In previous articles I have presented the ongoing Norep-case, wherein the Norwegian Appeal Court ruled that 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 of “agent” in the act. 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.
The case was 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 decided to submit two questions to the EFTA Court.
A quick reminder of the questions that were asked and the answers that were provided:
Question 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?
Answer: 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.
Question 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?
Answer: 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.
2 The ruling of the Supreme Court
The Norwegian Supreme Court gave its judgement in early April 2022. The case was limited to the question of whether the Appeal Court had interpreted the definition of an agent in the Norwegian Agency act incorrectly when concluding 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.
The Supreme Court started out by concluding that the definition in the Agency Act did not in itself presuppose direct involvement in with the placing of orders. The Supreme Court stated that the wording in itself (“obtaining orders”, “innhente ordre” in Norwegian) did not rule out the situation where the order is sent directly from the customer to the principal. Furthermore, it was concluded that the intentions of the Agency Act – protecting the commercial agent – does not imply that the agent must have a direct involvement with the orders. Thirdly, the Supreme Court noted that the preparatory work assume that the agent does not have to have such a direct involvement. It was also noted that it is stated in the preparatory works that the definition shall be the same in the Agency Act as in the Directive.
After having concluded that the definition in the Agency Act did not rule out the situation where orders are sent directly from the customer to the principal and based on the judgement by the EFTA Court, the Supreme Court went on to conclude that the definition of an agent in the Directive does not presupposes such an involvement. As there was no inconsistency between the Agency Act and the Directive, the Supreme Court came to the (quite obvious) conclusion that the Appeal Court had interpreted the Agency Act incorrectly, whereas the judgement from the Appeal Court was set aside.
The Supreme Court did not consider if Norep as such qualified as an agent, ref. the second question submitted to the EFTA Court.
3 What now?
As the judgement from the Appeal Court was set aside, the case goes back to the Appeal Court for a new trial, where the Appeal Court must base its judgement on the correct interpretation of the definition of an agent. The oral hearing will take place ultimo September 2022.
As the Supreme Court did not consider if Norep as such qualifies as an agent under the correct understanding of the definition, this question is still in the open. It will be up to the Appeal Court to consider the facts of the case against the guidance provided for by the EFTA Court in its answer of the second question.
If the Appeal Court concludes that Norep is an agent as defined by the Agency Act, the second question will be if and to what extent Norep is entitled to indemnity. The key question will most likely be if and to which extent Norep has contributed to the obtaining of new customers and/or significantly increased the volume of business with existing customers.
A fifth article on the Norep case can be expected when the judgement of the Appeal Court is available, most likely late October. It remains to be seen if that will be the end of the saga or if the case will revisit the Supreme Court for a final ruling.
Henrik Renner Fredriksen, IDI Member