Key takeaways
- New government consultation launched proposing to abolish the Commercial Agents Regulations.
- The Commercial Agents Regulations have been in force since 1 January 1994, pursuant to an EU-wide directive. They provide important statutory protection to agents, including a right to a goodwill termination payment.
- If the government proceeds with its plans, it will have a significant impact on agents operating in the UK and will put more of an onus on negotiating a written agency agreement.
- Consultation is open for responses until 11 July 2024.
Summary
On 16 May 2024 the Department for Business and Trade published the Smarter regulation: deregulating the Commercial Agents (Council Directive) Regulations 1993 consultation, which proposes to “simplify the law” in Great Britain by preventing new commercial agencies (CAs) from being created under the Commercial Agents (Council Directive) Regulations 1993 (CARs). Deregulation would mean contracts between a principal and agent would be negotiated on their own individual terms, without the current protection afforded to agents under the CARs. The government is seeking responses to test whether this reform would be welcomed or rejected by those affected.
Commercial Agents (Council Directive) Regulations 1993
The CARs were enacted in the UK to implement EU Council Directive 86/653/EEC. In summary, the CARs govern contracts entered into between an agent and principal in the context of goods. The main purpose of the CARs is to provide a minimum level of protection for agents. A number of provisions in the CARs are mandatory so the parties cannot exclude them from the contract. The CARs also apply to agency relationships where there is no written contract.
The CARs also contain provisions dealing with the timing of commission payments and minimum notice periods for termination. Perhaps the most controversial aspect of the CARs has been the right for an agent to a goodwill termination payment at the end of the relationship. The agent is entitled to either an indemnity payment or a compensation payment. Since the payment is based on models from the German (indemnity) and French (compensation) systems, the UK courts have had to grapple with concepts that are unfamiliar under common law, leading to some interesting judgments over the years.
The CARs also impose duties on the principal to:
- Act dutifully and in good faith in their relations with the agent;
- Provide the agent with the necessary documentation relating to the goods concerned;
- Obtain necessary information for the performance of the agency contract and notify the CA within a reasonable period once they anticipate that the volume of commercial transactions will be significantly lower than that which the commercial agent would normally expect; and
- Inform the CA within a reasonable period of their acceptance or refusal, or non-execution, of a commercial transaction which the CA has procured for them.