Eaton Leonard Technologies Inc. of California terminated an agency arrangement it had with Ingmar of the UK
Topic: Selling on-line
Who: Ingmar GB Ltd -v- Eaton Leonard Technologies Inc
When: November 2000
Where: European Court of Justice, Luxembourg
Eaton Leonard Technologies Inc. of California terminated an agency arrangement it had with Ingmar of the UK. Ingmar sued in the UK Courts for compensation under the Commercial Agents Regulations, introduced in 1993 under an EU wide Directive. Eaton Leonard defended on the basis of the agency contract which appointed Ingmar. This stated that Californian law applied and so, they said, they were not bound by the 1993 Regulations. The ECJ disagreed, holding that because the Commercial Agents Directive was designed to create a harmonised business environment across Europe for commercial agents, it should not be possible for this grand design to be negated by the simple ploy of a contract clause stipulating that the law of a non EU state would apply. So in all cases, the court held, where a commercial agent carries on its activity in an EU member state, regardless of whether the principal is located in the EU or outside, the directive should apply. Ingmar can now go back to the English High Court and press their claim for compensation.
Why this matters:
In B2C sales contracts it is well established that a foreign governing law clause cannot deprive the consumer of the protection of so called "mandatory" rules in the consumer's home state. There is still lack of certainty as to the precise ambit of the "mandatory rules" definition, but one example of the type of mandatory rules a "California law governs" clause could not exclude might be the Unfair Terms in Consumers Contracts Directive which disables sellers from relying on unreasonable provisions in consumer contracts.
That is in the B2C domain, but now, thanks to this case, we are perhaps seeing a similar trend in the B2B environment. It has to be said that the purlieu of the Commercial Agents Regulations is not wide and it should not apply to most contracts for the provision of advertising and marketing services. This is mainly because a marketing services agency will in these cases normally be acting as principal and not agent for the client. This case does underline, however, that it should not necessarily be assumed that a "this contract shall be governed in all respects by the law of Delaware" clause will exclude the operation of EU legislation and regulations where one of the parties is based in Europe.