1. A UNIFORM MODEL FORM FOR INTERNATIONAL TRADE

When negotiating agency agreements abroad, one of the main difficulties which parties engaged in international trade are faced with is the lack of uniform rules for agreements of this type. Since there is no globally agreed uniform legislation on the subject (unlike for example in the case of international sales contracts¹), parties must rely on national laws on agency which: (i) do not take into account the specific needs of international trade (since they have been enacted in primis for domestic agreements), and (ii) substantially differ from one country to another.

An important step towards the harmonization of national laws, has been made within the European Union, in virtue of the EEC Directive n° 86/653 of 18 December 1986,² which has been implemented in all Member States and has influenced the development of legislation in countries outside Europe. However, the directive does not dictate an outcome with respect to all aspects of the contract, leaving the Member States free to choose, with regard to several matters, between alternative solutions; moreover, it leaves Member States free to maintain (or possibly adopt in the future) provisions which derogate from the directive in favour of the agent. This means that even within the European Union there are still important differences between the national laws on commercial agency. And, if we consider the rest of the world, the differences are much greater.

For the above reasons the ICC believes that there is space for an alternative solution, consisting in the use of uniform contractual rules, not based on any specific national law, but incorporating the prevailing practice in international trade as well as the principles generally recognised by the domestic laws on agency.

In preparing this model form, the working group has tried to find fair and balanced solutions to the main problems arising from an agency relationship, in accordance with prevailing legislative standards (and in particular those indicated in the European directive). However, since it is impossible to make uniform rules and, at the same time, to respect every rule of the various national laws (which moreover may contradict each other), the model form may contain some clauses which are not in accordance with specific mandatory provisions of a particular legal system. However, since it is in line with the basic principles of domestic agency laws, the risk of conflict with such provisions (and in particular with domestic rules which would remain applicable whatever the law applicable to the contract) should be almost non-existent; in any event, in order to cover exceptional situations of this kind, it is expressly stated that, if a conflict with ordre public rules of the country of the agent arises, the latter provisions should in any case be considered, if their application appears reasonable in the context of international trade (Article 24.2.).

2. SCOPE OF APPLICATION

This model form has been prepared on the assumption that it would apply only to international agency agreements, with self-employed commercial agents,³ acting for the sale of goods.

2.1 International agreements

In this respect it is undisputable that international agency contracts should be governed by special rules in order to take into account the special situation which exists in an agency agreement between parties of two different countries.

Since the present model form has been established especially for these situations, it will, in principle, not be appropriate for domestic contracts, i.e. contracts between parties having their place of business in the same country.

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The parties are therefore advised not to use this model form for domestic contracts, unless they check which amendments are necessary in order to comply with a local situation.

2.2 Agent acting as reseller

This model deals with commercial agents, not with distributors/resellers. However, it sometimes happens that the agent also does some business as reseller.⁴ Thus, for instance, in the fashion industry where the customer makes seasonal orders, agents sometimes keep a small quantity of products for supply to customers who need further goods. Another possible situation is that where the agent owns a shop of its own. When this is the case, parties should provide in the contract appropriate rules (e.g. by expressly stating if the agent is entitled to commission on such sales, or if its margin has already been accounted for in the price of the products). Another critical issue might be that of deciding whether the turnover made as reseller should be considered for calculating a possible goodwill indemnity.

In all these cases such activities will not change the nature of the agency agreement, provided they remain of limited importance, so that they can be considered to be merely accessory.

On the contrary, if the resale activity becomes the prevailing one, parties are advised to reorganize the contractual relationship, for example by replacing the agency agreement with a distributorship contract.

2.3 Contracts with employed agents

In some countries the law not only provides for specific rules regarding independent commercial agents but labour law may also have special provisions regarding employed sales representatives. Parties should therefore take care to specify clearly that the subject of the contract is an agent. In most countries that protect employed sales representatives, it is accepted that contracts with legal entities will not fall under the scope of labour law.

Note, though, that in some countries, even when an agent is not qualified as an ‘employee’, the agent may be protected under labour law in certain circumstances where the agent is considered not to be truly independent.

