Applicable law and jurisdiction. Problems posed by the express submission clause to arbitration before the ICC in Paris in agency contracts between Spanish and EU businesses<\/u><\/strong><\/p>\n 1.- Introduction<\/strong><\/p>\n In Spanish law, the agency contract is regulated by Act 12\/1992 <\/strong><\/i>on the agency contract, which in Article 1<\/strong><\/i> provides that by the agency contract a natural or legal person, called the agent, undertakes towards another, on a continuing or stable basis and in return for remuneration, to promote commercial acts or transactions on behalf of others, or to promote and conclude them on behalf and in the name of others, as an independent intermediary, without assuming, unless otherwise agreed, the risk and fortune of the transactions<\/i>.<\/p>\n This Act results from the transposition into Spanish law of Directive 86\/653\/EEC of 18 December 1986 on the agency contract<\/strong><\/i>The Directive places the emphasis on defining what an agent is, whereas Spanish law places it on what an agency contract is. And, a 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 \u201cprincipal\u201d, or to negotiate and conclude such transactions on behalf of and in the name of that principal.<\/i><\/p>\n Under either definition, it is essential that the contract be commercial, lasting, for consideration, informal and an independent intermediation contract.<\/p>\n In short, any commercial agent, whether Spanish, from an EU country or from outside the EU, providing services in Spain will face the coexistence of two applicable laws governing the contractual relationship: the Directive and Spanish law. And, from 2008, we cannot ignore the application of Rome I Regulation 593\/2008 of 17 July 2008 on the law applicable to contractual obligations<\/strong><\/i>, and Brussels I bis Regulation 1215\/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.<\/strong><\/i><\/p>\n 2.- Law applicable to an international agency contract to be performed in Spain<\/strong><\/p>\n The first thing to clarify is that, under Rome I Regulation 593\/2008,<\/strong>the agency contract is a type of management contract<\/strong><\/i> contracts by which one party assumes functions of negotiating and\/or defending the interests of another party<\/i>, and most of these contracts will be service contracts governed by Article 4(1)(b) of the Rome I Regulation (RR-I).<\/u><\/strong><\/p>\n The legal regime of the agency contract was unified by Directive 86\/653\/EEC, although the degree of unification is admittedly low.<\/p>\n This contract will be governed by the law chosen by the parties under the conditions laid down in <\/u>Article 3 RR-<\/u>I, <\/strong><\/i>and where no law has been chosen <\/u>in the contract (lex contractus), by THE LAW OF THE COUNTRY OF RESIDENCE OF THE COMMERCIAL AGENT<\/u>. Consequently, if an agency contract is to be performed in France and the agent is domiciled in Spain, Spanish law would apply in the absence of a choice by the parties; but in the case of an agent with no fixed place of business (no own place of business), the law of the country where the agent, as a natural person, normally resides or lives will apply.<\/p>\n Where the parties have chosen in the contract the application of the law of a third State,<\/u> but the contract is to be performed in the EU,the Directive 86\/653\/EEC will apply provided that the commercial agent carries out his activity in a Member State<\/u> and even if the lex contractus is the law of a third State, in accordance with the CJEU judgment of 9 November 2000, C-381\/98, Ingmar. Directive 86\/653\/EEC is the mandatory regulatory framework that guarantees protection of the EU freedom of establishment, which includes the goodwill indemnity in order to ensure the security of commercial transactions. The aim is to guarantee the rights of the commercial agent and, even where the law of a third State applies, the mandatory rules contained in the Directive must be respected if the commercial agent carries out his activity in any of the Member States.<\/p>\n If the commercial agent carries out his activity in Spain, even though a lex contractus of a third country has been designated, Act 12\/1992 must be interpreted to the effect that the mandatory legal provisions it contains must apply, these mandatory rules constituting overriding mandatory provisions applicable to the contract through Article 9 RR-I<\/strong>, whose purpose is not to protect the agent but to protect the EU and Spanish economic system, safeguarding freedom of establishment, undistorted competition in the internal and Spanish market, and the security of commercial transactions in the Spanish market.