The current legal framework of agency relations is set forth by the Law on Commerce (the “LC”), effective as of July 1, 1991. The LC names legally the figure of the agent as a commercial representative. Under the provisions of the LC the agent is a person who independently and by profession assists the business of another merchant (the “principal”) against remuneration. The agent may either execute transactions on behalf of the other merchant or on its own behalf, but always for the account of the principal.  The LC does not introduce any limitations as to the nationality of the agent or its personality,. i.e. the agent might be either an individual or a legal entity. 

Under the provision of the LC, the relationships between the agent and the principal shall be compulsory regulated via written agreement which shall govern the scope and region of agent’s activities as well as the internal relationships between the latter and the principal.

According to the LC, the agent shall act with due care, taking into consideration the principal's interests. Further, the agent may represent several merchants as long as they are not in competition among themselves. As far as the obligations of the principal are concerned, the latter is obliged to provide the agent with all information and documents necessary for execution and performance of the commissioned transactions. Further, the principal is also obliged to promptly notify the agent whether said principal accepts a deal concluded without representation powers, as well as whether the principal has concluded a deal prepared by the agent.

The LC permits entering into del credere agency agreements, i.e. inclusion of a provision in an agency agreement, stipulating that the agent will be personally liable for performance of the obligations under executed transactions in consideration of an additional commission to be agreed in writing.

In accordance with the provisions of the LC, the agent shall be entitled to a commission for all transactions executed by him or through his assistance during the term of his contract with the principal. A commission shall also be paid for deals prepared by the agent but not concluded, except in cases where this is not due to the fault of the principal. The LC further stipulates that where an agent is entrusted with a specified territory or circle of clients, he shall also be entitled to a commission for all transactions concluded without his assistance, but with persons from the same territory or with the same clientele. In addition to the above compensations, the agent shall be also entitled to a commission for any of principal's claims which the agent has collected. Where the commission has not been explicitly agreed upon, the customary rate for such activity shall be due. Under the statutory provisions, the agent's commission shall be paid on a monthly basis. However, the parties to the agency agreement may agree other term for payment of the commission, but not later than the end of the month following the quarter during which the relevant transaction was concluded or had to be concluded.

Pursuant to the LC, the agent, respectively the heirs thereof in the case of his death, shall be entitled to compensation upon termination of the agency agreement if the principal continues to enjoy benefits from the clientele established by the agent or the latter has considerably increased the volume of the transactions of the principal. Such compensation shall be equal to the annual commission of the agent, calculated on the basis of the latter’s average annual commission for the entire duration of his agreement, but for not more than the last five preceding years. This compensation may not be claimed when (i) more than one year has expired following termination of the contract without the sales representative having informed the principal in writing that this compensation is due; (ii) the contract is rescinded at the fault of the agent or has been terminated unilaterally by the latter; (iii) the agent has transferred the legal relationship to another person, with the principal’s consent. 

The LC permits negotiation of certain restrictions on the activities of the agent to be in force following termination of the contract provided such restrictions are agreed in writing. These restrictions shall however concern the same territory and type of goods or services subject matter of the agency agreement and they may not be for more than two years following termination of the contract. The principal shall owe a respective compensation for the period of the restrictions.

In relation to termination of the agency agreement, the LC sets forth that where the agreement has been concluded for an indefinite term, during the first year any of the parties thereto may terminate it with one month prior notice, during the second year - with a two months prior notice, and during the third year - with a three months prior notice, unless the parties have agreed on shorter terms. Where a longer period of prior notice has been agreed, that period should be identical for both parties.

An agreement which has been concluded for a definite period may be terminated before its expiration if the party wishing to terminate it, compensates the other party for all damages caused.