By Miller Samuel Hill Brown on Tuesday, 24 October 2017
Category: News

Diamonds (and Agency Agreements) are Forever?

A recent case in the High Court of England and Wales (but nonetheless of relevance to Scotland) has shed light on the secretive world of the global diamond trade, and at the same time highlighted the importance of the snappily-titled Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”).

In W Nagel v Pluczenik Diamond Company NV [2017] EWHC 1750 (Comm), Mr. Nagel sued an international diamond trading company for, amongst other things, commission that he said his company was owed flowing from purchases of diamonds. The court’s judgment makes for interesting reading, even apart from the legal issues raised – briefly charting the rise, and monopoly, of De Beers in the diamond trade, and the opaque manner in which De Beers sold rough diamonds to a select few “Sightholders”. One such Sightholder was the eponymous Pluczenik. Mr. Nagel’s relevance was that De Beers formerly insisted that each Sightholder have an agent act for it – of which Mr. Nagel was one.

Broadly, the Regulations apply to anyone who is engaged by a principal on a self-employed basis who has authority to negotiate the sale or purchase of goods for the principal. The Regulations can be said to be weighted in favour of the agent – except in limited circumstances, the agent is entitled to payment under the Regulations from the principal. However, any such claim has to be intimated to the principal within a fairly short timescale. 

As the judge in the case notes, “[d]iamonds are not forever.” Nor, in this case, was the agency agreement. Pluczenik terminated the agreement, and Mr. Nagel raised a seven-figure claim under the Regulations and common law. The court dismissed Mr. Nagel’s claim under the Regulations, but allowed other aspects of his claim. The reasoning in the judgment for dismissing the Regulations claim was that the sales of diamonds fell within an exception in the Regulations for “commodity exchanges or commercial markets”. Expect to see this point argued again, now that it has been examined in the High Court.

The case also serves as a timely reminder of the importance of the Regulations. Mr. Nagel had claimed for $437,141.68 and £3,547,546.00 – huge sums of money in a situation where, normally, the assumption is that the principal (Pluczenik) will have to pay the agent something if it terminates the agreement. The case also highlights the complexity of the Regulations, and indeed how much scope there is for new points to be argued.

Nothing in this article should be taken as legal advice. If you have any queries on the content of this article – whether you are a principal or agent embroiled in a dispute under the Regulations – please contact us.

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