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/obtain the orders from the customer and transmit those to the principal.
As informed about in the previous articles, the case has been brought before the Norwegian Supreme Court by the agent (Norep), arguing that the appeal court’s ruling was based on an interpretation of the Norwegian Agency Act that was in conflict with the definition of a commercial agent in Article 1(2) of the Directive. The Supreme Court asked the EFTA Court to answer the following questions:
1. Shall the term “negotiate” in Article 1(2) of Directive 86/653 be interpreted as presupposing involvement with orders from customers to the principal, with the result that the orders may not go directly from customers to the principal, as the facts in the present case is described in Chapter 3 above?
2. If question 1 is answered in the negative, which factors are relevant in the assessment of whether sales-related activity is to be deemed to be “negotiation” for the purposes of Article 1(2) of Directive 86/653?
The oral hearing of the case took place on October 27, 2021, and the decision was delivered on December 14 and can be found here: https://eftacourt.int/download/2-21-judgment/?wpdmdl=7699
The EFTA Court gave the following advisory opinion, supporting the argument made by Norep:
1. Article 1(2) of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, and in particular the term “negotiate”, should be interpreted as not necessarily presupposing the agent’s direct involvement with the placing of orders by customers with the principal, or excluding a scenario in which orders go directly from customers to the principal.
2. Sales-related activity should be deemed to be negotiation for the purposes of Article 1(2) of Directive 86/653/EEC if it is specifically undertaken with a view to achieving the conclusion of contracts of sale or purchase of goods by the principal, and if the agent acts as an intermediary between the principal and his customers.
As to the first question, the EFTA Court begins by referring to Zako (C-452/17), stating that there are three necessary and sufficient conditions for a person to be classified as a commercial agent. “First, that person must be a self-employed intermediary. Second, he must be bound to the principal by a contractual relationship of a continuing character. Third, he must exercise, on behalf of and in the name of the principal, an activity which may consist either simply in being an intermediary for the sale or purchase of goods or in both acting as intermediary and concluding sales or purchases of goods.”
The Court goes on to state that only the third of those conditions, insofar as it concerns the term “negotiate”, is at issue in the present case. With reference to the Trendsetteuse-cae (C-828/18) it is stated that, as the Directive does not define the term “negotiate” and does not make any reference to national law concerning the meaning to be given to it, the term must be regarded as containing an autonomous concept of EEA law which must be interpreted in a uniform manner throughout the EEA, and that the meaning and scope of terms for which EEA law provides no definition must be determined by considering their usual meaning in everyday language, while also taking into account the context in which they occur and the purposes of the rules of which they are part.
Focusing on the wording of Article 1(2) of the Directive, the Court begins by pointing out that the third condition referred to above sets out two alternative possibilities: the agent must have “continuing authority” to either “negotiate the sale or the purchase of goods on behalf of another person” or “negotiate and conclude such transactions on behalf of and in the name of that principal”. As the Commission had pointed out in its observation, if the term “negotiate” presupposed that in each instance orders must be placed, or transactions concluded, through the agent, then the first of those possibilities would be superfluous. Furthermore, the Court notes that while the majority of the language versions of Article 1(2) of the Directive use terms which can be translated as “negotiate”, some versions such as the German one contains a broader term, which can be translated as “act as intermediary”. The Norwegian-language version, like the Danish-language version, also contains the broader term “formidle”, which can be translated as “to intermediate”. Notwithstanding such differences, the EFTA Court points out that the “wording used in the various language versions of Article 1(2) of the Directive do not contain any requirements presupposing involvement with orders from customers to the principal or that orders must be placed via the commercial agent.”
The Court goes on to state the conclusion to be drawn from the wording is supported by the context and objective of Article 1(2), which is to protect commercial agents in their relations with their principals, to promote the security of commercial transactions, and to facilitate trade in goods between EEA States by harmonising their legal systems within the area of commercial representation, referring to the second and third recital of the Directive as well as Zako and Marchon Germany (C-315/14), and that this prevents a restrictive interpretation of the term “negotiate”.
