sales representative. The employed sales representative performs work according to the instructions of the employer and under the supervisions of the employer (unlike the agent who may freely organize his working process). The employer determines the employed sales representatives’ working hours, place of work, customer visits and others. Employee does generally not have authorization to conclude agreements on behalf of the employer and the legal representatives of employer must sign the contracts on behalf of the employer. As regards remuneration, the agent usually earns a fixed salary (and receives also other payments prescribed by law or collective bargaining agreements, such as holiday bonus), whereby a part of the salary may present so called “variable salary” which depends on the performance of the employee. The provisions governing agency agreement with respect to the payment do not apply to remuneration of the employed sales representatives.

Intermediary/Brokerage. Through a brokerage contract the broker undertakes to endeavour to find and place in contact with the principal a person that will negotiate with the principal to conclude a specific contract and the principal undertakes to make a specific payment to the broker for such if the contract is concluded (Article 837 of the OZ). The broker is usually entitled to payment only if the contract with a third party is concluded, however it may even be agreed that the broker is entitled to payment also if his endeavours fail. Contrary to the agent, the broker has a duty of care towards both parties and not only towards the principal and the broker shall be liable for damages to both parties (i.e. the principal and the third party with which the principal enters into transaction) if the parties suffer damages due to culpable behaviour on the side of broker. As a general rule, each party shall bear half of the commission payable to the broker.

Commission agent. The commission agent differs from the agent since it is selling the goods in his own name but on the account of the principal. The rights and obligations under the concluded transactions must be transferred to the principal otherwise the principal may not enforce rights and obligations towards third parties. OZ regulates commission agents under Articles 788 through 806. also elements of the storage agreement.

Distributor. Distributor is buying goods or services in its own name and on its own behalf and is further selling those on its own name and on is own behalf. Typically, the supplier does not bear the risks with respect to the further sale of the goods or services by the distributor to the distributor’s customers. Typically, the distributor is independent at organizing its business. In the event that distributor performs typical tasks of an agent and its position is significantly similar to the agent’s one in the agency relationship and due to mentioned the relationship may be qualified as to have a legal nature of an agency relationship, certain provision of agency agreement may mutatis mutandis be applied to distribution relationship.

Franchisee. Franchisee performs business activity in its own name and on its own account and in accordance with the franchise agreement. The franchisor usually provides the franchisee with a business concept of distributing goods and the intellectual property rights in this regard, for which the franchisee has to pay a franchise fee. By entitlement to use the franchisor’s business concept, know-how and other IP rights, the franchisee may acquire advantages at distribution of goods in the market.

How to appoint an agent in Slovenia

There is no explicit rule under the Slovenian law on the manner of appointment of an agent. Therefore, the agent may be appointed by a letter of appointment executed by both parties, by a written agency agreement, by exchange of correspondence or even by conclusive acts. A verbal appointment or a verbal agency agreement would in principle also be sufficient and legally binding.

However, the OZ explicitly provides that each party may request that a written document be compiled on the content of the agency agreement, including all the latest changes, and such a document must be signed by the other party. The parties may not waive this right.

There are no registration, notification or similar requirements under the Slovenian laws with respect to agency agreements. The Slovenian agents performing agency activities shall, however, comply with all the mandatory general laws for the performance of business activities in Slovenia (such as registration obligation with the competent business register and with the tax authorities). Agents performing agency activities in Slovenia shall acquire all the necessary permits, licenses and/or authorizations for performance of agency activities where required (for example real estate agents must acquire specific license; insurance agents must acquire permit from the Insurance Supervision Agency, etc.) and must comply with all general laws for running a business in Slovenia (e.g. payment of social security contributions and taxes).

Is it possible to apply a foreign law?

An International Agency Agreement may be governed by a foreign (non-Slovenian) law.

The possibilities and limitation set forth under the Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (“Rome I Regulation”) apply and the Slovenian courts would in case of dispute apply the Rome I Regulation. For contracts concluded on or before 17 December 2009 the law governing the relationship between the parties to the agency agreement will be determined pursuant to the provisions of the Private International Law and Procedure Act (Zakon o mednarodnem zasebnem pravu in postopku, Official Gazette of the Republic of Slovenia No 56/99, “ZMZPP”). Generally, the contract can be governed by the law chosen by the parties, whereby the choice of law shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.

