Commercial Agents and Commercial Law: Difference between pages

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by ''[[Knut Benjamin Pißler]]''
by ''[[Klaus J Hopt]]''


== 1. Object and goal ==
== 1. Concept and sources of commercial law ==


A commercial agent is defined by Art 1(2) of Dir 86/653 relating to self-employed commercial agents as a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person or to negotiate and conclude such transactions on behalf of and in the name of that principal. From an economic perspective a commercial agent is one of the three principal forms of distribution channels moving goods from the producer to the ultimate buyer. The distribution of products by wholesale or by retail is the most predominant form; commercial agents or distributors are important and often used; direct sales via self-owned outlets or travelling salesmen have become less common. Legally speaking, a commercial agent is integrated in the distribution ([[Sales (Forms of Distribution)|sales (forms of distribution)]]) of another entrepreneur’s products, a fact that distinguishes commercial agents from wholesalers or retailers. Unlike brokers, the integration of the commercial agent in the other business is permanent. However, he retains his legal independence, and in this regard the commercial agent is distinguished from an employee. Indeed, the delimitation between commercial agents and employees is one of the most difficult problems in the field of substantive law of commercial agents. Compared with employees, commercial agents have more freedom in conducting their business, but this freedom trades off with less legal protection. In practice, the types of commercial agents show great variety. They range from large distribution companies having considerable market power on whom producers are dependent (eg particular importers), across legally independent but economically dependent commercial agents, and on to commercial agents restricted to representing only one single entrepreneur who have quasi-employee status and a subsequent need for protection. Today, commercial agents are only one single form of existing marketing and distribution systems; the law of commercial agents is correspondingly part of the law governing distribution systems such as [[Franchising|franchising]] and distribution agreements. However, the commercial agent and the rules stipulated for his protection serve as a model for related distribution systems.
In some instances, commercial law is contained in a separate codification, eg in France’s [[Code de Commerce|''Code de commerce'']] of 1807 or Germany’s Commercial Code of 1897 (similarly in Belgium, Luxembourg, Spain, Portugal and Greece; and also as a model law since 1954 in the United States’ Uniform Commercial Code). In other countries, it is embedded in the general civil law as part of the Civil Code, such as in Switzerland ([[Swiss Code of Obligations (OR)]] of 1881 and [[Swiss Civil Code (ZGB)]] of 1907), in Italy where the original separate codification was later abandoned ([[Codice Civile|''Codice civile'']] of 1942), or, more recently, in the Netherlands ([[Burgerlijk Wetboek (BW)|''Burgerlijk Wetboek'' (BW)]]). In some countries, such as the Scandinavian nations, there are only separate statutes dealing with certain parts of commercial law. In others, such as the United Kingdom and Ireland, most of it is covered not by written law but by [[Judge-Made Law|judge-made law]] alone. It follows that there are also many differences in the legal doctrine in the various countries on whether there is a separate concept of commercial law and, if so, what its reach and content are. It is therefore disputed, for example, whether commercial law also includes accounting law, transport law ([[Carriage, Contract of|carriage, contract of]]), [[Company Law|company law]], banking and stock exchange law ([[Banking Law|banking law]]; [[Banking Law (International)|banking law (international)]]; [[exchanges]]), insurance law ([[Insurance Contracts|insurance contracts]]; [[Insurance Contract Law (International)|insurance contract law (international)]]) and portions of labour law.


The commercial agent industry is a relatively recent phenomenon which is firmly linked to the economic development in the second half of the 19th century. At that time industrialization and increasing foreign trade brought about the emergence of this new form of distribution. The growing division of labour between the stages of production and distribution gave rise to a supplementary trading stage between producers and ultimate buyers. A further factor was the extension of the demand markets through the construction and expansion of transportation networks, which opened up new and remote regions for the sale of products. In this situation the use of a permanent intermediary was necessary to ensure enhanced presence and customer service. The task of such an intermediary was initially accomplished by employees. However, this approach proved to be too expensive due to the large distribution areas and the broad range of products. Therefore, producers employed intermediaries who were stationed further away from the place of production; these intermediaries, representing multiple businesses, put the infrastructure that they had created at the producer’s disposal. The gradual transition from the payment of a remuneration to payment based on results led to a steady increase in the independence of the external representative with the result that they developed more and more as self-employed entrepreneurs bearing their own business risks. With the economic crises in the 1920s it became obvious that the commercial agent was—notwithstanding his legal status as a self-employed entrepreneur—extremely economically dependent on his principal. This dependency was even more apparent when the principals proceeded to contractually prohibit their agents from representing more than one single entrepreneur with the aim of tying the agent closer to the principal’s business. However, at that time no appropriate legal protection existed which could protect commercial agents from such economic dependence.
Conceptually, commercial law may be considered a separate part of the general legal order dealing either with certain persons who are engaged in business transactions or dealing directly with certain business transactions and activities. Depending on this, commercial law may begin and be delineated by either regulating certain transactions (commercial transactions, the ‘objective system’) or, like the German and Austrian Commercial Codes, rather by regulating certain persons (the merchant as in Germany or the enterprise as was more recently done in Austria). The latter is the ‘subjective system’, though mixtures between the two systems are common. Commercial law is then the law of merchants, and commercial law regulates the transactions performed by these merchants either among themselves or with private persons. Commercial law is private law, though occasionally it also contains public law norms, eg concerning the commercial register, certain rules on the name of the merchant and accounting.