<\/p>\n An agency contract may be governed by the law of a Member State designated by the parties as lex contractus and be performed in another Member State with its own law regulating, for example, the customer indemnity. The question is therefore whether the law of the Member State where the contract is performed will apply on matters of mandatory law, such as the goodwill indemnity, since Directive 86\/653\/EEC provides that it is mandatory. The Directive sought to give all Member States a harmonised regulation, and made this matter an overriding mandatory provision, for example. This view is confirmed by the CJEU judgment of 9 November 2000<\/i> (Ingmar, already cited), and the CJEU judgment of 17 October 2013, C-184\/12, Unamar<\/i>, and it concludes that a Member State may apply its national rules governing the agency contract in that Member State, implementing the Directive, not to protect the agent, but because it defends a crucial and general interest, namely granting the commercial agent broader legal protection than that provided for in the Directive. <\/i>In conclusion, the law of the Member State of performance of the contract could apply if it grants more protection to the commercial agent than the chosen lex contractus.<\/p>\n Finally, there are commercial agency contracts to be performed in a third State but governed by the lex contractus of a Member State (a contract to be performed in Russia, where a Pole provides his services and Polish law was chosen). In this case the Directive will not apply because Articles 17 and 18 expressly make its territorial scope depend on the agent providing his services in a Member State; although the Directive does not prevent a Member State from developing it and extending its legal protection to the national commercial agent who works outside that country\u2019s internal market.<\/p>\n The law of the agency contract in Spain and mandatory rules, such as the goodwill indemnity.<\/strong><\/p>\n Article 28<\/strong><\/i> establishes the obligation to pay the agent a goodwill indemnity on termination of the contract so as to prevent the principal from being unjustly enriched if the commercial agent has built up a clientele, which some authors call the goodwill surplus value; and the principal can continue to profit from that clientele, which imposes the obligation that the indemnity be equitably due. This article was incorporated into the Act in transposition of Directive 86\/653\/EEC, whose Article 17<\/strong> provides that the commercial agent shall be entitled to an indemnity if he has brought new customers, where payment of that indemnity is equitable, and sets the amount at a sum equivalent to one year\u2019s average remuneration received by the agent. Spanish law coincides in the maximum period of the goodwill indemnity; however, some Member States have transposed that directive establishing higher maximums (France, for example, 2 years).<\/p>\n Thus, any commercial agency contract performed in Spain, or any commercial agent habitually resident in Spain, unless there is a specific lex contractus that respects this rule, will be protected by this mandatory rule of the Agency Contract Act (LCA).<\/p>\n Greater problems are posed by what in Spain is a mandatory rule contained in the additional provision of Act 12\/1992 regarding territorial jurisdiction, as we will explain below.<\/p>\n 3.-<\/strong> Jurisdiction to hear disputes relating to international commercial agency contracts.<\/strong><\/p>\n We must refer to the Brussels I bis Regulation (BR I bis<\/strong><\/i>), which establishes which court has jurisdiction to hear civil and commercial disputes.<\/p>\n The starting point is the principle of party autonomy, whereby the parties may include a clause by which they expressly submit to the jurisdiction and competence of the courts of a Member State that decide\/resolve, subject to the limitations we will explain.<\/p>\n In the case of the agency contract, we refer to what has already been said, starting from the fact that the commercial agency contract is regarded as a contract for the provision of services. In accordance with Article 7 of the BR I bis<\/strong><\/i>, the courts of the place in the Member State where the services are provided under the contract will have jurisdiction.<\/u><\/strong> The place where payment is to be made is irrelevant for the purposes of this article (as established by the Barcelona Provincial Court judgment of 31\/12\/2012).<\/p>\n That the concept of a contract for the provision of services encompasses the commercial agency contract was already settled by the CJEU judgment of 11 March 2010, C-19\/09, Wood Floor.<\/p>\n Now we must analyse the concept of place of provision of the service, which obviously must have been fixed by the parties; and if they have not done so, the CJEU considers it to be the place where the service provider has actually carried out, predominantly, his activities in performance of the contract, provided that the provision of services in that place is not contrary to the will of the parties, as follows from what they have agreed (CJEU judgment of 10 September 2015, C-47\/14, Ferho).