Brexit – What does it mean for the Commercial Agents Regulations?

The Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) is one example of a multitude of EU-derived laws whose future is now being called into question following the UK’s decision to leave the European Union. Post-Brexit it is unclear which of these UK laws will continue to have effect and the Government will be tasked with leafing through the statute books to see which to keep and which to remove. The 1986 Council Directive on the co-ordination of laws for self-employed commercial agents, which the Regulations implemented, sought to create uniform trade conditions within the single market, promote trade and crucially, to ensure commercial agents have a minimum level of statutory protection. The most important and controversial element of that protection ensures that in most circumstances, including on expiry of their contract or retirement, agents are provided with compensation or an indemnity on termination of their agency agreements. These payments can be substantiated and can run into six and seven figure sums. Prior to the EU directive English law had no equivalent and so the Regulations introduced potential liabilities where none had previously existed. Indeed, the UK was initially resistant to the Directive on its inception in 1986 as the Directive inherently conflicts with the English law principle of freedom of contract. That said, the UK was the only Member State to give the parties an option of electing an indemnity or compensation. This is surprising as compensation is generally more favourable to the agent and all the other Member States (with the exception of France who developed their pre-existing compensatory measure) selected the indemnity option. The compensation payable has since been an area of much dispute and it took until the 2007 House of Lords case of Lonsdale v Howard & Hallam Limited [2007] EWHL 32 for the court to provide authoritative guidance on the level of compensation with the debate continuing this year following the decision in Alan Ramsey Sales and Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm). Removing the Regulations completely would be a surprising move for the UK to take. A 2015 European Commission review of the Directive found it to be meeting its objectives and should the UK wish to maintain access to the single market it may need to retain the Regulations under domestic law – similar to the systems in place in Norway and Switzerland (where equivalents of the Regulations are in place). Further, UK law makers may conclude that the Regulations do not impose unnecessary burdens upon businesses and leave it on the statute book unaltered. To remove the Regulations would be a boon to principals who would benefit from the removal of a significant potential liability when engaging agents, but agents would claim that it would create too risky an environment for them to be able to operate effectively and would unfairly weight the bargaining power further in the principal’s favour. For more information contact Andrew Leach (Partner) at DWF LLP on Andrew.Leach@dwf.law or on +44 3333 203 145

 

Andrew Leach is a Partner and Head of Litigation (Birmingham Office)

Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, DWF 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 the 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.

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