From that starting point, the Court observes that to “negotiate” transactions is not necessarily the same as to conclude them; negotiation can still take place even if the commercial agent does not ultimately conclude a transaction. Some negotiations may lead to the conclusion of a transaction while others may not. This implies that the involvement of the agent in finalising a transaction (if one is in fact concluded) is incidental, rather than essential. Furthermore, the Court states that the requirement of an activity which may consist of being an intermediary for the sale or purchase of goods, as set out in Zako and Trendsetteuse, does not necessarily entail a role for the agent in taking orders.
With reference to Zako, the EFTA Court also points out that a commercial agent cannot be excluded from the benefit of the Directive’s protection on the grounds that the contract which binds him to the principal provides for the performance of other tasks than those related to the activities of a commercial agent. Any contrary interpretation would allow the principal to circumvent the mandatory provisions of the Directive.
The Court goes on to observe that it would enable the principal to evade his obligations to the agent and jeopardise the achievement of the objective pursued by the Directive, if the classification of “commercial agent” were made subject to conditions additional to those laid down by Article 1(2), such as a condition necessitating the direct involvement of the commercial agent in taking or finalising orders.
In our opinion, paragraph 40 and 41 of the decision are fundamental with regard to the question that was referred, stating the following:
40 It should be noted that the fact that a commercial agent does not have a role in taking or finalising orders on behalf of the principal does not, in itself, prevent the commercial agent from carrying out the main tasks of a commercial agent, namely to bring the principal new customers and to increase the volume of business with existing customers (compare the judgment in Trendsetteuse, cited above, paragraphs 32 and 33).
41 It is possible for the commercial agent to accomplish those tasks by providing information and advice, as well as through discussions aimed at facilitating the conclusion of the transaction for the sale of goods on behalf of the principal, without requiring the commercial agent to have a direct involvement in taking orders (compare the judgment in Trendsetteuse, cited above, paragraph 34).
Thus, the main task of the commercial agent is to bring new customers and increase the volume of business with the existing ones, and this can be done without having a role with the orders from customers.
Consequently, the interpretation of the definition in the Norwegian Agency Act made by the Appeal Court stands in contrast to the EFTA Court’s interpretation of the Directive.
As to question 2 and which factors are relevant in the assessment of whether sales-related activity is to be deemed to be “negotiation” for the purposes of Article 1(2) of Directive 86/653, the EFTA Court states that the act of negotiation must relate to the sale or purchase of goods for the principal highlights the intention of the legislature that that act should have as its objective the conclusion of contracts of sale or purchase on behalf of the principal. While this does not require the conclusion of transactions or taking of orders, the term “negotiation” cannot be interpreted so broad as to encompass all activities related to sales.
Thus, the agent’s activities must be undertaken specifically with a view to achieving the conclusion of contracts, regardless of whether sales or taking of orders are carried out directly between the principal and the customer. Furthermore, the Court states that the commercial agent must act as an intermediary, entailing a function as a link between the customer and the principal, appearing as the principal’s representative. The mere provision of sales-related or promotional services will not in itself entail that the person acts as a commercial agent.
From there, the EFTA Court continues by stating that it is not possible to list all relevant facts when considering whether the term “negotiation” is fulfilled, and that it is up to the national court to take into account all relevant facts. Having said that, the EFTA Court highlights the importance of the agreement between the parties with regard to the goods which the principal intends to sell through the mediation of the commercial agent, and that the national court should assess how the respective obligations of the parties are set out. As examples of relevant factors are mentioned:
– whether the purported commercial agent is granted exclusive rights in a particular geographic area, leading to remuneration as foreseen in Article 7 (2),
– whether the purported commercial agent represented, participated in sales meetings, actively pursued increased sales, or sought and obtained new clients.
These are only examples, and the Court stresses that none may be seen as independently determining whether the person in question is a commercial agent undertaking negotiation, but that it is necessary to look at the agreement and the activities as a whole.
It remains to be seen how the Norwegian Supreme Court will rule in the Norep-case based on the interpretation made by the EFTA Court. We will get back to this in a fourth article about the Norep-case when the decision from the Supreme Court is published, hopefully sometime before summer 2022.
Henrik Renner Fredriksen, IDI Member