Implementation of the Commercial Agents Directive (1986) across Europe in 2008 - Italy

10 January 2008

International Dispute Resolution Group

The original provisions of the Italian Civil Code on commercial agency have been greatly altered by the European provisions contained in the Directive 86/653/CEE, implemented by the legislative decree n. 303/1991 and the subsequent amendments (in particular the legislative decree n. 65/1999). An agent is someone who permanently works for a principal, securing contracts in a specified territory for remuneration. The agent does not have the power to act on behalf of the principal and directly complete contracts unless the principal expressly grants the agent that power. The principal should not employ more than one agent at the same time for the same area and business. In addition, an agent should not transact business in the same area in relation to the same goods and services for the benefit of several competing principals. These provisions can, however, be waived by agreement between the parties.

Forum shopping

Parties may choose the applicable law but this rule is subject to public policy considerations and the mandatory rules in respect of certain aspects of agency agreements.

Contracting out

Many of the provisions of the Italian Civil Code on commercial agents are mandatory and can not be modified to the detriment of the commercial agent unless the commercial agent carries out his activities outside the Italian territory. In particular, the parties cannot agree to waive the indemnity provisions to the detriment of the agent.

Commissions

The agent is entitled to commission on the agreements concluded through his activity.

A commission is due to the agent, unless a different agreement is reached between the agent and the principal, for example, in relation to:


  1. parties previously acquired by the agent as customers;

  2. parties located within the agent’s territory, or relating to a customer group or category assigned to the agent.

The agent is entitled to commission on agreements concluded after the cancellation of the agency contract if the purchase order is sent to the principal or to the agent before the cancellation of the agency contract, or if the agreements are reached within a reasonable period from the date of such cancellation and their conclusion was due to the agent’s activity.

Indemnity or compensation on termination

The principal must pay an indemnity to the agent upon termination in the following circumstances:

  • where the agent has secured new customers for the principal or has significantly developed the business with existing customers; and/or

  • where the payment of an indemnity is deemed fair in all the circumstances.

The indemnity cannot exceed the equivalent of an agent's average annual remuneration calculated over the preceding five years. If the duration of the contract is less than five years, the annual average remuneration is calculated according to the duration of the agreement (e.g. two months for a two year agreement). The agent must notify the principal of his intention to pursue his right to an indemnity within one year of the termination of the agreement.

The payment of an indemnity does not prevent the agent from seeking compensation for damages, if the damage was due to the unlawful termination of the agreement by the principal.

Avoiding compensation

A principal does not have to pay any indemnity to the agent in the following circumstances:

  • if the principal terminates the agency relationship due to a serious breach by the agent;

  • if the agreement is terminated by the agent, unless this termination is due to the acts of the principal, or because the infirmity or illness of the agent prevents him from continuing his activities; or

  • if the agent, in agreement with the principal, assigns his rights and duties under the contract to third person.

Alternatives

The above-mentioned provisions, in particular those in relation to the termination indemnity, may not be altered to the detriment of the agent. For this reason, alternative relationships should be taken into consideration before concluding an agency agreement.

The agency agreement is a hybrid relationship where the agent has a substantial degree of independence from the principal but is nevertheless entitled to a legislative protection which is similar to that of an employee.

In addition, where an agreement - designated an agency agreement - has the typical characteristics of an employment contract, Italian employment law applies to the agreement. In this situation, the judge can declare that the relationship between the parties is an employment relationship.

Employment is an alternative, particularly when it is envisaged that the agent will be strictly supervised in his activity.

On the other hand, when the prospective agent is supposed to act independently (and is financially viable) the relationship can be contractually construed as a distribution agreement, with different characteristics. A distributor is an independent purchaser of goods from the principal (whereas the agent merely solicits business for the principal) and enjoys a substantial degree of independence from the principal as to the terms and conditions of resale. Upon termination of a distributorship agreement, no indemnity is payable to the distributor unless specifically provided for in the agreement.

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International Dispute Resolution Group