This article considers how a potential Brexit (a British-exit from the EU) might impact upon you through changes to the current regime of the Commercial Agents (Council Directive) Regulations 1993 (the Regulations).
As at the date of writing this article, opinion polls are at a 50:50 deadlock and only time will tell how the public truly feels about the EU. If the UK votes to leave the EU, this would likely bring about the UK’s exercise of Article 50 of the EU Treaty, effectively a notice provision giving the EU two years’ notice of the UK’s intention to leave. From that date, the UK would have just two years to negotiate its terms of withdrawal and get its domestic house in order, so to speak, to live without the benefit and burden of the EU. While there is clearly no end to the considerations and arguments for and against leaving the EU (which if we have not heard them already, we surely will in the next few weeks), given that the Regulations are ultimately a product of EU law, there are inescapable consequences for the Regulations if we are to leave the EU, for both commercial agents and principals alike. The Regulations were introduced into English law on 1 January 1994 in order to comply with the Commercial Agents Directive (86/653/EEC), a European Directive requiring the co-ordination of laws across European member states with regard to commercial agents. The manner in which the Regulations were brought into being is of critical importance to the impact of a potential Brexit. The Regulations became English law by way of a statutory instrument (an order of subordinate or secondary legislation) because of the European Communities Act 1972 (the ECA), an Act of Parliament requiring the UK to give effect to EU law. If the UK votes to leave the EU, it is quite possible that the ECA would be repealed, with the knock-on consequence of any statutory instruments brought into being under it also falling away, resulting in the total wiping out of the Regulations and the protection afforded to commercial agents through them. In the event of a Brexit, should Parliament wish for English law to continue to provide protection to commercial agents, it would need to take action within the two year notice period.
Options would be to either effect a “saving provision” within the legislation repealing the ECA, such that the Regulations would remain good English law post-Brexit or pass a new Act of Parliament entirely exclusive of the EU, protecting commercial agents in a similar or even, different manner to the Regulations. It may also be necessary for transitional provisions to be put into place to help smooth out the change from EU law to UK law, whatever that may mean. While only a secondary consideration at this stage, it is worth mentioning that if Brexit becomes a reality, there is likely to be a further attempt at Scottish independence, which at some point in the future, may result in vastly differing laws across the border, affecting those agents covering the entirety of the UK and raising doubt as to the applicable law by which they are protected and governed. While leaving the EU would inevitably bring about a period of instability, confusion and change, both generally and in relation to the Regulations specifically, it is unlikely that Parliament would allow all protection afforded to commercial agents to fall away or be withdrawn in totality. The real question is whether Parliament would opt to continue with the Regulations in their current form or take the opportunity to redraft and clarify the protection afforded to commercial agents.
If the form of protection for commercial agents were to considerable altered (if the Regulations were to no longer be good English law), it is entirely possible that case law developed under the Regulations since 1993 may become obsolete or simply no longer applicable, resulting in a wholesale change of commercial agency rights, obligations and law. For those bound by written agency agreements, whether agent or principal, Brexit has the potential to completely throw into disarray the meaning of any English choice of law clause. For example , a standard clause may read: “this agreement and any dispute arising from it shall be governed by and construed in accordance with English law” – when negotiating and signing the agreement, did you or your counterparty give consideration to the potential of the UK no longer being a part of the EU and therefore, not subject to EU law? I suspect the answer for the vast majority would be in the negative. Imagine the UK leaves the EU and enacts its own protection for commercial agents which differs from the form of the Regulations; you are an agent in the UK acting for a principal based in France with an English choice of law clause in your agency agreement. What is the position, say in five years’ time, when your agency is terminated and you wish to bring a claim? Which country’s law applies to your dispute?
At the time of signing the agency agreement, both you and your principal evidently intended for the Regulations (the then English law) to apply. What if you, as an agent, don’t have a written agreement and you want to bring a claim – in which country should the claim be brought then? Could future English law be overridden by the European Court of Justice to protect commercial agents with a connection to the EU through another member state, as in Ingmar GB Ltd v Eaton Leonard Technologies Inc. (Case C-381/98), where a Californian choice of law clause was ignored and the Regulations applied to protect the English agent, regardless of the contractual provisions agreed between the parties?
This choice of law conundrum is likely to cause confusion and uncertainty, not just in relation to commercial agency claims but litigation, generally. Any change in the law also raises the potential for English agents to be treated less favourably than their EU equivalents, as reluctance to be the first ‘test case’ under any new laws, prevails. Should the leave vote be successful on 23 June 2016, we anticipate a widespread review of commercial agency agreements in an attempt to tighten up contractual rights, obligations and protections, to guard against the uncertainty and risk of any Brexit-induced change of law. At this point in time and with opinion polls predicting such a close contest, it would appear that the UK leaving the EU is a real possibility. If that is the case and the UK votes with its feet to leave the EU, the position and protection of commercial agents in the UK is likely to be up in the air for some time, at least until Parliament clarifies its intentions and makes known the law pursuant to which commercial agents and their principals will be governed, into the future.
Myerson Solicitors LLP
Regent Road, Altrincham Cheshire WA14 1RX Email: email@example.com www.myerson.co.uk
Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, Myerson LLP and the writer accept no liability in connection with the general guidance given in this column. Please ensure that you obtain legal advice before acting in reliance upon anything in this article. For example, please be clear that the answers given in this column may not cover all possible angles, aspects, relevant considerations and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon