Globalisation has been a feature of business over the last 30 years and many agents have been appointed in the UK by principals who are based abroad.
Often the agent and principal have met at a trade show and the agency agreement, if it is reduced to writing at all, consists of little more than a one page letter. What should the agent in the UK look out for? The first thing is for him to think about what happens on termination if say a principal based in Germany terminates the agency “out of the blue”. The agent has just lost a significant source of income and wants to know what claims he has.
Two questions immediately arise. These are, firstly, which country’s law governs the claims which the UK agent wants to make and secondly which country’s courts should hear the UK agent’s claims? The first relates to what the lawyers call the “governing law” and the second relates to what the lawyers call “jurisdiction”. The problem for the UK agent is that the one page letter usually has nothing to say on either of these questions.
A UK agent would not want to become involved in arguments over what country’s laws applied to the agency agreement and nor would he want to have to conduct legal proceedings according to a foreign law system, in a foreign language and in a foreign country with any witnesses in support of his claim being based in England. It is a fair chance there would be an expensive initial legal skirmish over which country’s laws should apply and which country’s courts should hear the case, before the main battle over the substantive claims began.
For many years arrangements have been in place to address the question of which country’s courts should hear disputes between litigants from different European countries. The latest of these is a regulation which came into effect in January 2015 commonly referred to as “Brussels Regulation Recast” (a Regulation issued by the European Union becomes immediately binding on all countries within the Union without the need for each individual country to pass legislation to give effect to it; this can be compared to a Directive which requires each European Union country to pass legislation to give effect to it, e.g. the Directive relating to self-employed commercial agents was implemented into English law by the Commercial Agents (Council Directive) Regulations 1993). The Brussels Regulation Recast provides that where the parties have agreed that the courts of a European country should have jurisdiction then the dispute will be heard by the courts in that country. In other words, if an agency agreement between a German principal and a UK agent provided for the courts in England and Wales to have jurisdiction then the German principal is stuck with defending the agent’s claims in the English court. It is obviously sensible that if the English court is to hear a case then English law should be applied and again if English law is chosen to apply that choice will be upheld by the countries in the European Union.
Having obtained a judgment, that is only half the story. The UK agent has to enforce that judgment against the principal and the principal is unlikely to have any assets in the UK which the agent can get hold of to satisfy his judgment. If the principal is based in the European Union, then there is a simplified procedure for enforcing judgments in countries which are members of the European Union. The Brussels Regulation (Recast), which applies to all European countries, also deals with the enforcement of judgments in civil and commercial matters. Under it, a judgment handed down by a court in one country of the European Union, e.g. England will be enforceable immediately by the courts of another member country, e.g. Germany without the court in that other country re-examining the case. All that is required is for the judgment holder to present to the court in the enforcing country, a copy of the judgment which he has obtained together with a completed standard form certificate (which is set out in an annex to the Brussels Regulation Recast) and this will allow him to enforce the judgment according to whatever method of enforcement procedure is provided for in that enforcing country.
Where a UK agent is appointed by a principal who is based outside of the European Union (e.g. a US corporation appoints a UK agent) it is even more important from the UK agent’s point of view to specify that English law applies to the agency and that any dispute should be heard in England. Nevertheless even if a foreign system of law and a foreign court was specified to hear any disputes (e.g. California), the UK agent would still be able to bring a claim in England for compensation / an indemnity on termination. This is because the right of a commercial agent to compensation / an indemnity on termination is mandatory under European law and cannot be gotten around by a principal specifying that a legal system which does not recognise those rights should apply to the agency contract. If the principal is based in a country outside of the European Union then permission from the English Court would still be required to serve the proceedings on the principal in his home country (if the principal was based in a European Union country and the agency agreement provided for English law to apply and for the English courts to have exclusive jurisdiction, then permission from the English courts would not be needed to serve the proceedings on the principal in his home European Union country).
A UK agent dealing with a non-UK principal should bear in mind that he is more likely to want to bring a claim (on termination) rather than to find himself defending a claim against him by the principal. The agent’s negotiating position will be relatively strong at the start of the relationship – after all, a principal based outside the UK could be expected to have spent time and trouble to choose him as an agent. If he did not raise the question of the governing law and jurisdiction at the start of the relationship, he may well regret it at the end of the relationship.