In May of last year, the Government announced a consultation on whether the Commercial Agents (Council Directive) Regulations 1993 (CARs) – which govern the arrangement between a business wanting to expand its distribution streams (known as the principal) and commercial agents, who are engaged to market, negotiate and/or conclude sales of goods – should be deregulated.
The CARs came into force in 1994 and are derived from EU legislation (Directive 86/653/EEC). Whilst the CARs create some mutually-beneficial aspects of an agency relationship – such as duties owed by the agent to the principal and vice versa – their effect is largely to protect commercial agents. This is in consideration of the agent’s efforts of expanding the market reach of a larger company, and the main protection (and point of contention) is the rights of an agent to payment from the principal upon termination of the agency relationship.
The purpose of de-regulating the CARs would be to allow the principal and agent to freely negotiate the terms of their relationship, which presumably would involve (from the perspective of the principal) the limitation or removal of such compensatory rights.
Unsurprisingly, with 70% of respondents to the consultation being agents, the overwhelming response was to reject the proposal to de-regulate. Agents responding to the consultation cited how important the CARs are for the protection of agents against large businesses, and in the provision of structure and certainty in the absence of a contract with the principal. Therefore, the government has decided that the CARs will remain in effect without amendment.
It is important to get legal advice if you are considering entering into a commercial agency arrangement, whether as principal or agent. Whilst the CARs do have some non-negotiables, their effect can (at times) be mitigated to the benefit of either party.
For more information, contact commercial services solicitor Alicia MacRae on amacrae@mincoffs.co.uk, or call the team on 0191 212 7745.
