French Supreme Court aligns its position with ECJ’s decision regarding commercial agency
In a recent decision delivered on 2 December 2020, the French Supreme Court overturned a decision of the Paris Court of Appeal that had denied a person the benefit of the status of commercial agent on the grounds that he was unable to negotiate the prices set by his principal.[1]
The factual context of the decision
In this case, “Editions Atlas”, a company specialised in the publishing and marketing of leisure products, had signed a contract with Mr “O” on 20 December 2006, an agreement to entrust him, for an indefinite period, with the prospecting of its customers in a geographical area.
After ceasing to perform his contract on 1 July 2011 and concluding an employment contract for an indefinite period as an exclusive sales representative with a third party company on 4 July, Mr “O”, sued Editions Atlas for termination of the contract and payment of various indemnities, claiming the status of commercial agent.
After a first disappointing decision for Mr “O”, the Paris Court of Appeal stated that he did not demonstrate that he had the power to negotiate contracts in the name and on behalf of his principal, which excluded any application of the status of commercial agent.
The meaning of “negotiation” at the heart of the debate
In its decision of 2 December 2020, the French Supreme Court states that the term "commercial agent" should henceforth be defined as a natural or legal person who, as an independent professional, without being bound by a services agreement, is permanently responsible for negotiating and possibly concluding contracts of sale, purchase, hire or provision of services in the name of and on behalf of producers, industrialists, traders or other commercial agents, although he does not have the power to alter the prices of such products or services.
The French Supreme Court has therefore aligned its case law with the position of the ECJ, and its recent decision Trendesetteuse SARL v. DCA SARL delivered on 4 June 2020 further to a request for a preliminary ruling from the Paris Commercial Court[2].
Firstly, the French Supreme Court in its decision recalls that it traditionally had a restrictive conception of the term "negotiate", holding until now that “negotiation” presupposed that the intermediary had the ability to influence the elements of the agreement before the conclusion of the contract with the client, in order to enable it to be carried out.
Indeed, for the past 12 years, the French Supreme Court has consistently proceeded with a strict interpretation of Directive 83/653/EEC which has harmonized the status of commercial agent[3], out of step with the jurisdictions of the other member states of the European Union[4] and certain Courts of Appeal such as those of Lyon[5], Rennes[6] and Toulouse[7] as well as the Paris Commercial Court[8] by ruling that an intermediary who does not have the power to modify the terms of the contract, such as the price and the conditions of sale, with the customer does not have the power to "negotiate" in the name and on behalf of the principal as provided for by the definition of commercial agent. The restrictive position of the French Supreme Court on the notion of “negotiation” was quite logical, due to its reluctance to apply a status to all kinds of commercial intermediaries and its apprehension of seeing the growth of litigation that is already well developed.
Secondly, the French Supreme Court directly cites the judgment of the ECJ of 4 June 2020 Trendesetteuse SARL v. DCA SARL, which held that Article 1(2) of Directive 86/653 must be interpreted as meaning that a person need not necessarily have the power to alter the prices of the goods which he sells on behalf of the principal in order to be classified as a commercial agent within the meaning of that provision.
Indeed, the ECJ begins in its decision by pointing out that the notion of negotiation constitutes "an autonomous notion of European Union Law which must be interpreted uniformly throughout the territory of the Union". Then, and since Directive 86/653 gives no definition of the term “negotiation”, the ECJ considered that the meaning and scope of that term must, according to the Court’s settled case-law, be determined by considering its usual meaning in everyday language, while also taking into account the legislative context in which it occurs and the purposes of the rules of which it is part.
Thus, the ECJ stated that “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 must be interpreted as meaning that a person does not need to have the power to change the prices of the goods which he or she sells on behalf of the principal in order to be classified as a commercial agent within the meaning of that provision”.
The French Supreme Court of 2 December 2020 therefore held that the Paris Court of Appel had infringed Article L. 134-1 of the French Commercial Code, by relying on the impossibility for the appellant Mr “O” to negotiate prices in order to conclude that he did not benefit from the status of commercial agent.
By doing so, the French Supreme Court aligns its position with the ECJ’s decision of 4 June 2020 and states that under French law, the status of commercial agent is now recognised in favour of an agent who does not have the power to alter the prices of the goods that he or she sells on behalf of the principal, which the French Supreme Court has denied until now.
The scope of both decisions
After the decision of the ECJ and the reversal by the French Supreme Court of its settled case-law, Article L. 134-1 of the French Commercial Code shall no longer be interpreted as excluding from the qualification of commercial agent commercial intermediaries who do not have the power to change their principal's prices.
We will have to wait for some more decisions concerning commercial agency status to see how the French Commercial Courts will react to this reversal of case law and whether it opens a Pandora’s box regarding the scope of commercial agency under French law.
[1] Com Div Fr Sup Court 2 December 2020, n°18-20.231
[2] ECJ, 4 June 2020, Trendsetteuse SARL v. DCA SARL, C-828/18
[3] Com Div Fr Sup Court, 15 January 2008, No.06-14.698; Com Div Fr Sup Court, 20 January 2015, No.13-24.231
[4] High Court, 23 April 2008, Nigel Fryer: 2 Lloyd's Rep 108, [2008] EWHC 767
[5] Lyon Court of Appeal, 8 September 2016, No.14/00666
[6] Rennes Court of Appeal, 28 April 2015, No.12/04294
[7] Toulouse Court of Appeal, 28 February 2018, No.17/01857
[8] Paris Commercial Court, 7 February 2018, No.2016070413; Paris Commercial Court, 28 November 2018, No. 2017037386