== 2. Trends of international legal development ==
In continental Europe, the sources of commercial law are primarily statutes, even though [[Judge-Made Law|judge-made law]] also plays a role. The latter is still the primary source of commercial law in [[Common Law|common law]] countries. Commercial usages and trade customs are more important in commercial law than in general private law. This is because of the specific needs and practices of commerce. Commercial usages are particularly relevant in international trade. [[Standard Contract Terms|Standard contract terms]] play an important role in a large part of commercial practice in many countries. They raise particularly difficult problems in transborder transactions. Furthermore, the recommendations of the [[International Chamber of Commerce (ICC)]] and other international and national institutions must be remembered.


In Germany and Austria the economic significance of the commercial agent and the necessity of establishing a corresponding legal framework were recognized early. Nevertheless, the ''Allgemeine Deutsche Handelsgesetzbuch'' (ADHGB) of 1891 only stipulated provisions on the commercial broker. Therefore commercial agency was still subject to the rules on contracts for work and services. It was not before the German ''Handelsgesetzbuch'' of 1897 that particular regulations for the commercial agency were seen as a necessity. However, shortly afterwards it became apparent that these new regulations were insufficient to improve the protection of the commercial agent from improper conduct of the principal. Thereafter, legal developments in Austria set the pace for legislative intervention and led to the enactment of the ''Handelsagentengesetz'' (later ''Handelsvertretergesetz'') in 1921, which introduced some mandatory rules for the protection of the commercial agent. This legislation established for the first time an indemnity for the goodwill of the commercial agent, which later served as a model for the corresponding rule in Germany. However, it was not until after World War II that the drafting works were completed; the part on commercial agents of the ''Handelsgesetzbuch'' was enacted in 1953.
== 2. Particularities of commercial law as compared to general civil law ==


The characteristic feature of the German law of commercial agency is its socio-political focus: §§ 84 ff HGB contain several mandatory rules for the protection of the commercial agent since he is considered as the typically weaker party. These rules concern the termination of the agency contract, the non-competition clause after termination of the contract and the indemnity for goodwill. This particular protection is not limited to commercial agents who are limited to representing only one single entrepreneur, but is applicable to all types of commercial agents.
Merchants are entrepreneurs who must stand up to competition or be driven out of the market. Therefore, they must be free to make business decisions and contracts as they think best, up to certain limits set by the law in protection of other parties and of the market as a whole. It is not surprising, therefore, that norms made by private persons or institutions (in particular contract norms, including [[Standard Contract Terms|standard contract terms]]) play an important role in commercial law. Mandatory legal norms ([[Mandatory Law (Fundamental Regulatory Principles)|mandatory law (fundamental regulatory principles)]]) are rare, with the exception of those for the protection of [[Commercial Agents|commercial agents]], for example. The merchants must evaluate and bear the risks and chances they face in commerce.


In France and Belgium the law of commercial agency remained unregulated for quite a long time. In both countries the [[Code Civil|''Code civil'']] of 1804 played an important role in solving legal problems with commercial agents (''commis voyageur'','' ''later'' représentant de commerce''), because the [[Code de Commerce|''Code de commerce'']] did not provide for rules in this regard. The commercial agency contract was classified within the service contracts (''contrat de louage de service'') or mandate contracts (''mandat''), whereby service contracts were defined by the subordination relationship (''lien de subordination'') between the service provider and the client. French law did not therefore distinguish between the self-employed commercial agent and the (employed) travelling salesman. Where the commercial agency contract was classified under mandate (''mandat''), it became apparent that the mandate in the ''Code civil'' is principally gratuitous and that the contract may be revoked at will by the principal. Therefore, French law was neither designed for a permanent contractual relationship between the representative and the principal nor for profit-making activities of the representative—characteristics which were contrary to the economic conception of com mercial agency. In 1937 the French legislature established a first legal basis for (non self-employed) commercial intermediaries by promulgating the ''statut professionel des voyageurs'','' représentants et placiers''. 1958 saw the emergence of a ''décret'' that regulated the contractual relationships between the ''agent commercial'' and principal. It banned the unilateral right of withdrawal from the contract of the principal and stipulated a claim for damages in the case of unilateral revocation of the contract. However, these protective instruments only applied to commercial agents who were registered. This resulted in the fragmentation of the French law of commercial agents because non-registered commercial agents (''agent non statutaire'') did not fall under the ''statut professionel'' of 1937 but were instead subject to the rules of the ''Code civil''.
Simplicity and rapidity are decisive for commercial transactions. Therefore, commercial law renounces unnecessary formalities and urges merchants to respond to offers and make dispositions quickly. Commercial norms, internationally uniform contract clauses like the [[Incoterms|incoterms]] and trade usages standardize the contractual and other business declarations of the merchant. Commercial law favours standardization; an example of this is that the power of [[Representation|representation]] is irrevocable in certain commercial contexts, such as for the representatives of commercial companies.