2.4 Buying agents

This model is meant for agents who represent a seller of goods, without taking into account so-called “buying agents” (i.e. agents who promote the purchase of goods, acting for the buyer).

2.5 “Service” agents

The model form is intended for the most common case of agents selling goods, and could need adaptation should it be applied to agents concerned with the promotion of services.

2.6 Consignment of the goods

It happens frequently that the principal wishes to appoint the agent as consignee of a stock of goods (or spare parts) placed in the agent’s country. This involves however a number of special problems, including application of antitrust laws or particular provisions of tax laws, which should be dealt with in a separate contract. Consequently the problems of consignment of goods have not been considered in this model form.

2.7 Agency as primary activity

This model form has been prepared on the assumption that the commercial agent acts on a full-time basis. Should the commercial agent have other main professional activities and act as an agent only as a secondary activity, in many countries, the statutory rules on commercial agency might not be mandatory. Parties should check whether the model form is appropriate for such a secondary activity.

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3 THE APPLICABLE LAW

This model contract has been based on the assumption that it will not be governed by a specific national law, but only by the provisions of the contract itself and the principles of law generally recognised in international trade as applicable to agency contract (also called “lex mercatoria”). The purpose of this solution is to ensure that the rules of this model form can be applied in a uniform way to principals and agents of different countries, without the interference of national laws, which may differ on a number of points of detail,⁵ without giving one party the advantage, and the other party the disadvantage, of applying one party’s national law.

Of course this solution, while avoiding the particularities of national laws, implies (at least for matters not expressly governed by the contract clauses) the recourse to less precise (and predictable) rules than those contained in the domestic laws on agency (although not all countries have detailed rules on commercial agency contracts).

The drafting group is of the opinion that this can be overcome by making a reference to the Unidroit Principles of International Commercial Contracts,⁶ which offer a reasonably foreseeable legal framework for most issues which may arise.

In fact, the Unidroit Principles offer adequate solutions to the majority of contractual problems of a more general nature (e.g. formation of contract, validity, performance, non-performance, damages, etc.). Only in some very exceptional cases the provisions of the Unidroit Principles may not actually reflect the expectations of international trade:⁷ however, when this happens, the general principles of international trade and the trade usages will prevail over such particular provisions of the Unidroit Principles on the basis of Article 24.1.A, which puts the various sources incorporated by reference in the following hierarchical order: contract clauses, general principles of law, trade usages, Unidroit Principles.

In any case, if the parties wish to have their contract governed by a specific national law, they can use the alternative set forth in Article 24.1. B. In such case they should carefully check if this model form conforms to all provisions and/or judicial precedents of the national law they have chosen.⁸ This alternative (national law) is preferable if parties submit the contract to the jurisdiction of ordinary courts (see Article 23) instead of arbitration.

When choosing a law other that the law of the agent, parties should check whether this choice is fully effective.⁹

In any case, whenever disputes are not submitted to arbitration, it is recommended to submit the contract to a national law, by choosing the Alternative B of Article 24.1, since it is very unlikely that national courts may accept that the contract be governed by a-national rules instead of a domestic law.

4 ANTITRUST RULES AND AGENCY

Since this model is intended for international trade generally, it should in principle not cover issues which relate to specific countries or groups of countries. However, as regards the European Union it appears justified to make an exception in consideration of the great number of countries covered.

As a general rule commercial agency agreements do not fall under the prohibition of Article 101 of the EC Treaty because they are not considered to constitute an agreement between independent

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undertakings for the purpose of Article 101. Only in special cases where the agent bears risks or costs relating to the sale of the goods which would normally be for the principal (e.g. advertising, transportation, repair and assistance of products, stock of products and/or spare parts), Article 101 may apply and the parties will have to check if the contract conforms to Regulation 330/2010.¹⁰ Under such regulation the agent must have the right to accept non solicited orders from customers outside the contractual territory; the agent must be free to grant price reductions on its own commission; a possible non-competition clause (prohibition to promote products of competitors of the principal) should not last more than five years and should in any case not apply after contract termination.

Since situations where contracts with commercial agents fall under Article 101 are rather exceptional, this model contract does not contain clauses specifically drafted to meet this situation. If parties think that their agency contract might fall under Article 101, they should seek expert advice for drafting the appropriate clauses.

