GERMAN-ITALIAN AGENCY LAW

We advise and represent you in the regulation of cross-border commercial agency agreements

Under Italian law, the activity of a commercial agent can be carried out by either a natural person or a legal entity. If the activity is carried out by a company, the legal representative of that company must meet the necessary professional requirements. In order to act as a commercial agent, a company must be registered in the Commercial Register, which is maintained by the individual Chambers of Commerce. The commercial agent is therefore essentially an independent trader.


The commercial agent acts as the sole representative of the principal in a given territory and carries out his own business activities with his own company structure and is therefore exposed to his own economic risks. He is bound to the principal by a contractual relationship aimed at promoting the conclusion of the contract. 


According to Italian law, exclusivity is the rule, but it can be modified by contractual agreement. In this case, the exclusivity is reciprocal, whereby, in addition to the obligation of the principal not to employ other agents in the same field during the entire duration of the contract, the commercial agent is also obliged not to carry out any competitive activity in the field assigned to him. It is not necessary to express a different contractual agreement, provided that it is clear and unambiguous from the agreements between the parties that the commercial agent is the only one in the territory and/or that he may also work for other principals. 


The parties to the contract have an inalienable right to require a written contract containing the content of the agreement. However, the written form is not a condition of validity for a valid agency relationship, as Article 1742 of the Italian Civil Code assigns it only an evidentiary function. There is no obligation to register the commercial contract.

GERMAN-ITALIAN TRADE AGREEMENT

An important issue in international agency agreements is the choice of law to be applied in the event of a dispute. Except in exceptional cases, there are no specific international rules that can be applied to commercial relations between agents and principals of different countries. This means that the starting point is almost always national law. As a result, the same international contract may be governed by the law of both the agent's country and the principal's country.


Therefore, it should be noted in advance that both countries have largely adopted the EU requirements in the same way. Nevertheless, before concluding a contract, one should carefully consider which law - German or Italian - applies or should apply to the contractual relationship. This question always goes hand in hand with the consideration of whether and which place of jurisdiction should be agreed.


Without a choice of law, the contract is governed by the law with which it is most closely connected (Art. 28 II EGBGB). For a German commercial agent working in Italy or concluding a commercial agency agreement with an Italian company, the law of his place of business or domicile applies without choice of law. If German law is applicable, a German court should also be chosen as the place of jurisdiction, otherwise Italian judges may have to apply German law in the event of a dispute, which is certainly not advantageous.

ENTITLEMENT OF THE COMMERCIAL AGENT TO COMMISSION

During the contractual relationship, the commercial agent is entitled to a commission on all contracts concluded if the actual conclusion of the contract is attributable to his activity (Art. 1748 c.c.). 


The amount of the commission can be freely determined by the parties and usually consists of a certain percentage of the agent's profit. This also applies to direct transactions of the principal and, under certain circumstances, to transactions concluded after the termination of the agency contract. Unless otherwise agreed between the parties, this right of the commercial agent shall fall due when the principal fulfills or should have fulfilled the order. The parties may postpone the date of recovery, but it shall be due at the latest when the third party has performed or should have performed. Italian law does not expressly provide for a right to reimbursement of expenses incurred by the agent in the course of his business. However, it is possible to reach a different agreement more favorable to the agent.


According to Art. 1742 of the Civil Code, the main obligation of the commercial agent in the agency agreement is to carry out promotional activities on a stable basis in order to conclude contracts on behalf of the principal in a given territory, in exchange for remuneration.


Thus, remuneration is one of the main characteristics of the agency relationship, which means that the commercial agent is entitled to remuneration for his promotional activities. According to art. 1748 of the Italian Civil Code, this remuneration generally consists of a commission, i.e. a percentage calculated on the value of the transaction concluded. The amount of the commission is left to the discretion of the parties; therefore, the court cannot verify the reasonableness of the commission or its adjustment to equity, except in cases where the contractual amount is ridiculous or purely symbolic for the commercial agent.


In the absence of an agreement between the parties, and since the Collective Agreement does not establish criteria for the calculation of the commission, it is up to the court to determine it, using the complementary sources referred to in Art. 1374 of the Civil Code, i.e. the substitute legal norms, the professional rates, the customs of the place where the principal's registered office is located and, in the absence thereof, equity. In any case, the constitutional principle of the employee's right to a salary commensurate with the volume and quality of the work performed does not apply to the commission due to the commercial agent.


In practice, the commission may be set as a fixed amount based on the turnover achieved or as a variable amount with different percentages depending on the level of turnover. It is also possible to provide for a fixed monthly salary for the commercial agent, supplemented by a percentage commission calculated on the actual turnover achieved. In the latter case, however, care must be taken to ensure that the amount resulting from the application of the commission rate represents a minimum proportion of the total remuneration, in order to avoid the relationship being reclassified as an employment relationship.


If monthly commission advances are provided for, as in the "AEC", it is advisable to provide for both positive and negative adjustments in order to avoid that the commercial agent's remuneration is in fact a fixed salary, with the consequence that the contract is reclassified as dependent employment due to the lack of a risk element.


The contractual amount of the commission may be modified, but only by agreement between the parties. According to the jurisprudence, a clause granting the principal the right to unilaterally modify the commission, with the exclusive obligation of prior notice, has been considered null and void because of the vagueness of the subject, pursuant to art. 1346 and 1418 of the Italian Civil Code. However, within certain limits and with certain consequences, collective agreements provide for the possibility for the client to unilaterally modify the amount of the commission.