The choice of law clauses are in principle fully recognized by Slovenian courts. The courts of Slovenia would refuse to recognize the choice of law clauses only due to the overriding mandatory provisions (exception under Article 9 of the Rome I Regulation). If all the elements relevant to the situation at the time of the choice of law are located in Slovenia and not in the country whose law has been chosen, the Slovenian courts would in such case (regardless of the choice of law clause) apply mandatory provisions of the Slovenian law (see Article 3, para. 3 of the Rome I Regulation).

If the agency agreement does not contain a valid choice of law clause it shall be governed by the law of the country where the agent has its habitual residence. Agency agreement is considered as an agreement for the provision of services by the agent to the principal. Therefore, the law of the country where the agent as a service provider has his habitual residence shall apply (Article 4, 1(b) of the Rome I Regulation). Same applicable law would be applied in case of applicability of the ZMZPP under which the relationship is governed by the law of the habitual residence of the party performing the characteristic fulfilment in the relationship. Therefore, foreign principals who wish that the agency agreement is governed by the laws of the country where they are seated/registered shall pay special attention to the applicable law provision in the contracts concluded with the agents.

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

Disputes arising from an International Agency Agreement may be submitted to a foreign jurisdiction or to a foreign arbitration in the event the parties have chosen such a venue for dispute resolution.

The validity of the agreement on the courts having jurisdiction in case of dispute between the parties shall be assessed in accordance with the Regulation (EU) No. 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Regulation Brussels I recast”). In situations where the Regulation Brussels I recast does not apply, international treaties shall be applied (e.g. the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (Lugano Convention)). For other international agreements, agreements on jurisdiction are possible in accordance with the ZMZPP. It shall be noted that under the ZMZPP the Slovenian courts may be chosen to have jurisdiction only where at least one of the parties to the agreement is a Slovenian entity and foreign courts may be agreed to have jurisdiction only if at least one of the parties is a foreign entity.

If the parties have agreed to submit the dispute to a (foreign) arbitration, such agreement shall be concluded in writing. As a general rule, any claim which the parties may freely dispose with (except in cases where the exclusive jurisdiction of Slovenian courts is determined) may be submitted to arbitration. In the event that all the parties to the agreement are Slovenian entities, they may nevertheless agree that a foreign arbitration shall have jurisdiction to resolve any disputes with respect to claims which the parties may freely dispose with (except in cases where the exclusive jurisdiction of Slovenian courts is determined).

When the parties do not agree on the competent body to resolve any disputes arising out of the agency agreement, the following rules apply: As a general rule, the party domiciled in a (Member) State shall be sued in that member state. A party domiciled in a Member State may also be sued in the place of performance of the obligation in question in cases of commercial agreements (Article 7(1) of the Regulation Brussels I recast; Article 56 of the ZMZPP). In cases where the ZMZPP applies, the Slovenian courts shall not have jurisdiction if there is such a connection between the matter and a foreign country which would present grounds for exclusive jurisdiction of Slovenian courts if such a connection existed between such matter and Slovenia (Article 50(2) of the ZMZPP).

As explained in Section 8 further below, an agent performing agency activities mainly in the EU member states is entitled to an indemnity/compensation upon termination according to articles 17 through 19 of the EU Agency Directive and the respective national laws. Such entitlement is internationally mandatory. Although the Slovenian courts have so far not yet addressed such an issue, it is expected that the jurisdiction/arbitration clauses leading to a court/arbitration situated outside the EU of which it is expected that it will not grant said internationally mandatory entitlement would be considered ineffective.

Recognition of a judical or arbitral order issued abroad

The recognition and enforcement of decisions issued by foreign EU courts in Slovenia is governed by the Regulation Brussels I recast. With respect to decisions issued by the courts of Norway, Switzerland and Iceland, the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters (Lugano Convention) applies. In case of the judicial decisions issued abroad by the courts of other countries, the provisions of international (bilateral) treaties shall be applied, if any, otherwise the decisions of foreign courts shall be recognized in accordance with the ZMZPP. Procedural rules applicable to recognition of foreign judicial decisions are set forth under the ZMZPP and the Civil Procedure Act (in Slovenian: Zakon o pravdnem postopku, Official Gazette of the Republic of Slovenia No. 26/99 as amended; “ZPP”).

Decisions of foreign courts are enforced in Slovenia in accordance with the provisions of the Claim Enforcement and Security Act (in Slovenian: Zakon o izvršbi in zavarovanju; Official Gazette of the Republic of Slovenia No. 51/58 as amended; “ZIZ”). The enforcement of a foreign (non-EU) judicial decisions is only admissible in Slovenia if the Slovenian court has issued a declaration of enforceability (exequatur). Reasons for not recognizing a foreign judgment are very limited (e.g. public policy). Under the ZMZPP, there are some procedural barriers that would prevent the foreign judgment to be recognized, for example no reciprocity, previous decision issued by the Slovenian court regarding the same subject matter, exclusive jurisdiction of Slovenian courts for the dispute, defendant not being given opportunity to participate in the proceeding, etc.

