What now for the Commercial Agents (Council Directive) Regulations 1993?

Earlier this year, the former government under the Conservative Party opened a consultation on the Commercial Agents (Council Directive) Regulations 1993 (the Regulations). The consultation is open for responses until 11:55pm on 1 August 2024, and the response page can be accessed here. 

By way of reminder, the Regulations implemented an EU Directive which aimed to address the imbalance that can exist between commercial agents (which are often smaller, less well-resourced companies and individuals), and principals which are often larger commercial entities. The definition of an “agent” for the purposes of the Regulations is therefore broad, and the Regulations currently apply to both written and also oral agency agreements as well as temporary, indefinite or fixed term arrangements. The Regulations also contain many obligations that agents and principals cannot contract out of either at all or to an only limited extent. These include minimum notice periods for termination and compulsory payments of either compensation or indemnification following termination.

The Regulations are not without their difficulties, however, and applying them in principle is not always straightforward. For example, whilst the Regulations are limited in scope to agency agreements in respect of goods only (and not services), given the inherent complexities of the subject matter of some modern agencies, whether the products in question are goods or services (or a combination of both) is not always obvious. Determining whether the Regulations apply to agency agreements with an international element can also often require detailed legal analysis.

In its introduction to the public consultation (which you can read here), the former government cited confusion for businesses and courts in interpreting the Regulations as one of their shortcomings. Other examples include:

• The fact that the Regulations restrict the freedom that English law ordinarily gives to businesses to negotiate contractual terms freely between themselves;
• The fact that, from an English Law perspective, it is unusual for regulations to prevail over contractual terms in contracts between businesses; and
• The difficulties that can be caused by the fact that many businesses are either unaware of the Regulations or unsure whether the Regulations apply to their agency arrangements.    

The introduction to the consultation notes that the Regulations may be beneficial from “the perspective of a genuine self-employed person” who does not have the ability to access to the necessary commercial advice. It also points out that the Regulations may protect agents who have less legal knowledge than larger entities they contract with from being forced to accept contract terms that are not in their interest. Despite those factors, however, the former government’s view was that deregulation in the law of commercial agency would make it easier for businesses to work together. It therefore proposed to introduce legislation preventing the Regulations applying to commercial agency agreements in future (though they would continue to apply to commercial agency agreements negotiated before then).  

It is unclear whether the current Labour government will share the same views on the Regulations and whether or not they should continue to apply. Both commercial agents and principals alike may wish to keep a watching brief on the outcome of the consultation. Equally, however, it should be borne in mind that there is no set date for the government to publish the results of the consultation, or to decide whether to take any action to change the Regulations. The Regulations will continue to apply in the meantime.