In a recent judgement from the Norwegian Appeal Court, the court ruled that the claimant – Norep AS (Norep) – was not entitled to indemnity in accordance with the Agency Act as it found that Norep did not qualify as an agent based on the definition in the Agency Act.
If the interpretation by the Appeal court is accepted, agents working with principals operating online B2B platforms or other schemes wherein the purchase orders go directly from the customer to the principal will run the risk of being deprived of the protection offered by the Agency Directive.
The case has been brought before the Supreme Court of Norway, which will rule on the matter sometime during 2021.
The core question is how the condition of “procuring orders” in the Norwegian definition is to be understood, especially considering the definition in the Agency Directive. Given the relevance of the Directive, the Supreme Court may decide to ask the EFTA Court (EEA’s equivalent of the ECJ) on its interpretation of the definition of commercial agent in the Directive.
It should be pointed out that the article is somewhat biased as the author represents Norep.
Norep was terminated after having represented the principal for over 20 years and claimed indemnity in accordance with the Norwegian Agency Act. Both the court of first instance and the Appeal court concluded that the Agency Act did not apply (neither directly nor by analogy) as they found that Norep did not meet the definition of “agent”.
The (unofficial) translation of the definition in the Agency Act is as follows:
“For the purpose of this Act "commercial agent" shall mean a person who as a business
activity has undertaken by agreement with another person (the principal) to negotiate on
an independent and continuing basis the sale or the purchase of goods for the
principal's account by procuring orders on behalf of the principal or by concluding
transactions in the principal's name.”
The conclusion of the Appeal Court, albeit somewhat unclear, was based on the understanding that Norep, in order to qualify as agent in accordance with the definition in the Agency Act, had to receive the orders from the customer and transmit those to the principal.
Norep worked actively in the defined territory to boost sales/market the products on behalf of the principal, but as Norep worked with grocery shops/supermarkets, which in Norway are all member of one of three large chains with their own wholesale organisations, all orders from the local supermarkets were (at least for the last 5-10 year) automatically generated and sent to the wholesale organisation, who in turn sent an electronic order to the principal. Norep received commission on all purchases made from the supermarket in his territory.
Based on these facts, the Appeal Court decided that Norep did in fact not “procure orders”, thus concluding that the company did not act as a commercial agent as defined in the Agency Act. The courts also found that the Agency Act could not be used by analogy and the intermediary was not awarded indemnity.
The definition found in the Norwegian Agency act is similar to the definition in the Swedish and Danish Agency Acts. However, the Directive does not say anything about procuring orders:
For the purposes of this Directive, 'commercial agent' shall mean a self-employed
intermediary who has continuing authority to negotiate the sale or the purchase of goods
on behalf of another person, hereinafter called the 'principal', or to negotiate and conclude
such transactions on behalf of and in the name of that principal.
The question is if the obligation to procure orders as interpreted by the Appeal Court is compatible with the Directive’s definition (“negotiate the sale”) as it is to be understood, especially in light of the recent decision in the ECJU in C-828/18 (Trendsetteuse). The opinion of Norep is that such an obligation is not compatible and that the Norwegian (and Swedish and Danish) definition must be interpreted restrictive as not to be in conflict with the Directive. We are aware of a judgement from the Swedish Appeal Court that is in line with the ruling from the Appeal Court in the Norep-case, but in our opinion, the deciding factor should be if the agent has brought new customers or increased business with existing customers, ref. paragraph 33 and 34 of the Trendsetteuse decision. Furthermore, the interpretation of the Appeal Court would – just as in the Trendsetteuse case (see paragraph 37 and 38) – limit the protection provided to agents in the directive and make it easy for principals to dodge the mandatory obligations following from the directive.
It will be very interesting to see how the Supreme Court will rule in this matter, and also if the Supreme Court decides to present one or more questions to the EFTA Court. This case will certainly result in several more articles.
Henrik Renner Fredriksen, IDI Member