5 SALES THROUGH THE INTERNET

Since e-commerce has opened new possibilities for marketing products, the working party has decided to deal with the issue if and to what extent sales made by the principal through its website should fall under the exclusivity, by adding a new clause 13.5 and by retaining Article 6.5 on limits on agent’s right to sell on the Internet.

The issue is not simple since the situations where the principal sells through its website may be very different.

• In some cases (e.g. for products sold directly to professional users, such as machine tools) the principal will reach through the Internet exactly the same customers with whom the agent is normally dealing and thus have a substantial impact on the agent’s business.
• In other cases the Internet may be a means to promote the products at least in part to new categories of customers, which are not actually in the reach of the agent. For example, a wine producer sells through the Internet to consumers, while the agent promotes sales to wine shops, restaurants, wholesalers, etc.

While the first situation implies that the principal is making direct sales on the same market where the agent is carrying out its activity (and it appears therefore appropriate at least to warrant the agent commission on such sales), in the second case the principal is opening a new distribution channel and it may therefore be reasonable not to pay the agent a commission on such sales, provided the Internet sales do not interfere with the agent’s activity.

It is for this reason that the working party decided to have two alternative solutions, respectively in Articles 13.5. A and 13.5. B. Parties are invited to use alternative B only in cases where the sales through the Internet do not appreciably interfere with the agent’s activity.

6 PROVISIONS ON INDEMNITY

There are provisions in several countries which grant the agent an indemnity if the contract expires or is terminated for reasons other than a default attributable to the agent. Such “indemnity” may be construed as a compensation for goodwill created by the agent and which accrues to the principal after the end of the contract, or as a compensation for the loss suffered by the agent (e.g. the commissions the agent would have earned had the contract lasted for a longer period or the investments agent would have amortised if the contract had not been terminated) as a consequence of the expiration or termination of the contract.

These two solutions have been incorporated (as alternatives) in Articles 17.2 and 17.3 of the EEC Directive. In fact they have the same purpose, i.e. to compensate the agent for the loss of goodwill when the contract is terminated without its fault: we will hereafter refer to the above indemnity or compensation as “goodwill indemnity”.

On the other side, there are countries which do not foresee any right to a goodwill indemnity or similar compensation in favour of the agent.¹¹

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Under these conditions it appears appropriate to give the parties the opportunity to choose if they wish to include or not the indemnity provision in their contract. For this purpose, Article 21 provides two alternatives (A and B) in order to cover the different situations.

It is strongly recommended to choose alternative A whenever the right to indemnity is recognised by the law of the agent’s country; in particular, as concerns EU countries, alternative B of Article 21 would conflict with mandatory rules of the legislation of the agent’s place of business. It should be noted that the European Court of Justice has ruled that when the agent performs its contractual activity within the European Union the rules on indemnity of the directive must apply even if the parties have submitted the contract to the law of a non-EU country.¹²

Furthermore, even in cases where the legislation of the agent’s country has no rules on indemnity, it may be fair to grant it to the agent, particularly if this conforms with international trading practice in that particular business and/or area. And a principal not acting ‘fairly’ in case of terminations risks losing reputation and loyalty throughout its entire agency/distribution network.

As concerns the system of indemnification, the model form has incorporated the principles contained in Article 17.2 of the EEC Directive, i.e. the “German” system, which appears to be prevailing in the countries which recognise the indemnity.¹³

7 RESOLUTION OF DISPUTES: ADR, ARBITRATION, NATIONAL COURTS

The drafters of an agency contract should consider how disputes arising out of or in connection with the contract shall be settled. There are binding and non-binding forms of dispute resolution. Litigation before state courts and arbitration are binding forms of dispute resolution, whereas mediation aims at inducing the parties of a contract to arrive at a consensual settlement to their dispute. There are many other forms of dispute settlement between arbitration and mediation. Mini-trial and expert determination are some examples of these intermediate forms. They often have an element of a legal opinion or decision, but they also demand consent of the parties to a certain extent.