The law of commercial agency in Belgium did not develop mandatory rules appropriate for protecting self-employed commercial intermediaries in their potentially weaker position vis-à-vis the principal.
Regarding merchants’ decisions, simplicity and rapidity presuppose that merchants can reliably inform themselves about their contractual partners and in commercial transactions can rely on those partners’ behaviour (ie in legal terms, without internal or mental reservations of the latter being relevant). Commercial [[Transparency|transparency]] and the concept of reasonable reliance on business appearances play an important role in commercial law.


In English law as well, no particular rules existed regarding the form of distribution labelled commercial agency in the continental European legal systems. This is due to the fact that the [[Common Law|common law]] had not developed distinct rules regarding commercial agency, but applied the general rules on the legal concept of agency ([[Representation|representation]]). In doing so, the traditional perspective of English law towards agency contracts took the stance of granting the principal and the agent the right to arrange their legal relationship at their own discretion. Consequently, no mandatory rules were established for the protection of an agent acting in the capacity of a commercial agent. He was not deemed to be in need of protection. In fact, the opinion prevailed that such a (commercial) agent in his status as a self-employed entrepreneur was capable of adequately asserting his rights against the principal. Conversely, English agency law presumed the principal as being potentially jeopardized and therefore in need of protection against the agent. The English common law is more concerned with the situation in which the agent abuses the rights granted to him causing damages to the principal. Accordingly, the common law of agency established certain fiduciary duties of the agent with regard to the principal, whereas rules to protect the (commercial) agent were not created (no claim for payment of a commission, termination of agency contracts without previous notice permissible and no indemnity for goodwill).
Commercial law has arisen to a considerable degree out of commercial practice. This can be observed in the legal sources and in the great importance of arbitration ([[Arbitration (International)|arbitration (international)]]). Commercial law is geared towards international trade, though in legal terms it is part of national law. Trade interests do not stop at borders. Commercial law is not only open to influences from outside, but in particular also to a pragmatic international harmonization of law. The German Common Commercial Law ([[Allgemeines Deutsches Handelsgesetzbuch (ADHGB)|''Allgemeines Deutsches Handelsgesetzbuch'' (ADHGB)]] of 1861) preceded the unity of the state by one decade and the uniform civil law in Germany ([[Bürgerliches Gesetzbuch (BGB)|''Bürgerliches Gesetzbuch'' (BGB)]]) by nearly half a century.


== 3. Regulations in uniform law ==
== 3. International harmonization of commercial law ==


Due to the fact that some European countries provided for mandatory rules for the protection of commercial agents (especially indemnity for goodwill) while other EU Member States put an emphasis on the freedom of contract and did not restrict the parties in the formulation of contracts, principals incurred different costs depending on which law was applicable to the respective commercial agency contract. Distortion of competition became apparent in cases of transnational transactions where the commercial agent represented the same principal in several Member States. For example, if a German principal uses a German commercial agent to represent him also in the Belgian market, this German principal competes with entrepreneurs in Belgium, whose contractual relations with commercial agents are subject to Belgian law. Since the Belgian law of commercial agency did not provide for indemnity for goodwill after the [[Termination of a Contract|termination of a contract]], there was a competitive disadvantage for the German principal due to the ‘more expensive’ German law of commercial agency. Aside from that, the disparity of competition was caused by the freedom of contract allowed in the conflict of laws. By choosing the law of another country, a foreign principal was able to circumvent mandatory rules for the protection of commercial agents in the country where business is conducted, but domestic principals were not allowed to do so.
The drive towards harmonization in the interest of trade is old, as shown by the ADHGB, for example. Harmonization of law and approximation of law were already practised by the High Commercial Court of the Reich ([[Reichsoberhandelsgericht (with Reichsgericht)|''Reichsoberhandelsgericht ''(with ''Reichsgericht'')]]). Early stages of harmonization of law by harmonization of trade practices include the [[Incoterms]] or the Uniform Customs and Practice for Documentary Credits ([[Letter of Credit|letter of credit]]) of the [[International Chamber of Commerce (ICC)]]. Since the time of the 19th century, it has been important international conventions, especially in the traffic sector, which have driven the onset and continuing evolution of global commercial law; examples include the International Conventions on the Uniform Rules Concerning the Contract for International Carriage of Goods by Rail (CIM) of 1890/1961, the Uniform Rules Concerning the Contract for International Carriage of Passengers and Luggage by Rail (CIV) ([[Railway Transportation|railway transportation]]), the Contract for International Carriage of Goods by Road (CMR) ([[Carriage of Goods by Road|carriage of goods by road]]) and the Unification of Certain Rules Relating to International Carriage by Air (Warsaw Convention, [[Air Transportation (Contractual Liability)|air transportation (contractual liability)]]). The several Geneva Conventions on the Unification of the Law Relating to Bills of Exchange and to Cheques in 1930/31 must also be mentioned. Further measures of international harmonization of commercial law concern UN sales law ([[Sale of Goods, International (Uniform Law)|sale of goods, international (uniform law)]]), financial leasing and [[Factoring|factoring]] (UNIDROIT Conventions), the contracts of guarantees (UN Convention; [[Guarantee, Independent|guarantee, independent]]), the business of storing and handling goods (UN Convention) and other areas of international transportation law. Last but not least there are the controversial [[Lex Mercatoria|''lex mercatoria'']], model laws, general principles and standard contract terms.


