Commercial agents: Change after change in case law

To read French version, please click here.

Less than a year has elapsed since the European Court of justice ("ECJ") has overturned previous national case law in its Trensdetteuse ruling dated 4 June 2020¹ by finding that a commercial agent does not necessarily need to have the ability to define the commercial and pricing policy of its principal.  This precise definition of the status of commercial agents was designed to be applied uniformly across the EU. 

However, the position of French courts concerning the definition of the status of a commercial agent remains uncertain.  In decisions dated 2 December 2020, 27 January 2021 and 10 February 2021², the French Supreme Court has issued decisions on one hand compliant and on the hand diverging from the European position.

A historically narrow definition adopted by French courts

As a reminder, a commercial agent is defined as (i) an independent intermediary, (ii) who is permanently bound by a contract to its principal and (iii) whose main activity is either to negotiate sales, purchase, rental or services agreements for its principal, or to negotiate and conclude such agreements.

The legal status of a commercial agent being independent from the will of the parties as expressed in their contract, courts can recharacterize the contracts differently³ and French case law has had to explain the meaning of the concept of "negotiation".  Since 2008, the French Supreme Court had been using a narrow definition and has refused to consider as commercial agents intermediaries who were not able to modify the conditions, notably pricing conditions, of agreements concluded for their principal⁴.

A wider definition adopted by the European Court of Justice

The French position was criticised by academics and has led to a preliminary question asked by the Paris Commercial Court to the ECJ.  In a decision Trensdetteuse dated 4 June 2020⁵, the European judge provides a definition of the concept of "negotiation power".  The ECJ explains that negotiation power is an autonomous concept of EU law that shall be subject to an uniform interpretation across the territory of the Union and that the existence of different linguistic versions of the EU directive related to commercial agents⁶ does not mean that a commercial agent must have the power to fix the goods' prices.

The Court consequently holds that the commercial agent might not have the ability to modify the prices of the goods that he helps selling since (i) price fixing by the principal might be justified for commercial policy reasons and since (ii) the absence of ability to fix prices does not preclude the commercial agent from completing his main tasks which consist in bringing new clients in and in developing operations with existing clients.

The widening of the definition of commercial agents by the European judge will have in practice an important impact.  Being qualified as a commercial agent allows the benefit of a public order status, pursuant to directive 86/653/EEC dated 18 December 1986 and to articles L. 134-1 and seq. of the French Commercial code.  The commercial agent shall notably be granted a legal indemnity at the end of the agency contract⁷, notwithstanding the fixed⁸ or indefinite term of the contract.  The grant of this legal indemnity can be financially quite interesting since it can be higher that the contractual indemnity⁹ or the indemnity that could be obtained pursuant to article L. 442-1 II of the French Commercial code¹⁰ for contracts other than commercial agents' contracts.

A variable application, in less than a year, of the European ruling by the French Supreme Court

The position adopted by the European judge last summer being contradictory with previous French case law, the French Supreme Court was expected to overturn its previous precedents in order to be compliant with European law.  Trial judges¹¹ as well as the French Supreme Court in a decision dated 2 December 2020¹² did follow the position of the ECJ.

However, two decisions taken by the French Supreme Court, in early 2021, seem to overturn, again, the position that it had taken in December 2020:

• the intermediary, who does not determine the commercial and pricing policy of its principal and who does not produce any negotiation documents or contracts established for the principal, does not have any negotiation power and only performed a contract of "courtage"¹³ of goods¹⁴; and

• the intermediaries, who only communicate information related to the principal to buying alliances and to communicate to the principal their requests, only put businesses in relation but do not have any negotiation power or any power to conclude contracts in the name of their principal¹⁵.

These rulings are difficult to reconcile with the decision of the French Supreme Court dated 2 December 2020¹⁶ and the Trensdetteuse ruling of the ECJ:

• if we follow the ECJ ruling's ratio, a lot of operations previously considered as "courtage" operations could now be considered as operations conducted by commercial agents, thus reducing the "courtiers"' category to rare instances where the "courtier" would not be a professional, and/or would not exercise its missions on a permanent basis, and/or would see his missions specifically regulated¹⁷.  However, the decision taken on 27 January 2021 by the French Supreme Court seems to consider that the "courtiers" category could still be used more widely by requiring that commercial agents have the power to define the commercial policy of their principals; and

• the French Supreme Court in the decision dated 10 February 2021 differentiates between merely putting businesses in relation and "negotiating".  The ECJ had however explained that one of the main tasks of the commercial agent could be to develop operations with existing clients, and in a way to put businesses in relation.

Hence, what solutions can be anticipated by businesses?  From the principals' standpoint, if returning to a narrow definition of the concept of "commercial agent" could be a good option, companies can hardly assess to date the applicable risks while defining their relations with their intermediaries.  From the intermediaries' standpoint, the latest position taken by the French Supreme Court is not in their favour and sheds doubt on their chances of success in case of litigation.

¹ECJ, case C-828/18, Trensdetteuse SARL c. DCA SARL, 4 June 2020.
²French Supreme Court., 2 December 2020, 27 January 2021, n°18-10835 ; 10 February 2021, n°19-13604.
³Ie courts can depart from the legal status referred to by the parties in their contract.
⁴French Supreme Court., 15 January 2008, n°06-14698 ; 9 December 2014, n°13-22476
⁵ECJ, case C-828/18, Trensdetteuse SARL c. DCA SARL, 4 June 2020.
⁶Directive 86/653/EEC dated 18 December 1986.
⁷Article L. 134-12 of the French Commercial code.  The indemnity often amounts to two years of commission.
⁸For contracts concluded before the law n°91-593 dated 25 June 1991.
⁹Case law considers that only a clause that sets an indemnity equivalent or higher than the prejudice resulting from the termination of the contract (ie higher than the indemnity that could be granted pursuant to article L. 134-12 of the French Commercial code) could be considered as valid.
¹⁰This article prohibits brutal terminations of established commercial relations..
¹¹Courts of first instance and courts of appeal in the French jurisdictional system.  See for instance Paris Court of Appeal, 1 October 2020, n°15/15954.
¹²French Supreme Court, 2 December 2020, n°18-20231.
¹³A French category of intermediary.
¹⁴French Supreme Court., 27 January 2021, n°18-10835.
¹⁵French Supreme Court, 10 Feburary 2021, n°19-13604.
¹⁶Even if the same judge did preside the panels of judges which have taken the decision dated 2 December 2020 and 10 February 2021.
¹⁷It is for instance the case for "courtiers" for medicines.