By the lawyer. Alberto Venezia
1. Introduction
The agency agreement, governed by Articles 1742 et seq. of the Italian Civil Code and, where applicable, by collective economic agreements (CEPAs), is a long-term collaboration agreement between a principal (manufacturer or distributor of goods or services) and an agent (who promotes the conclusion of contracts within a given territory). This relationship may include a post-contractual non-compete agreement, aimed at protecting the business’s commercial assets and the principal’s clientele, as well as those brought and developed by the agent, even after the termination of the relationship. This provision can be considered a sort of extension of the non-compete agreement inherent in the exclusive right and represents a significant exception to the general principle of entrepreneurial freedom, and for this reason, it is subject to stringent and well-defined limits.
2. The regulatory discipline
The non-competition agreement after the termination of the agency contract is governed by Article 1751-bis of the Italian Civil Code, introduced by Legislative Decree No. 303 of 10 September 1991, implementing Directive 86/653/EEC. This provision establishes that:
The agreement limiting the agent’s competition after termination of the contract must be in writing. It must concern the same area, clientele, and type of goods or services for which the agency contract was concluded, and its duration cannot exceed two years following the termination of the contract. Acceptance of the non-competition agreement entails the payment of a non-commissionable indemnity to the commercial agent upon termination of the relationship. This indemnity must be commensurate with the duration, no longer than two years after termination of the contract, the nature of the agency contract, and the severance pay. The determination of the indemnity based on the parameters set out in the previous paragraph is entrusted to the negotiation between the parties, taking into account national economic agreements for the sector.
In the absence of an agreement, the compensation is determined by the judge on an equitable basis, also with reference to:
- to the average of the fees collected by the agent during the contract and to their impact on the overall turnover in the same period;
- to the causes of termination of the agency contract;
- to the size of the area assigned to the agent;
- whether or not there is an exclusive obligation for a single principal.”
The right to compensation was incorporated into the law by Article 23, paragraph 1, of Law No. 422 of 29 December 2000 (Community Law 2000), effective June 1, 2001. Pursuant to Article 23 of the same law, the provisions of this paragraph apply exclusively to agents operating as individuals, partnerships, or single-member corporations, as well as, where provided for by national trade agreements (the AEC Commerce Agreement only provides for limited liability companies), to corporations formed exclusively or predominantly by commercial agents.
3. Nature and function of the agreement
The agreement is binding, not real, and constitutes an agreement independent of the main contract, although connected to it. Its function is twofold:
- Defensive, as it protects the principal from the risk that the agent, once the relationship has ended, may use the commercial information acquired and the clientele brought and developed in addition to the existing one to his own advantage (or that of third-party competitors);
- Economical, as it preserves the value of company investments made in the reference market and the related goodwill.
4. Validity requirements
a) Written Form
The written form requirement is essential and essential: failure to do so in writing renders the agreement null and void.
b) Objective and subjective scope
The agreement must be limited:
- to the geographical area in which the agent operated;
- to the customers actually served;
- to the type of goods or services that are the subject of the contract.
Such limits must be determined or determinable, in order to avoid an excessive and indeterminate restriction of the agent’s freedom.
c) Term
The maximum term is two years from the termination of the contract. Any provision for a longer term is null and void for the remainder.
5. Accessory obligation and compensation
The non-competition agreement, since it affects the agent’s freedom of economic initiative, should be remunerated.
There are limits to the subjective applicability of the right to indemnity, and it is also worth noting a recent case law that allows the parties to agree not to recognize any indemnity to the agent, provided that this provision is express.
The AECs, however, where applicable, establish precise quantification criteria.
6. Rapporti con l’indennità ex art. 1751 c.c.
The indemnity for the post-contract non-competition agreement, if due, is added to the severance pay, even though the text of the directive provides for the presence of a post-contract non-competition agreement as one of the elements to be considered for the quantification of the severance pay and not as an obligation on the basis of which additional compensation is granted.
7. Breach of the agreement and remedies
Violation of the agreement exposes the agent to:
- Request for compensation for damages, to the extent necessary to compensate the principal for the losses suffered;
- Application of penalties where contractually provided for, which may however be reduced where manifestly excessive;
- Judicial injunctions against carrying out the activity, where the principal demonstrates a breach of duty and a concrete risk (periculum) of customer theft or diversion.
It is advisable, when drafting, to include safeguard clauses, such as automatic penalties and compensation for any further damages.
8. Conclusions
A post-contractual non-compete agreement is an effective tool for protecting existing and developed customers, as well as commercial know-how, but it must be used with caution, taking into account the difficulties associated with its practical effectiveness and the possibility of effectively pursuing legal action to obtain protection in the event of violations. Finally, the possibility of contractually excluding the right to indemnity should be evaluated, considering recent case law in this regard.