It was against this background that the harmonization of commercial agency laws in the EU slowly gathered speed. Aiming to align the costs of entrepreneurs incurred by mandatory rules in certain Member States and to harmonize the standards in protecting the commercial agents provided for in these rules, Dir 86/653 relating to self-employed commercial agents was finally adopted on 18 December 1986.
== 4. European harmonization of commercial law ==


The adoption of the directive was preceded by a 25-year long preparation phase, which was caused not least by fierce criticism articulated in England. Whilst a draft of the Directive of 1976 was clearly shaped/modelled after the German law of commercial agency, the adopted Dir 86/ 653 contains implementation options that allow the Member States to adhere to their own basic legal conceptions on commercial agency without abandoning the aim of harmonization. This is the case for the very relevant practical question of what rights are granted to an agent who is entrusted by the principal to cover a specific geographical area, and also for harmonizing the rules on indemnity for goodwill. Whereas the draft of the Directive of 1976 adopted the (German) concept of a commercial agent entrusted by the principal to cover a specific geographical area, Dir 86/653 gives the Member States the choice to opt for the conception of a commercial agent given the exclusive right to a specific geographical area, a conception which was originally found in most of the Member States (Art 7(2) Dir 86/653).
Today the harmonization of law in the [[European Union]] is proceeding rapidly. Many [[Directive|directives]] aiming to coordinate commercial law in a wider sense have already been enacted and it is fair to speak of a core of genuinely European commercial law. This has even led to a demand for a European commercial law statute. If the directives are not transposed into national law, there is a threat that the Member State could become liable for damages towards its citizens. The uniform interpretation of national commercial law in light of European commercial law may create difficulties. For example, the European directive on [[Commercial Agents|commercial agents]] provides for a duty of acting in the interest of the entrepreneur, yet this same duty has been concretized in national law in many different ways. The important issue in practice and as far as procedure is concerned is that the [[European Court of Justice (ECJ)]] is competent to decide doubts arising out of the interpretation of European directives under Art 267 TFEU/234 EC. If the duty of the national judge to refer such a matter to the ECJ is violated, this amounts to the withholding of the ‘competent judge’, ie a violation of a basic right under the German constitution.


As to the termination of the agency contract, Dir 86/653 also stipulates two options for the implementation in the Member States: on the one hand an indemnity for the goodwill of the commercial agent, which by and large follows the German approach (Art 17(2) Dir 86/653), and on the other hand compensation for the damage the commercial agent suffers as a result of the termination of his relations with the principal (Art 17 (3) Dir 86/653). In accordance with Art 17(6) Dir 86/653, the [[European Commission]] in 1996 published a report on the implementation of the rules on the termination of the agency contract (COM (96) 364 final). In the report the Commission observed that only France, the United Kingdom and Ireland have opted for the compensation of damages, while all other Member States have chosen the indemnity for goodwill alternative. However, the United Kingdom has permitted the parties to choose the indemnity option, but if they fail to do so, the agent will be entitled to compensation. In practice, such a choice of the parties occurs rarely. Furthermore, the Commission noticed that prior to the implementation of Dir 86/653 in the United Kingdom, principals terminated their agency contracts and generally re-negotiated new contracts. There were also occasions where new agency contracts were not entered into or the agent was taken on as employee.
As for commercial law in a narrower sense, only specific parts of commercial law have been harmonized in the European Union. These include the transparency by means of and the reliance on the commercial register (1st Company Law Harmonization Directive 68/151 of 9 March 1968, Transparency Directive) and more generally the law of the commercial register including an electronic commercial register (Dir 2003/58 of 15 July 2003 modifying the previously mentioned directive); the annual accounts and the consolidated accounts of public companies (4th and 7th Company Law Harmonization Directives, Annual Accounts Directive 78/660 of 25 July 1978 and Consolidated Accounts Directive 83/349 of 13 June 1983); the definite inclusion of the German GmbH & Co (a mixture between a commercial partnership and a limited liability company) into these accounting directives (Dir 90/605 of 8 November 1990, so-called GmbH & Co Directive); auditors (8th Company Law Harmonization Directive of 10 April 1984, Auditors Directive 84/253, replaced by Dir 2006/43 of 17 May 2006 on audits ([[Auditor|auditors]]); the recommendation of the [[European Commission]] of 16 May 2002 on the independence of auditors; the recommendation of the European Commission of 5 June 2008 concerning the limitation of the civil liability of auditors and auditing companies; the law of commercial agents (Dir 86/653 of 18 December 1986, Commercial Agents Directive); and the disclosure requirements in respect of certain company branches (11th Company Law Harmonization Directive 89/666 of 21 December 1989, Branch Directive).