The following section outlines arbitration and litigation procedures, giving some remarks on their advantages and disadvantages as well as some hints on how to legally implement arbitration or litigation in an agency contract.

7.1 Arbitration

Since the model form is a set of uniform contractual rules, avoiding (as far as possible) the direct application of conflicting domestic legislations, it is appropriate that possible disputes be solved by a uniform resolution system, organised on an international level.

From this point of view the most appropriate solution appears to be international commercial arbitration (see particularly Article 23.2. A) and this is the reason why in Article 23.2 arbitration is the “default solution” which applies automatically if the parties make no choice (see Article 25.1.).

However, recourse to arbitration is not recommended in cases where the dispute may be considered as non-arbitrable (i.e. “not capable of settlement by arbitration”) according to the New York Convention of 1958. The above risk exists in particular under national laws which assimilate agents to employees (see above, § 2.3.), whenever this implies a special jurisdiction for disputes of this type. In these situations it is advisable to contract with agents who are legal persons (see above, § 2.3.), or to choose other solutions for the resolution of disputes, e.g. by submitting possible disputes to national courts (see hereunder, § 7.2.).

The same problem may arise with respect to national laws which expressly provide for an exclusive jurisdiction of their courts for disputes with agents established in that country.

7.2 Jurisdiction of national courts

Under Article 23.2. B the parties may choose to submit possible disputes to the national courts indicated in such clause.

When choosing this alternative parties must check whether the choice of forum clause is effective in the countries involved.

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7.3 ADR/Mediation

It may be advisable to try to solve the dispute without litigation through the recourse to an amicable method of dispute resolution, i.e. to a procedure aiming at facilitating an amicable settlement of the controversy. In fact a qualified neutral (mediator) will often be able to help parties to agree upon a settlement, thus avoiding the recourse to arbitration or to courts.

Under Article 23.1 each party may propose to the other party to proceed to mediation under the ICC Mediation Rules,¹⁴ but such request is without prejudice to the proceedings under Article 23.2. This means that mediation is optional and does in no way limit the parties’ right to have recourse to arbitration or to national courts (according to the choice made under Article 23.2.).

If the parties wish that mediation should be obligatory, i.e. that parties should be bound to submit the dispute to settlement proceedings before starting arbitration or submitting the dispute to courts, they should modify Article 23.1 appropriately.¹⁵

Parties should check whether during the mediation procedure the statute of limitation period continues to run or is stopped.

8 PRECAUTIONS FOR USE OF THE MODEL FORM

Any model contract should, to the extent possible, be adapted to the circumstances of a specific case.

Of course, in theory the best solution consists in drafting an individual contract based on existing model forms in order to take account of all the specific requirements of the parties. However, the parties are often not in a position to prepare a specific contract and prefer to have recourse to a ready-to-use balanced model form: in this case they will ask for a model which can be used as it stands, without any need to make modifications or additions.

The present model is an attempt to achieve a balance between these two possibilities.

The ICC has tried to work out a single solution on every issue. However, where this has not been possible (see e.g. Articles 8, 13, 18, 21, 23, 24 and 29), alternatives have been suggested.

Such alternative solutions have been presented side-by-side under the letters A and B, in order to point out that only one of them can apply.

Therefore, before signing the contract, the parties must decide which of the alternative solutions they choose, and then cancel the alternative they do not want to apply.

In any event, the model form provides that, if the parties do not make a choice by cancelling one alternative, one of them will automatically apply (according to Articles 25.1 and 25.2 of the model form).

There are also a number of points where the parties must fill in their requirements: definition of the territory and the products, amount of commission, etc.

All such points have been put in the annexes to this document, so that the parties can fill in and (where necessary) modify such annexes during the life of the contract, without making changes to the basic text of the contract.

Before signing the contract the parties should (and must — as far as Annex V is concerned) fill in the Annexes and, if appropriate, delete the parts they do not need.

In order to avoid misunderstandings the parties should, when signing the contract, put their initials on each page of the contract and of the Annexes, in order to make sure which amendments they have agreed upon or which alternative solutions they have chosen.

The Annexes have been construed throughout so that (except for Annex V regarding commission) even when the parties do not fill in some points, a solution can be found within the contract.

2010.

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