Foreign arbitration awards shall be recognized in Slovenia in accordance with the applicable provisions of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Once recognized, the decisions are then enforced in Slovenia in accordance with the ZIZ.

Agency agreement termination

Agency agreements concluded for a definite term terminate automatically upon the expiry of the term for which the agreement is concluded. There are no further notice or other requirements, unless the agreement concluded between the parties provides otherwise. However, in the event that the parties continue to perform the agreement after expiry of the fixed term for which the agreement was initially concluded, the agreement shall transform into agreement for indefinite term and may be terminated according to the rules applicable to termination of agreements concluded for indefinite term.

Agency agreements concluded for indefinite term may be terminated by a termination notice served to the other party. In such case the agency agreement terminates upon expiry of the notice period. Notice period shall depend on the duration of the agreement; the following notice periods apply: minimum notice period shall amount to one month for each year begun of the validity of the agreement. If the contract lasts longer than five years, the notice period shall be six months. Notice period shall start running on the first day of the next calendar month in which the termination notice was given (unless the agreement explicitly provides otherwise) and shall expire on the last day of the relevant calendar month. The parties may agree on different notice periods; however, those shall be the same for both parties and shall not be shorter than the minimum notice periods prescribed by law. Termination notice may be given in any form, however written form is recommended.

An Agency Agreement (either concluded for definite or indefinite term) may also be terminated extraordinarily for serious reasons. In such case the agreement terminates with immediate effect upon service of termination notice to the other party. This right may not be limited or excluded by the agreement. Termination notice shall specify the serious reasons which present the grounds for termination, otherwise the termination shall be deemed to have been made with the notice period. An unjustified termination shall give the other party the right to claim damages occurred due to unlawful termination and the termination right to terminate the agreement without notice.

Goodwill indemnity is due to the agent upon termination of the agency agreement. For further details regarding goodwill indemnity claim, please see the response under the Section 8 further below.

Termination indemnity

According to Article 833 of the OZ, the commercial agent is entitled to indemnity claim upon termination of agency relationship. Such claim is due upon termination of the agreement. Slovenia has opted for indemnity system pursuant to Article 17(2) of the EU Agency Directive.

The agent is under the Slovenian law entitled to the indemnity claim if the agent brought new customers or significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits therefrom, or if payment of goodwill indemnity is equitable having regard to all the circumstances, in particular the loss of commission on transactions with such clients.

The amount of indemnity would depend on actual circumstances of the case. There are no further rules or formulas developed by Slovenian courts according to which the claim shall be calculated. The law however provides that when determining the amount of indemnity it shall be necessary to make appropriate consideration of the commission obtained by the agent for contracts concluded after the termination of the relationship with the principal and any prohibition on competitive activities after the termination of the relationship. The amount of the goodwill indemnity is, however, limited by the average annual commission over the last five years or the relevant shorter period since the conclusion of the agreement.

Slovenian law grants to the agent an indemnity claim also when an agreement concluded for a definite period terminates before the end of this period or when an agreement concluded for an indefinite period terminates before five years have passed since it was concluded. In such case the agent shall have the right to appropriate indemnity in the amount of the difference between the costs incurred by the agent in connection with the introduction of the product to the market and all the other costs incurred by the agent in connection with the performance of the contract, and the revenues obtained by the agent on the basis of the performance of the contract and the revenues the agent would in all likelihood have obtained by the end of the duration of the contract if performed throughout the fixed period or in five years from the conclusion of the contract if concluded for an indefinite period. The agent is entitled to this type of indemnity (i.e. indemnity specified under this paragraph) if the conditions for payment of goodwill indemnity claim specified under the previous paragraphs under this Section 8 are not fulfilled or if the indemnity under this paragraph would be higher than the indemnity calculated pursuant to the previous paragraphs.

The claim for indemnity upon termination of agency relationship may not be excluded or waived in advance. Payment of goodwill indemnity shall not exclude the agent’s right to compensation of damages or other claims the agent might have towards the principal due to termination of the agreement.

