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The commercial agent exclusion looks set to be no longer viable in the EU’s Payment Services Regulation (PSR), as the requirements to be able to use it become tighter. 

When the EU first unveiled its Payment Services Regulation (PSR), the focus was on the big ticket items, such as changes to open banking and tougher expectations for national competent authorities. 

However, some changes, although less headline-grabbing, could cause a greater impact. One of these is the change to the commercial agent exclusion. 

"The commercial agent exclusion has long been an area of legal uncertainty, and it has been interpreted in different ways,” explained Max Savoie, a partner at Sidley Austin. 

Savoie explained that across sectors, and across the EU, some firms have taken a more conservative approach, and some have taken a more aggressive approach to the exclusion. 

“The difficulty has always been about demonstrating that you as the provider are negotiating or concluding the transaction, meaning the underlying purchase or sale, not just the payment transaction,” he explained. 

An ongoing issue

This has been an ongoing issue for regulators in the EU, and the rule was initially already tightened via the PSR’s predecessor, the revised Payment Services Directive (PSD2). 

“I sense frustration here from regulators that some firms are continuing to take quite an aggressive approach to applying the exclusion, leading the commission to propose the changes under the PSR,” said Savoie. 

The new approach outlined by the PSR proposal would require the agreement with the commercial agent to give the payer or the payee a real margin to negotiate with the agent or conclude the sale or purchase.

“There is a hard stop for most companies operating e-commerce platforms and marketplaces being able to rely on the exclusion,” said Andrea De Matteis, founder of De Matteis Law.

Currently, if a platform operates a marketplace and does not enter into possession of funds, then it will not need a PSD2 licence because the funds are transferred via third-party payment processors so the payment is done through separate entities.

“Tomorrow, this will not be possible, and instead, needing at least a payment institution licence is likely,” he warned. 

"It is very difficult to find a real margin to negotiate, one of the requirements is to rely on the commercial agent exclusion,” pointed out Roderik Vrolijk, a partner at Stibbe. 

Vrolijk explained that it is difficult in most use cases to do this. “I don't think that real margin is really there for many online marketplaces that would use this type of exclusion."

Savoie agreed, suggesting that the latest iteration of the payment regulation could change how it is applied quite a lot.

“The kinds of firms that this will be most relevant for are those that operate online marketplaces with third-party sellers that are not currently authorised as payment service providers,” he said. 

“It will also hit firms that are really just providing a payment acceptance service to a merchant and receiving funds, such as into a bank account in the firm’s name, to pass on to the merchant or to put themselves back in funds for pre-settlements to the merchants,” Savoie continued. 

This means that firms in either of these categories will face a lot more questions from regulators and possibly from their EU banking partners too.

"What this really comes down to is what your role is in the transaction. Is what you are doing really more akin to a merchant acquirer or are you doing something more like what a ticket sales agent or a real estate agent would do?” suggested Savoie. 

In practice, the London-based lawyer explained that a lot of this will mean not just having lawyers looking at the terms but also considering whether firms relying on this exclusion are actually embedded in the sales process as an agent and not just processing the payment transactions behind the scenes like a merchant acquirer would.

Destined to happen

The use of the exclusion has become increasingly challenging since the EU began regulating payment services. 

In fact, Vrolijk suggested that the new proposal is not as drastic as PSD2 was. “The main parties are already in scope, so this appears to be the last sweep."

"You start to see a development if you look at PSD3 alongside PSD1 and PSD2,” he said. “Each proposal further narrows down the commercial agent exclusion. We're in a position now where initial firms would prefer to be a properly licensed payment institution rather than using the exclusion.”

This means that the commercial agent exclusion is now a very narrow concept that links back to other EU laws.

The 1986 conundrum 

Sophie Peeters, founder of PayInnovate.eu, pointed out that the definition now used in the PSR legislative file dates back to a 1986 directive — a time when the EU was but a twinkle in the European Economic Community’s eye. 

“The proposed text explicitly adds two conditions to the reference to the 1986 definition, one of them being that there be a 'real margin to negotiate',” noted Peeters. 

The Brussels-based consultant asked: “Does that completely sideline the modern interpretation of the concept of 'commercial agent'?” 

“Or is this a mere confirmation of what is already somewhat contained in the current texts through the PSD2 recitals which, in relation to the commercial agent exclusion effectively already use the words ‘without real margin to negotiate’ albeit in the same breath as platforms trading for ‘both individual buyers and sellers’ and without this ‘real margin to negotiate’ being put forward as a positive condition either,” she said.  

Peeters also pointed out that the purpose of the 1986 directive is quite different from the purpose of the PSD2 and PSR in the sense that the 1986 law wants to protect the commercial agent. 

“However, the PSD2 and PSR want to protect payment users against unsound payment institutions and institutions overreliance such as the commercial agent exclusion, hence favouring a narrow interpretation of the concept of commercial agent,” she said. 

“Is that why the proposed PSR, in addition to referring to the 1986 definition of commercial agent, explicitly adds two conditions, including that there be a real margin to negotiate?”

Peeters told 91����ԭ�� that “the amendments are supposed to bring clarity where, to me, they rather add to the confusion”. 

"Commercial agents have to exist in a narrow definition that will result in people either needing to find a way of no longer being in the flow of funds or getting a licence,” said Vrolijk. 

“The various iterations of PSD have practically exterminated use, and it is rare to find parties that can rely on it now."