The debate has been raging for years both within the French legal community and in courtrooms. Does the power to negotiate contracts of commercial agents mean that they have a margin of maneuver in respect of the principal’s prices?

The answer to this question is far from being purely of theoretical interest: on the contrary, it is of major significance in financial terms. Indeed, where there is no power to negotiate, the agent cannot claim the status of commercial agent, which benefits from a statutory severance indemnity, which the courts routinely evaluate as two years of commissions!

It is therefore understandable that, in many disputes further to the termination of an agency agreement, the negotiating power criterion soon becomes the absolute crux of the matter.

However, the case law on this issue appeared to be very divided even though the Court of Cassation has ruled in principle that the authority to negotiate implies the power to modify the principal’s rates (Cass. com., 15 Jan. 2008, LawLex08106; 19 June 2019, LawLex19836), to adapt the conditions, in particular prices, of the contracts proposed to its clients (Cass. com, 27 Oct. 2009, LawLex093258), to give discounts (Cass. com., 20 Jan. 2015, LawLex15104; 13 Sept. 2017, LawLex171444) or to “effectively have a margin of maneuver on at least part of the economic transaction” (Cass. com., 9 Dec. 2014, LawLex141455).

In effect, while the courts ruling on the merits, have on the whole, aligned themselves with the position of the Court of Cassation  (CA Montpellier, 5 Nov. 2019, LawLex191357; CA Paris, 17 Oct. 2019, LawLex191235; 7 Nov. 2019, LawLex191371; 16 Jan. 2020, LawLex2061), in some decisions, supported by highly critical legal commentators, they have considered that the negotiating authority of agents cannot be reduced to merely the power to set or modify the principal’s prices without the latter’s prior agreement, but includes everything the agent does in order to secure orders (CA Toulouse, 28 Feb. 2018, LawLex18370; CA Lyon, 3 March 2018, LawLex18410; CA Paris, 3 Feb. 2020, LawLex20232).

Faced with this very predicament , the Paris Commercial Court of first instance (Tribunal de commerce) decided to refer a question to the Court of Justice for a preliminary ruling (T. com. Paris, 19 Dec. 2018, LawLex19220), to which the Court has now replied in a landmark ruling. The Court states that the concept of negotiation constitutes “an independent concept of Union law which must be interpreted in a uniform manner in the territory of the Union“. The solution given will therefore apply in all Member States, even though on other points the directive is not of maximum harmonization.

According to the Court, although Directive No 86/653 does not define “negotiate”, the fact that the act of negotiating must relate to “the sale or the purchase of goods” for the “principal” highlights the intention of the Union legislature that the purpose of the act is the conclusion of sales or purchasing contracts on behalf of a principal.

It goes on to state that “the main tasks of a commercial agent are to bring the principal new customers and to develop business with existing customers“. However, the commercial agent may carry out these tasks by providing information and advice as well as pitches to promote the conclusion of the deal for the sale of goods on behalf of the principal, without the commercial agent having the authority to modify the prices of those goods.

Only the French version of the decision in available for the moment.