<\/p>\n Where the service is provided in several Member States, the court of any of those Member States will have jurisdiction, unless they are very numerous or indefinite.<\/p>\n In the commercial agency contract, the court of the place where the contract is performed will have jurisdiction, that is, where the agent carries out the provision of the service and where the agent has his domicile. The CJEU has determined that an agency contract falls within the term \u201cmatters relating to a contract\u201d, for which we refer to the Arcado case. And, in this case, the place where the obligation to pay the commissions earned, and any indemnities that may be due as a result of an abusive termination of the contractual relationship, must be performed is the place where the contract has been performed and where the commercial agent is paid.<\/p>\n We must refer to the very common situation of a contract containing an express submission clause to mediation and arbitration, which very frequently also provides that it will be held before the International Chamber of Commerce in Paris.<\/p>\n Article 25 BR I bis<\/strong><\/i> admits express submission, and one of its advantages is the Better Court, which they choose taking into account criteria of speed, quality of Justice\u2026 In fact, it is very common for the choice of forum to be an element of the negotiation. The wording of this article leaves no room for doubt: \u201cIf the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise\u201d.<\/i><\/p>\n The express submission clause must meet three requirements:<\/p>\n 1st Procedural validity, which requires that there be a genuine agreement conferring jurisdiction, that the courts of a Member State be chosen, that the dispute concern an international situation, that the matter be contentious, and that the agreement not affect matters subject to the exclusive jurisdiction of the courts of Member States.<\/p>\n 2nd Formal validity, so that it is required to be in writing or in a form habitual between the parties or in international trade.<\/p>\n 3rd Substantive validity, which refers to the capacity of the parties and their consent to agree to submit to the courts of a Member State, and will be governed by the law of the Member State whose courts have been chosen by the parties exclusively, including its conflict-of-laws rules.<\/p>\n In this regard, we must not lose sight of the fact that the BR I bis aims to prevent forum shopping because of the legal uncertainty it causes, and that its Article 73 states that this Regulation shall not affect the application of the 1958 New York Convention on international arbitration, and in this case the express submission clause to arbitration tends to prevail where an express jurisdictional submission clause and an arbitration clause coincide.<\/p>\n By way of conclusion, we must be clear that if a commercial agent domiciled in Spain wants to sue a principal domiciled in Italy, with an express submission clause to the Italian courts, the BR I bis will apply; but if the aim is to sue a principal domiciled in the USA, the Regulation will not apply, and the principal will not be able to prevent the commercial agent domiciled in Spain from suing before his own forum. The Spanish courts have had the opportunity to rule on this issue, the Order of the Barcelona Provincial Court, Section Fourteen, of 15 February 2019 stating that: \u201cthat Regulation favours express submission agreed by the parties to the competent courts of the Member States, provided that one of the parties is domiciled in a Member State, and that such submission does not concern matters excluded by its Article 24, again of the 2012 Regulation, exclusive jurisdictions not being confused with special ones, such that among the exclusive ones of Section 6, Article 24, the one relating to the agency contract was not to be found\u2026\u201d<\/p>\n The express submission clause to arbitration is absolutely valid under the BR I bis; however, problems arise regarding territorial jurisdiction. In such cases, the distortion between the parties\u2019 free disposition over jurisdiction and what the Regulation establishes, namely that territorial jurisdiction must be assumed by the courts of the Member State where the performance arising from the service must be carried out, is more than evident.<\/p>\n The problem arises when the parties submit to arbitration before an arbitral tribunal that is not that of the place where the service performance must be carried out, and it is very common for the express submission clause to arbitration before the International Chamber of Commerce in Paris to be inserted because the principal (generally with all the economic power) requires its inclusion. Submitting any dispute arising from the legal relationship between a commercial agent, for example Spanish, and a French one to the ICC Court of Arbitration in Paris is exorbitant in terms of costs, and will cause the agent\u2019s right of access to effective judicial protection to be diminished, since he will be deterred unless a very high economic interest is at stake.