Judgment given by Islamabad High Court, Pakistan in favour of Air France (now Air France KLM) dismissing a claim for declaration, injunction and damages.
Capital Travels (Pvt) Ltd were appointed General Sales Agent (GSA) of Air France in 1977 for the territory of North of Pakistan and continued to be the agents until December 2009. The agency agreement used to be extended by signing addendums for the periods of 3 or 4 years. The GSA agreement besides its terms and conditions, was also governed by International Air Transport Association (IATA) Rules and Billing Settlement Plan (BSP) Manual for IATA agents. The agents were entitled to certain commissions on promotion and sale of Air France tickets.
It should be noticed that over the last decade or so, commission on the sale of air transportation started to be reduced and now generally abolished and replaced by incentive schemes which are provided to the GSAs in the airline industry. Before the expiry of the last GSA agreement in December 2009 Air France started negotiations with their GSA to sign a fresh agreement on the basis of incentive scheme. While the negotiations continued to take place for a fresh agreement after expiry of GSA in December 2009 and GSA continued to use the ticketing system of Air France, Air France disconnected in March 2010 all the facilities which were being provided to GSA under the agreement. GSA rushed to the court and filed a suit for recovery of US$ 4,200,000.00 as damages, declaration that they continued to be the agents of Air France and for injunction/mandatory injunction restraining Air France from terminating the agency agreement. The agents claimed that, after expiry of the GSA agreement they continued to provide services as a GSA and that by signing the addendums and execution of the bank guarantee in terms of the agreement, the agency agreement as per practice continued to be extended automatically. They further claimed that, as a result of their hard work, business of Air France was established in Pakistan, they took over management and possession of the office of Air France and made huge investments in terms of finances and manpower in the said office as a result of which business of the airline multiplied. The agents further contented that, while they were doing the business, Air France disconnected their ATB printer and reservation system, as a result of which their business came to a standstill. The agents claimed declaration that they continued to be the agents of Air France, injunction against appointment of any other person as GSA of Air France and claimed damages on the basis of their entitlement to commission and other losses suffered by them.
During the hearing, the court did not allow declaration and injunction applications and deferred them until the decision on the merits of the case after recording evidence of both the parties. The agents examined their two witnesses and summoned Country Manager and Finance Manager of Air France for giving the evidence, while Air France produced its evidence through an attorney of a Pakistani office. Finally, after the negotiations between agents and Air France, the suit was dismissed by Islamabad High Court on 14th March 2016 whereby agents’ claims for declaration, injunction and damages were rejected.
The law of agency, provided in Pakistan by Contract Act, 1872 and its section 202, provides as follows:
“Termination of agency where agent has an interest in subject-matter. Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.”
According to the above section if an agent acquires an interest in the subject matter of the agency, the agency cannot be terminated, it could be in a case where an agent acquires a vested interest in the transaction. In the instant case the Islamabad High Court did not consider the claim of the agents that they acquired an interest in the business despite being the agents for a period of 33 years and claimed to have spent sufficient time in promoting the business and making investments in it.
Khalid A. Rehman, IDI country expert for agency and distribution in Pakistan defended Air France against the claim of the agents.