C-381/98

INGMAR

OPINION OF ADVOCATE GENERAL LÉGER delivered on 11 May 2000 *

1. From 1989, the company incorporated 4. In the main proceedings, the Court of under English law, Ingmar GB Ltd Appeal of England and Wales, United ('Ingmar'), was the commercial agent of Kingdom, finds it necessary to ask the Eaton Leonard Technologies Inc., a com- Court about the applicability of the Direc- pany incorporated under Californian law tive to the contract at issue, in the circum- ('Eaton'), in the United Kingdom and the stances of the present case, where the Republic of Ireland. parties had expressly chosen to submit that contract to the law of a non-EU State, rather than to the national legislation implementing the relevant Community leg- islation.

2. After the commercial agency contract came to an end in 1996, Ingmar instituted proceedings to obtain payment of commis- sion and compensation for the damage suffered as a result of the termination of the relationship between the two compa- nies. I — The legislation applicable

10. Under Article 19 of the Directive, '[t]he parties may not derogate from Articles 17 and 18 to the detriment of the commercial agent before the agency contract expires'. 7. Article 1(1) of the Directive provides that '[t]he harmonisation measures pre- scribed by this Directive shall apply to the laws, regulations and administrative provi- sions of the Member States governing the relations between commercial agents and their principals'. National law

11. In the United Kingdom, the Directive was implemented by the Commercial Agents (Council Directive) Regulations 8. Under Article 17(1) of the Directive, 1993, 3which entered into force on 1 Jan- 'Member States shall take the measures uary 1994 in accordance with Regulation necessary to ensure that the commercial 1(1). agent is, after termination of the agency contract, indemnified in accordance with paragraph 2 or compensated for damage in accordance with paragraph 3'. Paragraphs 2 to 5 specify the conditions to which the payment of the indemnity and compensa- 12. Regulation 1(2) states that the Regula- tion is subject, and the way in which they tions 'govern the relations between com- are fixed. mercial agents and their principals and,

2 — Second recital in the preamble. 3 — Hereinafter 'the Regulations'.

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subject to paragraph 3, apply in relation to unless there is a public policy reason, such the activities of commercial agents in Great as an overriding provision, for not so Britain'. doing. In such circumstances, are the pro- visions of Council Directive 86/653/EEC, as implemented in the laws of the Member States, and in particular those provisions relating to the payment of compensation to 13. Under Regulation 1(3), 'Regulations 3 agents on termination of their agreements to 22 do not apply where the parties have with their principals, applicable when: agreed that the agency contract is to be governed by the law of another Member State'.

III— The question referred for a preli- That argument does not appear to be minary ruling connected with the choice of law made by the parties to the contract. It is worth looking into it separately from the choice- of-law question in order to determine what impact the fact that the contracting parties 16. By the question referred, the national are not both established within the Com- court seeks to know, in substance, whether, munity might have on the law applicable. It since the provisions of the Directive is thus necessary to ascertain the territorial require, after the termination of a commer- scope of the Directive since that is, in fact, cial agency contract, the payment by the the problem raised in this respect. principal of an indemnity to his agent or compensation for the damage suffered by the agent, they apply to a contract under which the principal has given authority to an agent based in a Member State of the Community to sell his products, exclu- sively, in the Community, where, first, the principal is an entity established in a non- EU State and, second, the contracting 19. Second, if the Directive is territorially parties have expressly chosen the law of applicable, it must be determined whether that State as the law applicable to the the provisions thereof relating to the sums contract. payable by the principal to the agent as a result of the termination of the commercial agency contract are materially applicable although the contract is expressly governed by the law of a non-EU State as chosen by the parties. 17. As is clear from its wording, the question formulated by the Court of Appeal actually includes two questions.

