Mike Davies writes on the Commercial Agents Regulations

Mike Davies is a partner at Veale Wasbrough.

The Court of Appeal case of AMB Imballaggi Plastici SRL v Pacflex Ltd tackled a difficult situation for agents and principals.

The issue was whether Pacflex was an agent within the meaning of the Commercial Agents (Council Directive) Regulations 1993.

AMB was the Italian manufacturer of food packaging products which Pacflex imported and sold in the UK. Their relationship ceased in 1994. AMB claimed against Pacflex under outstanding invoices. Pacflex counterclaimed that it was a commercial agent and entitled to compensation after the termination of the relationship.

Judge Raymond Jack QC found in the Bristol Mercantile Court that: 1) The regulations applied to commercial agents which are companies. 2) Pacflex on the facts was a distributor and not an agent. To be a commercial agent a company must either have continuing authority to negotiate sales or purchases of goods on behalf of a principal, or to negotiate and conclude sales or purchases of goods. 3) The activities of Pacflex were secondary and so the regulations would not apply if the judge was satisfied that it was otherwise a commercial agent. The latter two points were appealed by Pacflex, but were dismissed.

If a person buys or sells as a principal, he is outside the ambit of the regulations because he is acting on his own behalf and not for another. There was never a contract that Pacflex had the continuing authority to do anything on behalf of AMB.

The difficulties of the regulations are as follows. Article 2(3) seems to allow a Member State to disapply the directive where the activities of the agent are secondary, as compared with the rest of the agent's business. But the schedule then seems to contemplate an assessment not of the activities of the agent compared with its other business, but of its arrangement with a principal.

Paragraph 1 of the schedule refers to a primary purpose "other than as set out in paragraph 2" but paragraph 2 does not set out a purpose: it describes aspects of the arrangement with a particular principal. Paragraphs 3 and 4 suggest pointers are given on whether an arrangement is within paragraph 2, but provide no help on what is being compared to decide what might be secondary as opposed to primary, nor any help on whether the other factors are excluded.

The Court of Appeal calls for early clarification of the schedule to the regulations.