A European Perspective #1 | FRANCE
In a significant decision for companies operating in France, the French Supreme Court (Cour de cassation) reaffirmed a broad interpretation of the concept of commercial agent under French law, in line with EU case law.
The Case at Stake: A home healthcare company specialising in diabetic patient management terminated a long-standing service agreement with a medical device distributor in the French Antilles. The service provider had been entrusted with extensive logistics and a 'sub-distribution' mission consisting primarily of promoting medical devices to healthcare professionals on behalf of the principal. It sought requalification of the agreement as a commercial agency contract and claimed a statutory termination indemnity.
The Decision: The French Supreme Court (Cour de cassation) recalled that the principal tasks of a commercial agent consist in bringing new clients to the principal and developing business with existing ones. Those tasks may be performed through information, advice and discussions designed to facilitate commercial transactions on behalf of the principal, even where the agent cannot itself modify prices or contract terms. Direct negotiation power is therefore not a necessary condition for characterising a commercial agency relationship. It is sufficient, to be qualified as an agent, that negotiation be facilitated by the latter between the principal and the final client.
Since the service provider was carrying out promotion of the principal's products to healthcare professionals – to encourage prescriptions – and to pharmacist groups and wholesalers – to incite purchases from the principal – the relationship should be requalified as a commercial agency. The substance of the activities performed, rather than the contractual label, determines the applicable legal regime. This requalification entitles the agent to a mandatory and non-waivable termination indemnity, typically assessed at two years of gross commissions – a significant constraint under French law with few equivalents in other EU jurisdictions.
Key Takeaways for Medical Device Manufacturers:
- Requalification risk is broader than expected. Promotional and prescriber-targeting activities – even without pricing authority – may suffice to trigger the commercial agency regime.
- Medical device intermediaries are particularly exposed, given the frequent overlap between logistics, materiovigilance and promotion.
- Recommendation to audit existing agreements involving promotion to healthcare professionals in France and revisit contractual drafting to ensure the legal characterisation accurately reflects the operational reality of the relationship.
- Termination indemnity exposure is statutory and non-waivable. It must be factored into any restructuring or exit decision.