The dispute, as we know, is between a that they were to have extra-territorial commercial agent and his principal. 5As is effect. 7 clear from Article 1(1) thereof, the Direc- tive is intended to coordinate the laws of the Member States as regards the legal relationships between economic operators of that type. 6 22. In other words, the application of a norm of Community law to an economic operator established in a non-EU State would constitute, in the absence of a statutory provision to the contrary, an unacceptable extension of that law to It follows, in addition, from a reading of persons who, in principle, are not subject Article 22(1) in conjunction with Arti- to it by virtue of their geographical loca- cle 22(3) of the Directive that, unlike the tion. other Member States, who were required to implement the Directive before 1 January 1990, Ireland and the United Kingdom were to adopt implementing measures before 1 January 1994. Just as for the other Member States, by contrast, those measures 23. While examining, amongst the provi- were to apply, at the latest, to contracts in sions of the Directive, those which may operation by 1 January 1994, which covers help us to delimit its territorial scope in the the contract at issue, since it was concluded case of a contract between parties one of in 1989 and terminated in 1996. which is established in a Member State and the other in a non-EU State, some facts about the territorial scope of Community law in general need to be borne in mind.

21. It is apparent from the order for reference that the High Court of Justice, the first court to adjudicate in the main 24. Under Article 227 thereof (now, after proceedings, found that the Regulations amendment, Article 299 EC), the Treaty is applied only where both parties to a to apply to the Member States of the contract were Member State nationals, Community, which, in substance, makes which is not so in this case. In that court's its geographical basis dependent on the view, there was nothing in the Regulations territory of those States. 8 That provision or the Directive which led it to conclude establishes a. principle of coincidence

29. The producers made an application to the Court for annulment of the decision 26. The idea of the location of economic taken by the Commission, claiming that the operators or of their conduct within the Community did not have jurisdiction to territory of the Community has, in several apply its competition rules to them since articles of the Treaty, a place which cannot their registered offices were all situated be overlooked for the purpose of their beyond the limits of its territory. interpretation and application.

27. Article 85 of the EC Treaty (now In addition to the plea based on an Article 81 EC), for example, refers to incorrect assessment of the territorial scope agreements which may affect trade between of Article 85, the applicants relied on the Member States and which undermine com- existence of a contradiction between the petition 'within the common market'. In contested decision and public international Ahlström and Others v Commission, the law. They claimed that public international Court found it necessary to determine the law precludes the Community from regu- territorial scope of that provision. 11 lating conduct restricting competition adopted outside the territory of the Com- munity merely by reason of the economic repercussions which that conduct produces within the Community.

28. In that case, the Commission had established that there existed concerted

9 — Ibid., No 7. 30. The Court rejected those arguments. 10 — See J. Groux, '"Territorialité" et droit communautaire' [1987] 1 RTDE S. The alleged concertation on prices on the 11 — Joined Cases 89/85..104/85, 114/85, 116/85, 117/85 and part of the applicants, whose activity 125/85 to 129/85 Åhlström and Others v Commission [1988] ECR 5193. consisted in selling their goods directly to

purchasers established in the Community, legitimise the Community's jurisdiction in had undoubtedly restricted competition cases where economic operators have, with within the common market. 12 The Court the territory of the Community, a link such found that what was crucial was the place that their conduct may affect the interests where the offending agreement had been of the Community. In that case, the terri- implemented and not the place where it had tory of the Community was the place where been formed. 13 In a clear expression of the the agreement had been implemented and legal basis and, at the same time, the had produced effects. criterion of reference underlying its judg- ment, the Court added that '[a]ccordingly the Community's jurisdiction to apply its competition rules to such conduct is cov- ered by the territoriality principle as uni- versally recognised in public international law'. 14 33. It should be observed that, in the present case, one of the objectives pursued by the Directive is to ensure the harmoni- sation of the conditions of competition between economic operators linked by a commercial agency contract, 'within the Community'. 16 31. In ruling on another argument put forward by the parties, based on disregard of international comity, the Court simply observed that that argument amounted to calling in question the Community's juris- diction to apply its competition rules to conduct such as that which had been found Although the legal basis of the norm to be to exist in that case and that, as such, that interpreted is not formally the same in the argument had already been rejected. 15 present case and in Åhlström and Others v Commission, since the Directive is not directly based on the Treaty provisions relating to competition, the Community interest at stake, based on the exercise of fair competition (Article 3(g) of the EC 32. In Åhlström and Others v Commission, Treaty, now, after amendment, Article 3(g) the Court acknowledges the territoriality EC), is indeed the same. principle as a basis for certain essential competition rules laid down by the Treaty. But the main interest of that case, as far as the present case is concerned, lies in the fact that that principle appears to be such as to 34. Since it is a question of defending that principle in the Community, the presence of 12 — Ibid., paragraphs 12 and 13. 13 — Ibid., paragraphs 16 and 17. an economic operator or the pursuit of his 14 — Ibid., paragraph 18, emphasis added. See also the Opinion business activity in a Member State cannot of Advocate General Darmon in Åhlström and Others v Commission, cited above, and, more specifically, P a r tII thereof which is devoted to international law. 15 — Ibid., paragraph 22. 16 — Second recital in the preamble.

36. The reference made by those provisions to the territory of a Member State of the Community reflects, in both regimes, the intention of the Community legislature to limit the benefit of the freedoms in question purely to economic operators already As we know, Ingmar's activity is covered by established on that territory, thereby pro- the definition of commercial agents given in moting their mobility and the mobility of the Directive. The Directive coordinates the the services they provide throughout the national laws which regulate their profes- common market. The territoriality of Com- sion in the Community. It was adopted on munity law constitutes, in this field, an the basis of Article 57(2) of the EC Treaty objective connecting method for indivi- (now, after amendment, Article 47(2) EC), duals which entitles them to pursue their which is applicable, under Article 66 of the economic activity free from any unjustified EC Treaty (now Article 55 EC), to matters restriction. both of establishment and of services.

37. The existence of a territorial link — either through the actual presence of one of 39. Thus the geographical basis which the economic operators in the territory of a distinguishes Community law, according Member State, or through the pursuit of an to the very terms of the Treaty, leads me economic activity in that territory — thus to believe that the existence of an element imposes Community jurisdiction on the of connection with Community territory in legal relationship in question. In that situa- a legal relationship, even if it is contractual, tion, the logic of abolishing restrictions on is such as to justify the application of the the pursuit of economic activities between norm of Community law in question.

46. However, it does not necessarily follow that the territorial scope of the Directive does not cover a contract, one of the parties to which is not established in the Commu- 43. Eaton also observed that the express nity. reference, in the second recital in the preamble to the Directive, to the establish- ment of the principal and the commercial agent 'in different Member States' consti- tutes an indication against a mandatory 47. The work of harmonisation undertaken application of the Directive to legal rela- is designed to promote the freedom of tions formed with an operator established establishment, in other Member States of outside the Community. the Community, of commercial agents

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OPINION OF MR LÉGER — CASE C-381/98

established in the Community, even if they minimum level of social protection for are already linked with principals estab- commercial agents. 17 lished in a non-EU State, or their freedom to provide services in respect of other Community principals.

53. We have noted that respect for equal competition, a principle to which the Directive expressly refers, cannot be restricted merely to relations between

50. The harmonisation also seeks to reduce 17 — Second recital in the preamble to the Directive. In Bellone, the differences affecting, as we know, the cited above, the Court pointed out that 'the Directive is designed to protect commercial agents, within the meaning conditions of competition and to ensure a of the Directive' (paragraph 13).

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INGMAR

On the other when harmonising the laws of the Member hand, the first part, relating to the differ- States relating to commercial agents'. 19 ences in national laws, deals with the conditions of competition and the level of protection available to commercial agents. It makes no reference at all to the location of the contracting parties, which lends credibility to the idea of taking account of 54. The second recital in the preamble to those issues in a way which is not strictly the Directive corroborates that interpreta- dependent on the principles of freedom of

26). In the present case, the Directive pursues such an meaning that it is, in principle, territorially objective while undertaking harmonisation under Arti- cle 100 of the EC Treaty (now Article 94 EC). The second applicable to a commercial agency contract paragraph of Article 117 makes express reference, more- over, to that type of action. It provides that improved where, as in the case in the main proceed- working conditions and an improved standard of living for ings, the commercial agent is based in a workers must ensue not only from the functioning of the common market but also from the ptocedures provided for Member State and pursues his activity in in the Treaty and from the approximation of Member States' provisions laid down by law, regulation or admin- one or more Member States.

procedural ones, and the express affirmation by the egislature of its intention to improve the general level of 56. I do not, however, mean to make the social protection ensured by the Member States in the field concerned lead me therefore to believe that social measures territoriality principle of the Directive such as those in the Directive must be interpreted independently, without taking account of the fact that absolute. It is necessary to determine the they form part of Community legislation which also seeks to attain the objectives of freedom of movement of persons effect to be given to a contractual clause by and free movement of services (for an example of a directive based exclusively on A r t i c l e100 of the Treaty which the contracting parties have, as in and referring to Article 117, see Council Directive 98/59/ the main proceedings, displayed their com- EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies mon intention to avoid the national legisla- (OJ 1998 L 225, p. 16)). tion adopted to implement the Directive.

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63. The Rome Convention is to apply to contractual obligations in any situation involving a choice between the laws of 59. The question referred by the Court of different countries. 22 It entered into force, Appeal seeks to have the precise scope of including with respect to the United King- that agreement clarified in the light of the dom, on 1 April 1991. However, Article 17 requirements of the relevant Community thereof states that the Rome Convention is legislation. to apply to contracts made after the date on which it entered into force, so that the contract concluded in 1989 between Ingmar and Eaton is not subject to the rules it lays down. 60. In its question, the national court refers to the rules of English law under which effect is to be given to the applicable law as chosen by the parties, unless there is a public-policy reason for not so doing. 64. In those circumstances, that Conven- tion cannot be relied on as a source of

20 — See, for example, as regards interpretation according to the wording, context and aim of the Directive, Case C-104/95 61. In order to interpret the Directive I will Kontogeorgas v Kartonpak [1996] ECR I-6643, para- graphs 16 and 25. a d o p t a comparable method. That 21 — OJ 1998 C 27, p. 34. approach assumes a determination on the 22 — Article 1(1).

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INGMAR

69. In ruling on the scope of Article 85 of 66. Those objectives assigned to the Direc- the Treaty in Ahlström and Others v tive result in the approximation of national Commission, cited above, the Court for- laws as regards the conditions for carrying mulated the following reasoning: '[i]f the on the activity of commercial agents. In applicability of prohibitions laid down particular, Member States, in accordance under competition law were made to with Article 17 of the Directive, are depend on the place where the agreement, required to put in place a system for decision or concerted practice was formed, indemnifying the commercial agent in the the result would obviously be to give event of the contract's being terminated. undertakings an easy means of evading That provision constitutes both a guarantee those prohibitions'. 24 The reasoning fol- for the agent and a burden for his principal. lowed by the Court can be applied, mutatis mutandis, to the present case.

23 — See Case C-233/94 Germany v Parliament and Council [1997] ECR I-2405, paragraphs 17 to 19. 24 — Paragraph 16.

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72. The principle of autonomy, which, under the Rome Convention, cited above, 25 is to prevail in contractual mat- ters, would be compromised if the Com- It follows that Articles 17 and 18 cannot be disapplied in favour of rules which are less favourable to the commercial agent. On the 25 — The first sentence of Article 3(1) thereof states that '[a] other hand, any other provision which contract shall be governed by the law chosen by the parties'. finds no counterpart in the Directive could

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INGMAR

prevail over the Directive if it were shown parties would be entitled to agree on a that it worked to the advantage of the regime less favourable to the commercial commercial agent. 26 agent, or even to relieve the principal of any indemnification.