On reference by the Court of Appeal of England and Wales (Civil Division) the Court of Justice decided in a much-discussed judgment that the regime established by Dir 86/653 for the protection of the commercial agent after termination of the contract is mandatory in nature and that these rules cannot be evaded by the simple expedient of a choice-of-law clause (Case C-381/98 – ''Ingmar GB Ltd v Eaton Leonard Technologies Inc'' [2000] ECR I-9305). Therefore, whenever the commercial agent is conducting business in one of the Member States of the EU, the rules on the protection of the commercial agent apply even if the parties have chosen the law of a country outside the EU (eg the law of California as in the case decided by the Court of Justice). According to the court this understanding follows from the purpose of the regime established in Dir 86/653, namely to protect the [[Freedom of Establishment|freedom of establishment]]—for all commercial agents—as well as the operation of undistorted competition in the internal market, to eliminate restrictions on the carrying-on of activities by commercial agents, to make the conditions of competition within the Union uniform and to increase the security of commercial transactions.
Looking through this stock of European harmonization measures in the area of commercial law in the narrower sense, it is easy to notice that the main focus of the European legislature lies on three areas: transparency in commercial and company matters, commercial agency and the law of the branches. The reasons for this are easily understood. [[Transparency|Transparency]] is one of the most important regulatory instruments in commercial and business law because it forces enterprises to face competition and control by the markets. For the European legislators, transparency is also important for another reason: it is a measure that infringes on commerce less than substantive regulation. Therefore, Member States are more willing to accept transparency norms than substantive regulation and intervention. The law of commercial agents is a central area of the sale and distribution of goods, which in an internal market must be possible with- out restrictions across borders ([[Commercial Agents|commercial agents]]). The law of commercial agents also contains protective norms. The European legislature demonstrates care for the protection of the weaker party here as well as in other areas, eg protection of the shareholders, the consumers and the workers. Finally, as to the law of the branches, its importance in an internal market is self-evident.


Regarding the termination of the agency contract and the requirements for an agreement restricting the business activities of a commercial agent following termination of the agency contract, Dir 86/653 establishes a minimum standard of protection of the commercial agent but leaves it to the Member States to stipulate a higher standard (Arts 15, 16 and 20 Dir 86/653).
== 5. European harmonization in areas that are close to commercial law ==


== 4. Unitary law ==
If one assumes a wider concept of commercial law (see 1. above), or if one takes into consideration the European harmonization of law in areas that are close to commercial law—like company law, banking and stock exchange law, insurance law and, in part, labour law—the number of European measures of harmonization of law is so high that it does not make sense to start enumerating them here. Instead, the reader must be referred to other entries in this work. To give an idea of the breadth of this harmonization, a 2007 text collection (Hopt and Wymeersch (2007)) contains 32 entries concerning European company and financial law, 42 concerning banking law, 24 concerning consumer law in financial transactions, 34 concerning stock exchange and capital markets law, 40 concerning insurance law and 13 concerning enterprise law.


In the Draft [[Common Frame of Reference (CFR)|Common Frame of Reference]] (DCFR) it is proposed that the law of commercial agency be unified as one part of the law of distribution. Certain rules inherent to all forms of distribution ([[Sales (Forms of Distribution)|sales (forms of distribution)]]) such as pre-contractual information duties, requirements to give notice prior to terminating the contract and indemnity for goodwill are stipulated in general rules applying to all of the concerned contracts. The influence of Dir 86/653 and, more specifically, the rules on the termination of agency contracts in Germany are quite apparent: the DCFR provides only for indemnity for goodwill and, in general, not for compensation for damages.
== 6. Towards a European commercial law statute? ==
 
Here and there voices have arisen that call for a European commercial law statute (Ulrich Magnus (1998)). The reason given is that apart from the formation of the contract ([[Contract (Formation)|contract (formation)]]) and general contract law, quite a number of specific commercial contracts have already been totally or partially harmonized internationally (sales of goods, financial leasing ([[Leasing|leasing]]), [[Factoring|factoring]], guarantee contracts ([[Guarantee, Independent|guarantee, independent]]), transport contracts, ([[Carriage, Contract of|carriage, contract of]]), commercial agency contracts ([[Commercial Agents|commercial agents]]), storing and handling of goods contracts, documentary credits ([[Letter of Credit|letter of credit]]) and transfer of money ([[Bank Transfers (Cross-Border)|bank transfers (cross-border)]]). But other important commercial contracts have been neglected, including contracts of distribution of goods ([[Sales (Forms of Distribution)|sales (forms of distribution)]]), [[Franchising|franchising]], [[License Agreements|licence agreements]] and know-how and technology transfer contracts. The parts that have already been harmonized could be used as building blocks, which would only need to be compiled into a truly European commercial law statute.
 
This quest is certainly on target insofar as the selection and the reach of these harmonization measures can be understood as political choices driven by interest groups. For the merchants, there is a free commercial choice whether to distribute their products directly, through commercial agents, through independent distributors, or in other ways. Therefore, it makes little sense in an internal market that only commercial agency has been harmonized, and even this only in parts—eg as far as the remuneration of the commercial agents and the termination of their contracts including severance pay is concerned—while the law of the independent commercial distributors has been left out (apart, of course, from the public law measures in antitrust and competition law).
 
Yet, on the other hand, it must be seen as described above that a separate [[Codification|codification]] of commercial law is by no means accepted throughout the Member States of the [[European Union]] and that, on the contrary, there is a movement towards integration of commercial law into general civil law ([[Code Unique|''Code unique'']]). Furthermore, there are considerable differences among Member State laws and in the legal discussion in these states as far as the concept and the reach of commercial law is concerned. Last but not least, it is well known that the movement towards European private law—not necessarily a European statute on private law—by means of principles, model laws and tools has gained unexpected momentum during the last decade. It is therefore more likely that commercial law harmonization on the European level will also make advances.


