By its judgment No. 3557 of 23 October 2018, the Court of Appeal of Rome dealt with the issue of the boundaries between agency agreement, as regulated by Articles 1742 et seq. of the Italian Civil Code, and business procurement agreement, highlighting similarities and differences. The ruling seems particularly useful to legal practitioners, who everyday strive to determine the legal framework of a case, enabling them to be increasingly aware of any clauses in a business procurement agreement that may cleverly disguise an agency agreement.

The case

In October 2010, a company underwent an inspection by the National Board for assistance of sales agents and representatives (“Enasarco”) on the allegation of failure to pay contributions in respect of fees paid to three sales intermediaries amounting to Euro 41,847.83. Enasarco indeed alleged that the relationship in place between the company and said intermediaries should be regulated by the statutory rules on sales agents, notwithstanding their classification as “intermediaries”.

The application and the decision of the Court of Rome

Following the negative outcome of the application filed with the Regional Employment Relations Committee through the Regional Employment Directorate of Rome, the company applied to the Labour Court of Rome against Enasarco, challenging the status as sales agents for the aforementioned intermediaries and its consequent obligation to pay contributions.

At that point, Enasarco entered an appearance, challenging the company’s application in both fact and law, while making a counterclaim in order for the Court to ascertain and declare the nature as an agency of the relationship in place between the intermediaries and the company.

The Court of First Instance upheld the company’s application, holding that the continuity in the transmission of orders and the amount of the fees, as elements of the agreement entered into with said intermediaries, could not be deemed per se sufficient indicators of an agency agreement, thus recognising the intermediaries’ status as business brokers.

The appeal and the decision of the Court of Appeal of Rome

Enasarco appealed against the judgment of the Court of Rome, arguing that the inspection report revealed no elements capable of demonstrating that the relationship be stable enough to be construed as agency, while, contrary to what stated by the judges at first instance, the continuity in the transmission of orders, the amount of the fees, the multi-year term of the relationship as well as the data emerging from the inspection report itself were symptomatic of an agency agreement and not just of a business procurement agreement.

The Court of Appeal then upheld the appeal, overturning the first-instance judgment and ordering the company to pay Enasarco the contributions not paid in respect of the intermediaries’ fees.

The decision of the Court of Appeal is based on the assumption that, according to a well-established line of precedents, agency agreements are characterised by a stable and continuous activity of business promotion in a given area, as opposed to business procurement, which is characterised by the occasional nature of the relationship. While, therefore, the service of an agent is by nature stable, with the agent being obliged to carry out his/her services on an ongoing basis, the service provided by a business broker is completely occasional, depending on the intermediary’s initiative only.

The Court of Appeal analysed in detail the findings of the inspection, with a focus on the invoices issued by the intermediaries to the company. Such invoices were numbered consecutively, as proof of the stability and exclusivity of the relationship in place with the company, and sometimes issued in advance for fees, thus demonstrating “without fear of denial” the stability of the relationship between the parties. The appellate judges concluded by arguing that “the payment of advances presupposes the certainty that the agent will continue to provide services over time, whereas it is not consistent with the occasional nature of the intermediary’s service”.

In addition to the analysis of the billing methods, the provisions contained in the appointment letter were decisive, since the company, besides having allocated specific areas of operation to the said intermediaries –  which element is in itself one of the distinctive features of agency agreements – had even allowed them to withdraw, provided that, for that purpose, due account be taken of the “seasonality   of the product lines, that is to say, only at the end of the summer or winter season”.

Such clause, despite formally reiterating the precarious nature of the mandate and the possibility to terminate it at any time, would however seem to express a non-occasional relationship, imposing a time obligation upon the intermediary, a feature that does not fit business procurement agreements. More specifically, the Court reasoned as follows: “The occasional nature of the obligation and the free initiative of the broker, which characterise the relationship, are not consistent with the provision mentioned above”.

Finally, the Court of Appeal considered the circumstance that the three brokers had been registered with Enasarco as agents for several years as evidence of the continuity of the activity covered by the agreement and by the judgment under examination.

Conclusions

To conclude, the judgment of the Court of Appeal is a significant precedent in case law to determine the discrimen between agency and business procurement agreements.

Although an authoritative ruling of the Supreme Court on the subject may be very welcome, the judgment at issue still remains an exemplary warning to those (including trial courts) who, sometimes misled by the nomen of a business procurement agreement, do not bother to concretely verify its peculiar features, thus providing legal operators with a number of tools to spot any cleverly-disguised agency relationship.

This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Francesca Rogai or Claudia Colamonaco.