Non-Compete Agreements in Agency Contracts under Italian Law: Legal Framework, Validity, Compensation and Remedies

In the complex field of agency contracts, the post-contractual non-compete clause—governed by Article 1751-bis of the Italian Civil Code—plays a strategic role in safeguarding the principal’s interests after the termination of the agency relationship. This clause, however, must be carefully structured to balance the need for protection with the former agent’s right to professional freedom. Here’s a complete overview of the current Italian legal framework and its practical implications.

Legal Form and Content Requirements

Article 1751-bis of the Civil Code, introduced by Legislative Decree No. 303/1991 and Law No. 422/2000, requires that any non-compete agreement post-contract termination be in written form (ad substantiam). The clause must be confined to the same geographical area, customer base, and product/service category as the original agency agreement, and cannot exceed two years in duration.

The scope of the clause cannot be altered by collective bargaining agreements or trade customs, given its mandatory legal nature. The clause must remain within the limits set by the agency contract and must not unduly restrict the agent’s future economic freedom.

If specific geographical or client restrictions are missing, courts interpret the clause as implicitly confined to the agent’s original territory or clientele. A simple list of customer names is not sufficient to define the relevant area. Nevertheless, courts have clarified that omissions do not necessarily render the clause void if the intended scope can be determined from contract interpretation.

Optional Nature of Compensation and Its Legal Value

Although Article 1751-bis provides that the agent is entitled to a non-commission-based compensation for the restriction, parties may waive such payment, provided this waiver does not violate public policy. In practice, the clause can remain valid even in the absence of explicitly stated compensation, although the agent retains the right to seek judicial determination of its value.

Compensation serves to reimburse the agent for the loss of opportunity (loss of profit), not as payment for services rendered, and is classified as a form of civil indemnity rather than income from self-employment. It is not subject to VAT and is taxed as “other income” under Italian tax law.

Calculation Criteria and Payment Timing

The compensation amount is usually calculated based on:

• ✓ The agent’s average annual commissions in the last five years;

• ✓ The type of agency contract (exclusive or non-exclusive);

• ✓ The contract’s duration;

• ✓ The agent’s client portfolio and zone coverage.

National collective agreements offer detailed guidelines. For example:

• ✓ Monomandatory agents (exclusive): 12 monthly payments if the contract lasted over 10 years;

• ✓ Plurimandatory agents: 6 to 10 months’ worth of compensation, depending on the contract duration.

The compensation can be paid in lump sum at termination or in monthly installments over the non-compete period. Courts have confirmed the legality of paying part of the compensation during the contract period as advance installments.

Breach of the Non-Compete Clause

Article 1751-bis grants the principal broad contractual remedies in case of breach, which may coexist with tort claims under Article 2598 of the Civil Code (unfair competition). Proof of actual client poaching is not required; mere competitive activity in breach of the clause suffices.

If breached, the agent must return any received compensation and may also face additional penalties as per collective agreements. Courts can assess damages equitably, considering lost revenues, contract duration, and involvement of third parties.

The clause remains binding even if the principal fails to pay compensation at the time of termination, although the agent may invoke the exception of non-performance (Article 1460 Civil Code) to justify non-compliance.

Final Considerations

A properly structured non-compete clause can be a powerful tool for protecting business interests post-contract, but it must strictly comply with Article 1751-bis. Legal advice is essential in drafting or contesting such clauses to ensure both compliance and effectiveness.

At OS Law, we assist companies and agents in negotiating, drafting, and enforcing non-compete clauses in full alignment with current legislation and case law.