The Department for Business and Trade (“DBT”) is consulting about whether the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) should be scrapped. DBT think “deregulating these regulations could simplify the law and free businesses to work with each other”, although in reality, scrapping the Regulations may well have the opposite effect.

What are the Regulations?

The Regulations’ name gives a clue that they derive from EU legislation and removing them is therefore on the UK government’s radar as a possible “Brexit benefit”. 

The Regulations were introduced to establish certain rights and obligations to ensure commercial agents would be treated fairly. However, the Regulations have been controversial over the decades and were opposed by the UK government in power at the time.  They are complex, derive from a mix of French and German law which has been difficult at times to fit into English law, and the current government believes they are a burden on business. Before 1993, if there was a dispute about a principal-agent relationship based on the UK law, the courts would rely on the contract and the law of agency to determine the case.

The Regulations apply to the relationship between a business (principal) and a commercial agent who negotiates the sale or purchase of goods on the principal's behalf or negotiates and concludes the sale or purchase of goods on the principal's behalf and in its name. The Regulations require a written contract, certain provisions relating to commission, termination, and perhaps most importantly, the agent's right to compensation on termination/expiry in certain circumstances.  They cannot be excluded.

The DBT consultation

The government’s intention is to prevent new commercial agents from being created under the Regulations, but they would continue to principal-agent relationships where the Regulations already apply.

The consultation questions include:

• To what extent respondents understand the impact of the Regulations.
• How important the protections provided by the Regulations are.
• Whether deregulating the Regulations would reduce or increase the ability for agents and principals to contract.
• Whether deregulating the Regulations would reduce or increase disputes between agents and principals.
• What effects might there be if the Regulations are deregulated.

The government believes that deregulation would simplify the law and free up businesses to work with each other. However, it also states in the consultation that the Regulations “provide some protection to businesses who may lack the legal knowledge of larger firms they contract with, or who face unfavourable terms being imposed on them”.

The government's proposals cover Great Britain only. Similar regulations to the Regulations are in place for Northern Ireland. The Northern Ireland Executive will decide if and how it reforms those regulations.

What next?

The consultation closes on 11 July 2024 following which responses will be considered and further information may become available about whether proposals will move forwards.

While the Regulations have been complex to implement, it remains to be seen whether removing them would make anything better.  Businesses might find the situation even more complicated, especially as the rest of Europe will still have the equivalent regulations so their mandatory laws are likely to apply in any case if you're appointing an agent in Europe.