==Literature==
==Literature==
Ole Lando, ‘The EEC draft directive relating to self-employed commercial agents’ (1980) 44 RabelsZ 1; Jürgen Basedow, ‘Das Vertretungsrecht im Spiegel konkurrierender Harmonisierungsentwürfe’ (1981) 45 RabelsZ 196; Commission of the European Communities, ‘Report on the Application of Article 17 of the Council Directive on the Co-ordination of the Laws of the Member States Relating to Self-employed Commercial Agents (86/653/EEC)(1996) (COM (96) 364 final); Till Fock, ''Die'' ''europäische'' ''Handelsvertreter-Richtlinie'' (2001); Roland Hagemeister, ''Der Handelsvertreter im englischen Recht und seine Ansprüche bei Beendigung des Vertretervertrags'' (2003); Klaus J Hopt, ''Handelsvertreterrecht ''(3rd&nbsp;edn, 2003); Michael Martinek, Franz-Jörg Semler and Stefan Habermeier, ''Handbuch des Vertriebsrechts ''(2nd&nbsp;edn, 2003); Martin W Hesselink, Jacobien W Rutgers, Odavia Bueno Díaz, Manola Scotton and Muriel Veldman, ''Principles of European Law Commercial Agency'','' Franchise and Distribution Contracts'' (2006).</div>
Peter Raisch, ''Geschichtliche Voraussetzungen'','' dogmatische Grundlagen und Sinnwandlung des Handelsrechts'' (1965); Wolfgang Zöllner, ‘Wovon handelt das Handelsrecht?’ [1983] ZGR 82; Franz Bydlinski, ''Handels- oder Unternehmensrecht als Sonderprivatrecht'' (1990); Uwe Blaurock, ‘Übernationales Recht des Internationalen Handels’ (1993) 1 ZEuP 247; Herbert Kronke, ‘Rechtsvergleichung und Rechtsvereinheitlichung des Reichsoberhandelsgerichts’ (1997) 5 ZEuP 735; Ulrich Magnus, ‘Die Gestalt eines Europäischen Handelsgesetzbuches’ in ''Festschrift Ulrich Drobnig'' (1998) 57; Karsten Schmidt, ''Handelsrecht'' (5th&nbsp;edn, 1999); Klaus J Hopt (ed), ''Vertrags- und Formularbuch zum Handels-'','' Gesellschafts- und Bankrecht'' (3rd&nbsp;edn, 2007); Klaus J Hopt and Eddy Wymeersch (eds), ''European Company and Financial Law'' (4th&nbsp;edn, 2007); Adolf Baumbach, Klaus J Hopt and Hanno Merkt,'' Handelsgesetzbuch mit GmbH & Co'','' Handelsklauseln'','' Bank- und Börsenrecht'','' Transportrecht (ohne Seerecht)'' (34th&nbsp;edn, 2009).</div>


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Latest revision as of 18:39, 5 June 2025

by Klaus J Hopt

1. Concept and sources of commercial law

In some instances, commercial law is contained in a separate codification, eg in France’s Code de commerce of 1807 or Germany’s Commercial Code of 1897 (similarly in Belgium, Luxembourg, Spain, Portugal and Greece; and also as a model law since 1954 in the United States’ Uniform Commercial Code). In other countries, it is embedded in the general civil law as part of the Civil Code, such as in Switzerland (Swiss Code of Obligations (OR) of 1881 and Swiss Civil Code (ZGB) of 1907), in Italy where the original separate codification was later abandoned (Codice civile of 1942), or, more recently, in the Netherlands (Burgerlijk Wetboek (BW)). In some countries, such as the Scandinavian nations, there are only separate statutes dealing with certain parts of commercial law. In others, such as the United Kingdom and Ireland, most of it is covered not by written law but by judge-made law alone. It follows that there are also many differences in the legal doctrine in the various countries on whether there is a separate concept of commercial law and, if so, what its reach and content are. It is therefore disputed, for example, whether commercial law also includes accounting law, transport law (carriage, contract of), company law, banking and stock exchange law (banking law; banking law (international); exchanges), insurance law (insurance contracts; insurance contract law (international)) and portions of labour law.

Conceptually, commercial law may be considered a separate part of the general legal order dealing either with certain persons who are engaged in business transactions or dealing directly with certain business transactions and activities. Depending on this, commercial law may begin and be delineated by either regulating certain transactions (commercial transactions, the ‘objective system’) or, like the German and Austrian Commercial Codes, rather by regulating certain persons (the merchant as in Germany or the enterprise as was more recently done in Austria). The latter is the ‘subjective system’, though mixtures between the two systems are common. Commercial law is then the law of merchants, and commercial law regulates the transactions performed by these merchants either among themselves or with private persons. Commercial law is private law, though occasionally it also contains public law norms, eg concerning the commercial register, certain rules on the name of the merchant and accounting.

In continental Europe, the sources of commercial law are primarily statutes, even though judge-made law also plays a role. The latter is still the primary source of commercial law in common law countries. Commercial usages and trade customs are more important in commercial law than in general private law. This is because of the specific needs and practices of commerce. Commercial usages are particularly relevant in international trade. Standard contract terms play an important role in a large part of commercial practice in many countries. They raise particularly difficult problems in transborder transactions. Furthermore, the recommendations of the International Chamber of Commerce (ICC) and other international and national institutions must be remembered.

