21 Oct How deep is the protection of European agents?

The Court of Justice of the European Union (CJEU) has once again issued a sentence that reaffirms the strength of EU regulations, even when parties attempt to circumvent them through
contractual clauses.
In this case, a commercial agent operating in the United Kingdom faced a complex situation: the contract he had signed with his American employer, a company based in California, stipulated that
the agreement would be governed by the laws of that American State. However, when the contract came to an end, a dispute arose regarding the agent’s right to compensation, as provided by
Directive 86/653/EEC. Could the employer avoid paying compensation simply because the parties had agreed to apply foreign law?

Any legal expert might have determined that, in most cases, contractual agreements take precedence over the law. As we well know, the Brussels I bis Regulation determines that the
choice of law prevails in most cases, except in matters of employment, insurance, and consumer protection. For this reason, the issue was brought before the CJEU, which quickly resolved this
dilemma, ruling that the protection of commercial agents, particularly the compensation due after the termination of the contract, is an imperative and inalienable right within the European rule of law.

According to Articles 17 and 18 of the aforementioned Directive, Member States must ensure that, following the termination of the contractual relationship, the agent is entitled to compensation,
either through indemnity or reparation for the damage suffered. This mechanism is essential, not only to protect commercial agents but also to ensure fair competition within the internal european market.

In this context, the agreement between the parties to subject the contract to California law became a failed attempt to circumvent European Union regulations. Despite the Californian entrepreneur arguing that the contract was expressly governed by legislation external to the European Union, the CJEU pointed out that the right to compensation cannot be subject to negotiation when the agent has carried out their activity within the territory of a Member State. Regardless of how freely the parties may have decided on the applicable law for the contract, they cannot override the protective rules established in the Directive, as these are mandatory.

The ruling clarifies that the compensation regime of the Directive is of fundamental importance, not only in the relationship between the agent and the entrepreneur but also to ensure the principles of the internal market, such as undistorted competition and the protection of workers within the European Union. The CJEU made it clear that allowing an entrepreneur from outside the EU to evade these obligations through a simple choice of law clause would undermine these principles and the stability of commercial relations within the Union.

The mandatory nature of the provisions on compensation is further reinforced by Article 19 of the Directive, which expressly prohibits the parties from agreeing to terms that differ from those established in the Directive to the detriment of the agent. Therefore, any contractual clause that attempts to reduce or nullify the agent’s right to compensation is void by law. In this case, the choice of California law was not sufficient to prevent the application of European rules when the agent carried out their activity in the United Kingdom, a Member State of the EU.

In conclusion, this ruling highlights that companies operating in the European Union must be prepared to comply with the regulations protecting commercial agents, regardless of the law they intend to apply in their contracts. The right to compensation is essential and cannot be ignored or negotiated, especially when the agent provides their services within the territory of the Union. Once again, the CJEU has demonstrated that the protection of workers’ rights in Europe is a priority that transcends borders, maintaining balance and fairness in the internal market.

At Navarro Llima Abogados, we have extensive experience in this area, so if you have any inquiries on the matter, do not hesitate to contact us at info@navarrollimaabogados.com or through our website.