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Spanish Law Applies to Expatriate Contract Dispute

In a decision with wide implications for expatriate workers, the Court of Appeal has ruled that a salesman who is seeking compensation following the termination of his agency agreement must have his case heard under Spanish law, notwithstanding that it is perceived as being less generous to claimants in such cases.

machineryPursuant to the agency agreement, the claimant, an Irish national, sold machinery for a UK registered company. His main but not exclusive area of operation was Spain, where he lived. The parties’ contractual relationship broke down following the failure of negotiations to replace the agreement with an employment contract. The claimant sought compensation in respect of the agreement’s termination pursuant to the Commercial Agents (Council Directive) Regulations 1993.

On the basis that his claim, if successful, would be worth substantially more if tried under English, rather than Spanish, law, the claimant argued that, on a correct interpretation of article 3 of the Rome Convention, the parties to the agreement had made an ‘implied choice’ that English law should apply in resolving the dispute.

That argument failed at first instance and, in dismissing the claimant’s challenge to that decision, the Court of Appeal ruled that, on the particular facts of the case, the contract was ‘most closely connected’ to Spain. The court rejected the claimant’s plea that the parties’ intention that English law should apply could be inferred from the surrounding circumstances.

The court acknowledged that the line between the search for the parties’ inferred intention and the search for the system of law with which a contract has its closest and most real connection is a fine one and frequently blurred. However, in the absence of an express choice of legal system within the contract, the ‘closest connection’ test laid down by article 4 of the convention was the ‘default rule’. In circumstances where the claimant lived in Spain and had his centre of operations there, he had failed to displace the presumption that Spanish law applied.