2. Particularities of commercial law as compared to general civil law

Merchants are entrepreneurs who must stand up to competition or be driven out of the market. Therefore, they must be free to make business decisions and contracts as they think best, up to certain limits set by the law in protection of other parties and of the market as a whole. It is not surprising, therefore, that norms made by private persons or institutions (in particular contract norms, including standard contract terms) play an important role in commercial law. Mandatory legal norms (mandatory law (fundamental regulatory principles)) are rare, with the exception of those for the protection of commercial agents, for example. The merchants must evaluate and bear the risks and chances they face in commerce.

Simplicity and rapidity are decisive for commercial transactions. Therefore, commercial law renounces unnecessary formalities and urges merchants to respond to offers and make dispositions quickly. Commercial norms, internationally uniform contract clauses like the incoterms and trade usages standardize the contractual and other business declarations of the merchant. Commercial law favours standardization; an example of this is that the power of representation is irrevocable in certain commercial contexts, such as for the representatives of commercial companies.

Regarding merchants’ decisions, simplicity and rapidity presuppose that merchants can reliably inform themselves about their contractual partners and in commercial transactions can rely on those partners’ behaviour (ie in legal terms, without internal or mental reservations of the latter being relevant). Commercial transparency and the concept of reasonable reliance on business appearances play an important role in commercial law.

Commercial law has arisen to a considerable degree out of commercial practice. This can be observed in the legal sources and in the great importance of arbitration (arbitration (international)). Commercial law is geared towards international trade, though in legal terms it is part of national law. Trade interests do not stop at borders. Commercial law is not only open to influences from outside, but in particular also to a pragmatic international harmonization of law. The German Common Commercial Law (Allgemeines Deutsches Handelsgesetzbuch (ADHGB) of 1861) preceded the unity of the state by one decade and the uniform civil law in Germany (Bürgerliches Gesetzbuch (BGB)) by nearly half a century.

3. International harmonization of commercial law

The drive towards harmonization in the interest of trade is old, as shown by the ADHGB, for example. Harmonization of law and approximation of law were already practised by the High Commercial Court of the Reich (Reichsoberhandelsgericht (with Reichsgericht)). Early stages of harmonization of law by harmonization of trade practices include the Incoterms or the Uniform Customs and Practice for Documentary Credits (letter of credit) of the International Chamber of Commerce (ICC). Since the time of the 19th century, it has been important international conventions, especially in the traffic sector, which have driven the onset and continuing evolution of global commercial law; examples include the International Conventions on the Uniform Rules Concerning the Contract for International Carriage of Goods by Rail (CIM) of 1890/1961, the Uniform Rules Concerning the Contract for International Carriage of Passengers and Luggage by Rail (CIV) (railway transportation), the Contract for International Carriage of Goods by Road (CMR) (carriage of goods by road) and the Unification of Certain Rules Relating to International Carriage by Air (Warsaw Convention, air transportation (contractual liability)). The several Geneva Conventions on the Unification of the Law Relating to Bills of Exchange and to Cheques in 1930/31 must also be mentioned. Further measures of international harmonization of commercial law concern UN sales law (sale of goods, international (uniform law)), financial leasing and factoring (UNIDROIT Conventions), the contracts of guarantees (UN Convention; guarantee, independent), the business of storing and handling goods (UN Convention) and other areas of international transportation law. Last but not least there are the controversial lex mercatoria, model laws, general principles and standard contract terms.

4. European harmonization of commercial law

Today the harmonization of law in the European Union is proceeding rapidly. Many directives aiming to coordinate commercial law in a wider sense have already been enacted and it is fair to speak of a core of genuinely European commercial law. This has even led to a demand for a European commercial law statute. If the directives are not transposed into national law, there is a threat that the Member State could become liable for damages towards its citizens. The uniform interpretation of national commercial law in light of European commercial law may create difficulties. For example, the European directive on commercial agents provides for a duty of acting in the interest of the entrepreneur, yet this same duty has been concretized in national law in many different ways. The important issue in practice and as far as procedure is concerned is that the European Court of Justice (ECJ) is competent to decide doubts arising out of the interpretation of European directives under Art 267 TFEU/234 EC. If the duty of the national judge to refer such a matter to the ECJ is violated, this amounts to the withholding of the ‘competent judge’, ie a violation of a basic right under the German constitution.

As for commercial law in a narrower sense, only specific parts of commercial law have been harmonized in the European Union. These include the transparency by means of and the reliance on the commercial register (1st Company Law Harmonization Directive 68/151 of 9 March 1968, Transparency Directive) and more generally the law of the commercial register including an electronic commercial register (Dir 2003/58 of 15 July 2003 modifying the previously mentioned directive); the annual accounts and the consolidated accounts of public companies (4th and 7th Company Law Harmonization Directives, Annual Accounts Directive 78/660 of 25 July 1978 and Consolidated Accounts Directive 83/349 of 13 June 1983); the definite inclusion of the German GmbH & Co (a mixture between a commercial partnership and a limited liability company) into these accounting directives (Dir 90/605 of 8 November 1990, so-called GmbH & Co Directive); auditors (8th Company Law Harmonization Directive of 10 April 1984, Auditors Directive 84/253, replaced by Dir 2006/43 of 17 May 2006 on audits (auditors); the recommendation of the European Commission of 16 May 2002 on the independence of auditors; the recommendation of the European Commission of 5 June 2008 concerning the limitation of the civil liability of auditors and auditing companies; the law of commercial agents (Dir 86/653 of 18 December 1986, Commercial Agents Directive); and the disclosure requirements in respect of certain company branches (11th Company Law Harmonization Directive 89/666 of 21 December 1989, Branch Directive).