27 — An explanation for that uncertain drafting can be found in 26 — At the hearing, Eaton put forward the argument that the the initial proposals for the Directive submitted by the court's task, where it is required to assess the relative Commission (OJ 1977 C 13, p. 2; and OJ 1979 C 56, merits of one law as compared with another, with the p. 5). Article 30(5) of those proposals provided that '[t]he purpose of determining which is most advantageous for the right to goodwill indemnity shall not by prior agreement commercial agent, would face major practical difficulties. be contracted out of or restricted. It may be exercised only The obligation to undertake a complex economic analysis during the period of three months following cessation of of the whole relationship between the contracting parties the contract'. The preceding paragraphs of that article would lead to unforeseeable results, which w o u l d cause fixed the method for calculating the goodwill indemnity. A real legal uncertainty. In truth, an evaluation of the distinction was drawn, in paragraph 4, between the respective advantages of one law as against another is indemnity owed in the event of ordinary termination, by doubtless a complicated exercise. That requirement is notice, and in the event of termination for exceptional evident, however, from the very letter of Article 19, as, reasons (principal's conduct or legitimate reasons particu- moreover, from that of other articles of the Directive lar to the agent), giving rise to indemnities of different (Articles 10(4), 11(3), 12(3)). It cannot, therefore, be amounts, the maximum in the first case being lower than ignored. It is even less possible to avoid the clearly in the second. That difference of method in fixing the expressed intention of the Community legislature in the indemnity explains the reference made in that article to a light of the fact that it reflects the general philosophy of the restriction on the right to the indemnity. It may explain Directive seeking to preserve the balance of the commercial why, in both the initial and final versions of the Directive, agent's interests against those of his principal. Further- the legislature remitted to the time when the contract had more, the difficulty of the exercise of comparison which expired the exercise of the right to restrict the indemnity, the court must undertake does not appear to be such that it except that, in the final version of the Directive, the cannot be resolved, where appropriate, by recourse to an possibility of restricting the indemnity or compensation expert. has disappeared.

81. A reading of the Directive shows us that two types of provision may be distin- guished in this respect. 83. That type of norms corresponds to those which the Community legislature has deliberately chosen to leave to the discretion of the national authorities. They fall within the sovereign power enjoyed by 82. The first category covers rules coupled the Member States in the performance of with a right of derogation. They may be laid down in the absence of any agreement between the parties and without prejudice 28 — Bellone, cited above, paragraph 14.

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their task of implementation. As such, 87. Article 19 of the Directive belongs to those rules reflect the Member States' free- that category of mandatory norms, as is dom to. choose the methods for attaining clearly shown by the prohibition which it the objectives fixed by the Directive. lays down on derogating from Articles 17 and 18.

88. I would add that, as the United King- 84. It should be pointed out that the Court dom rightly pointed out, such a categorisa- has found that whenever the Directive tion concords with what is laid down in allows the Member States to derogate from Article 7(2) of the Rome Convention, cited its provisions, express provision is made to above, which states that '[n]othing in this that effect. 29The Member States are there- Convention shall restrict the application of fore entitled not to follow certain provi- the rules of the law of the forum in a sions of the Directive or to supplement situation where they are mandatory irre- them as they see fit. spective of the law otherwise applicable to the contract'.

Conclusion

92. In the light of those considerations, I propose that the Court answer the question referred by the Court of Appeal as follows:

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, in accordance with Article 19 of that directive, Articles 17 and 18 thereof are applicable to a contract under which a principal has given authority to a commercial agent based in a Member State of the Community to sell his products, exclusively, in the Community, even if, first, the principal is an entity established in a non-EU State and, second, the contracting parties have expressly chosen the law of that State as the law applicable to the contract.

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