<\/p>\n We would understand that this clause could be declared null and void<\/strong> since it contravenes the agent\u2019s rights, and would be abusive given its incorporation by the principal without any possibility of negotiation by the agent, so that the agent\u2019s right of access to Justice is diminished and he is deterred from claiming his rights if that clause were applied. The CJEU judgment of 27 June 2000, Joined Cases C-240\/98, Oc\u00e9ano (ECLI:EU:C:2000:346)<\/strong><\/i>applying Directive 93\/13\/EEC of 5 April 1993 on unfair terms, holds that a jurisdiction clause in a standard-form contract may be void and the court may rule ad limine litis on its invalidity even in the face of an express submission, in order to protect the weaker party who could not negotiate the inclusion of the clause. It must respect the mandatory nature of the rule establishing territorial jurisdiction in favour of the courts of the place where the performance is to be carried out, even if the parties submit to arbitration. Therefore it should be the arbitral tribunal of the country where the performance is to be carried out, and it would only be appropriate if that were France. In all other cases, we understand that EU and national law would be contravened.<\/p>\n From the standpoint of the Spanish Agency Contract Act, we must apply the aforementioned additional provision, which contains a procedural rule that has not been repealed by Act 1\/2000, a mandatory rule requiring the claim to be filed before the court of the commercial agent\u2019s domicile; but this rule constitutes a forum of territorial jurisdiction, and not a forum of international jurisdiction. Spanish case law admits express and tacit submission in relation to international agency contracts.<\/p>\n This rule contained in the final provision is mandatory and so far-reaching that it will apply even to contracts signed before this Act entered into force, as established by the Supreme Court judgment of 26 December 1996. The rationale of this rule is that the party who is normally the weaker, the agent, should not be harmed and forced to sign an agreement that prejudices him by obliging him to litigate, generally, in the courts of the principal\u2019s domicile for the latter\u2019s exclusive benefit and convenience. In fact, it is presumed that an agent who signs an agreement contrary to this provision does so under compulsion by the principal. And it could be declared void for the reasons argued above.<\/p>\n In this regard, we must clarify that the commercial agent is entitled to tacitly accept a jurisdiction other than that of this rule, if he is sued by the principal before another court and does not lodge the corresponding declinatory plea of jurisdiction or competence, or if he himself sues before another court.<\/p>\n This rule would even render void the agreement to submit to arbitration, unless the commercial agent himself agrees to submit to arbitration; although there are scholarly opinions supporting that an express submission clause to arbitration may be included whose validity will require it to be an arbitral tribunal of the agent\u2019s domicile.<\/p>\n In conclusion, we advise focusing attention, in the contractual negotiations of a Commercial Agency Contract, on the choice of applicable law and on jurisdictional and territorial competence, given the implications they will have in the dispute that may arise in the performance of the legal relationship between the parties arising from the contract concluded.<\/p>\n The choice of applicable law is a matter that will be of great interest to the commercial agent, given the mandatory nature of the goodwill indemnity. But he cannot overlook the significance of the court he would have to turn to if a dispute arises, because it may lead to his being unable to litigate, for reasons such as costs, distance, language, and hiring professionals to represent him, his right to effective judicial protection lapsing because he treated the negotiation of these two points lightly.<\/p>\n Lawyer: Arantxa Cagigal Casquero<\/strong><\/p>\n Managing partner of Ar\u00e1nzazu Abogados, S.L.P. (www.aranzazu-abogados.com)<\/p>\n Head of the Civil-Commercial Department at Ar\u00e1nzazu Abogados and ADAFE (Alliance of Franco-Spanish Lawyers), at the Madrid\/Salamanca offices.<\/p>\n Extracted from the article published on togas.biz<\/a><\/p>\n![\"Aranzazu](\"https:\/\/aranzazu-abogados.com\/wp-content\/uploads\/2017\/05\/Logotipo-v2.png\")
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