In addition to the commission, the agency agreement often provides for incentives to the commercial agents in the form of bonuses, which are usually granted by the principal at its discretion, depending on the achievement of certain objectives. Such incentives may also be contained in separate letters (side letters) that have a specific term, also independent of that of the agency agreement.


The costs of promotional activities are generally borne by the commercial agent, as expressly provided in the last paragraph of art. 1748 of the Italian Civil Code, which expressly excludes the agent's right to reimbursement. Nevertheless, the principal has the possibility, for example during the first term of the contract, to contribute to the agent's expenses.

NOTICE AND TERMINATION

In Italy, commercial contracts may be concluded for either a definite or an indefinite period. Contracts concluded for a definite period are automatically converted into contracts for an indefinite period in accordance with Art. 1750 of the Italian Civil Code if they are maintained by the parties after their natural expiry. Italian law provides that a contract concluded for an indefinite period of time may be revoked at any time by giving notice to the other party within a specified period of time. The minimum period of notice is one month in the first year of the relationship, two months in the second year, three months in the third year, four months in the fourth year, five months in the fifth year and six months in the sixth and subsequent years (art. 1750, para. 3 of the Italian Civil Code). More favorable agreements for the commercial agent are possible in the form of longer notice periods, as provided for in many collective bargaining agreements. Failure to observe the notice period constitutes a breach of contract which may oblige the principal to pay damages. The contract concluded for a certain period of time has its natural expiration at the same time and therefore cannot be terminated in the usual way. A fixed-term contract, like an open-ended contract, may be terminated by either party for cause with immediate effect. Italian law does not provide any special rules for extraordinary termination, but case law has developed a number of cases in which extraordinary termination is permitted. 


The extraordinary grounds for withdrawal are based on facts that affect the relationship of trust between the parties and therefore generally constitute serious breaches of their obligations, such as the culpable breach of the obligation to pay commissions, the breach of the exclusivity or non-competition clause, the systematic refusal of the principal to conclude the business received from the contractor, etc. Articles 1453 et seq. of the Italian Civil Code also contain general rules on the possibility of terminating the contract for breach of contract by one of the parties. According to these rules, the diligent party may request early termination of the contract if the other party breaches its obligations. Termination is determined by a court or automatically by a notice of default, which must be complied with within a specified period. 


Consequences of termination


One of the most important consequences of the lawful or unlawful termination of a business relationship is the right to compensation. According to Art. 1751 of the German Civil Code (BGB), the commercial agent is entitled to compensation in the event of termination of the contract if he has acquired new customers or significantly expanded the existing customer portfolio and the principal continues to derive significant benefits from this referral. The compensation according to Art. 1751 par. 5 of the Italian Civil Code shall not exceed the amount resulting from the Agent's average annual remuneration calculated on the basis of the average of the last five years. In the case of contracts with a shorter duration, reference is made to the average calculated up to that point. According to a widely followed case law, the maximum amount is first calculated in the actual calculation, from which various deductions are made for different reasons. The commercial agent is not entitled to indemnity in certain exceptional cases provided for in Article 1751(4) of the Civil Code. This does not apply if the principal terminates the contract for important reasons, in particular in the case of extraordinary termination for important reasons due to the agent's culpable conduct, or if the agent terminates the contract without giving reasons, or if the agent terminates the contract due to age or illness, or if a third party takes over the contract in the agent's place. A post-contractual non-compete clause is lawful if the legal requirements are met. In the case of a non-compete clause, the principal must pay the agent reasonable compensation. In the absence of an agreement, the amount shall be determined by the court. The calculation may be based on the duration of the prohibition, the average remuneration of the commercial agent, the size of the territory and the reasons for the termination of the contract. The non-compete clause may be imposed for a maximum period of two years after the termination of the contract.

LEGAL DISPUTE WITH THE ITALIAN COMMERCIAL AGENT

Disputes concerning commercial agency contracts are decided by the labour courts when the contractual relationship is purely Italian and the personal performance of the commercial agent is the primary consideration. The court of the commercial agent's domicile has jurisdiction. According to the Code of Civil Procedure, this rule cannot be deviated from by agreement, except in the case of disputes concerning the payment of commissions or indemnities. In such cases, the parties may agree that the dispute shall be brought before the court of the place where the payment is to be made. However, this rule is not relevant for most commercial agency contracts, because in the case of international contractual relationships within the EU territory, the jurisdiction is determined in accordance with the EU Regulation, unless the parties have agreed otherwise. In principle, the parties in Italy are free to choose the applicable law; they can choose Italian law, the law of the foreign principal, the law of a third country or the law of more than one country. If the parties have not chosen the applicable law, the law of the country with which the contract has the closest connection is applied, which is usually the country where the party providing the characteristic service has his habitual residence at the time of the conclusion of the contract. Since the characteristic service in commercial agency contracts is the activity of the agent, Italian law applies to contracts with agents established in Italy, unless there is no other choice. Even if foreign law is chosen, all the mandatory provisions of Italian law remain applicable. All rules that cannot be derogated from to the detriment of the agent under Italian law - such as commissions - cannot be avoided by choosing another applicable law and are therefore applicable to the commercial contract in question.

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