Looking through this stock of European harmonization measures in the area of commercial law in the narrower sense, it is easy to notice that the main focus of the European legislature lies on three areas: transparency in commercial and company matters, commercial agency and the law of the branches. The reasons for this are easily understood. Transparency is one of the most important regulatory instruments in commercial and business law because it forces enterprises to face competition and control by the markets. For the European legislators, transparency is also important for another reason: it is a measure that infringes on commerce less than substantive regulation. Therefore, Member States are more willing to accept transparency norms than substantive regulation and intervention. The law of commercial agents is a central area of the sale and distribution of goods, which in an internal market must be possible with- out restrictions across borders (commercial agents). The law of commercial agents also contains protective norms. The European legislature demonstrates care for the protection of the weaker party here as well as in other areas, eg protection of the shareholders, the consumers and the workers. Finally, as to the law of the branches, its importance in an internal market is self-evident.

5. European harmonization in areas that are close to commercial law

If one assumes a wider concept of commercial law (see 1. above), or if one takes into consideration the European harmonization of law in areas that are close to commercial law—like company law, banking and stock exchange law, insurance law and, in part, labour law—the number of European measures of harmonization of law is so high that it does not make sense to start enumerating them here. Instead, the reader must be referred to other entries in this work. To give an idea of the breadth of this harmonization, a 2007 text collection (Hopt and Wymeersch (2007)) contains 32 entries concerning European company and financial law, 42 concerning banking law, 24 concerning consumer law in financial transactions, 34 concerning stock exchange and capital markets law, 40 concerning insurance law and 13 concerning enterprise law.

6. Towards a European commercial law statute?

Here and there voices have arisen that call for a European commercial law statute (Ulrich Magnus (1998)). The reason given is that apart from the formation of the contract (contract (formation)) and general contract law, quite a number of specific commercial contracts have already been totally or partially harmonized internationally (sales of goods, financial leasing (leasing), factoring, guarantee contracts (guarantee, independent), transport contracts, (carriage, contract of), commercial agency contracts (commercial agents), storing and handling of goods contracts, documentary credits (letter of credit) and transfer of money (bank transfers (cross-border)). But other important commercial contracts have been neglected, including contracts of distribution of goods (sales (forms of distribution)), franchising, licence agreements and know-how and technology transfer contracts. The parts that have already been harmonized could be used as building blocks, which would only need to be compiled into a truly European commercial law statute.

This quest is certainly on target insofar as the selection and the reach of these harmonization measures can be understood as political choices driven by interest groups. For the merchants, there is a free commercial choice whether to distribute their products directly, through commercial agents, through independent distributors, or in other ways. Therefore, it makes little sense in an internal market that only commercial agency has been harmonized, and even this only in parts—eg as far as the remuneration of the commercial agents and the termination of their contracts including severance pay is concerned—while the law of the independent commercial distributors has been left out (apart, of course, from the public law measures in antitrust and competition law).

Yet, on the other hand, it must be seen as described above that a separate codification of commercial law is by no means accepted throughout the Member States of the European Union and that, on the contrary, there is a movement towards integration of commercial law into general civil law (Code unique). Furthermore, there are considerable differences among Member State laws and in the legal discussion in these states as far as the concept and the reach of commercial law is concerned. Last but not least, it is well known that the movement towards European private law—not necessarily a European statute on private law—by means of principles, model laws and tools has gained unexpected momentum during the last decade. It is therefore more likely that commercial law harmonization on the European level will also make advances.

Literature

Peter Raisch, Geschichtliche Voraussetzungen, dogmatische Grundlagen und Sinnwandlung des Handelsrechts (1965); Wolfgang Zöllner, ‘Wovon handelt das Handelsrecht?’ [1983] ZGR 82; Franz Bydlinski, Handels- oder Unternehmensrecht als Sonderprivatrecht (1990); Uwe Blaurock, ‘Übernationales Recht des Internationalen Handels’ (1993) 1 ZEuP 247; Herbert Kronke, ‘Rechtsvergleichung und Rechtsvereinheitlichung des Reichsoberhandelsgerichts’ (1997) 5 ZEuP 735; Ulrich Magnus, ‘Die Gestalt eines Europäischen Handelsgesetzbuches’ in Festschrift Ulrich Drobnig (1998) 57; Karsten Schmidt, Handelsrecht (5th edn, 1999); Klaus J Hopt (ed), Vertrags- und Formularbuch zum Handels-, Gesellschafts- und Bankrecht (3rd edn, 2007); Klaus J Hopt and Eddy Wymeersch (eds), European Company and Financial Law (4th edn, 2007); Adolf Baumbach, Klaus J Hopt and Hanno Merkt, Handelsgesetzbuch mit GmbH & Co, Handelsklauseln, Bank- und Börsenrecht, Transportrecht (ohne Seerecht) (34th edn, 2009).

Retrieved from Commercial Agents – Max-EuP 2012 on 23. July 2025.

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