The agent shall notify the principal of his intent to enforce the right to an indemnity claim within one year upon termination of the agreement otherwise it looses the right to indemnity. Indemnity shall, however, not be payable if the agreement is terminated due to culpable reasons on the side of the agent, if the agreement was terminated by the agent (except where the agent terminated the agreement due to breach(es) committed by the principal or due to the agent’s age or disease) or if, based on the agreement between the agent and the principal, another agent enters into the agreement in place of the (previous) agent.

Other peculiarities

The agent shall be entitled to commission with respect to all the transactions/contracts concluded with the latter’s intermediation, and also for those contracts concluded by the agent if so authorised or by the principal, if the party was found by the agent. The agent which is granted exclusivity with respect to specific territory or customers shall also have the right to commission with respect to customers from those territories or with respect to agreements concluded with the allocated customers although the transactions were concluded without the agent’s intermediation services. It shall be noted that an agent may be entitled to commission also after termination of an agency agreement. Namely, the agent shall have the right to a commission for a contract concluded after the termination of the agency agreement if the contract is the result of the agent’s efforts during the agency relationship and was concluded within a reasonable time after the termination of this relationship, or if the third person’s offer to conclude the contract came to the agent or the principal prior to the termination of their relationship and this involves any of the contracts with respect to which the agent would be entitled to a commission during the agency relationship.

An agent shall be entitled to a commission in the amount agreed under the agreement, or in absence of the agreement on the commission, in the amount prescribed under the applicable tariff or (if tariff does not exist) in the amount which is customary in the area where the agent performs the activities for the principal, considering the type of agency transactions (if the agent performs activities in several territories, the customary commission at the place of the agent’s registered office shall be relevant). The agent shall acquire the right to a commission only if the third person performs its part of the obligations deriving from the transaction with the principal. The agent shall not have the right to a commission when it is clear that the contract will not be performed by a third party and the reason for the non-performance is not on the part of the principal. If in such case the commission already paid must be returned to the principal. If the contract between the principal and the third person is being performed through a longer period of time, the agent shall have the right to an appropriate advance on the commission.

It is also worth noting that the calculation period for payment of commission and the invoicing period shall be at least each 3 months (it is not permitted to agree on longer invoicing periods). An agent shall have the right to request the principal to submit an excerpt from the business books on all the transactions entitling the agent to commission and to notify the agent regarding all the circumstances affecting the commission. If the principal refuses the agent’s request or if the agent has doubts over the accuracy of the excerpt, the agent may request that an official auditor inspects the principal’s business books and documents in respect of the figures significant to the commission and report them to the agent (Article 826 of the OZ). The described right of an agent may not be limited or excluded.

According to Article 829 of the OZ the agent holds a statutory lien on all the sums collected from third parties on behalf of the principal as well as on all the principal’s things which are in the agent’s possession and on things which are in the agent’s possession on behalf of the principal; such a lien shall exist as a security for any and all outstanding claims of the agent towards the principal under the agency agreement. Hence, the agent shall not be obliged to deliver to the principal any item on which it holds a statutory lien until all the principal’s outstanding obligations towards the agent are fully satisfied.

In absence of an express contractual provision, the agent is not subject to a post contractual non-compete obligation. According to Article 836 of the OZ, a post contractual non-compete obligation may be agreed for up to two years after termination of the agreement and shall only be valid if agreed in written form and if it relates to the same area, the same persons and the same goods as those stipulated in the agency agreement. Where a contract is terminated for the reasons on the side of the principal, such non-compete obligation shall only be binding upon the agent if the principal paid appropriate goodwill indemnity to the agent upon termination of the relationship and if during the period when the non-compete obligation is binding the principal is paying the agent appropriate monthly compensation in an amount equal to the average monthly commission calculated based on the commission paid over the last five years of the agreement (or throughout the duration of the agreement if it was in force for less than five years). If the agent terminated the contract because of the principal’s culpable behaviour, the agent may, within one month after the termination, declare (by a written notice) that he will not observe the non-compete obligation. All the aforementioned provisions granting rights to the agent are mandatory and may not be deviated from to the detriment of the agent.

It should be noted that according to Slovenian law it is presumed that the employment relationship exists if elements of an employment relationship exist. Therefore, the agent shall not be de facto included in the principal’s organised working process and shall not carry out work in person under instruction and supervision of the principal, but shall remain independent and independently organize its work, working time and working process. Otherwise, it might be presumed that the elements of employment relationship exist between the agent and the principal. If there are elements of an employment relationship in these relationships, such person (agent) could under certain conditions request to be recognised as an employee of the principal, which would, among others, lead to additional payment obligations of the principal towards this person (difference in salary, holiday bonus, other additional payments available to regular employees – for the entire period of their work for the principal).

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