A Win-Win for Agents and Principals: The UK Government upholds the Commercial Agents Regulations.

On 14 February 2025, the UK Government announced its decision to maintain the Commercial Agents (Council Directive) Regulations 1993, a conclusion reached after consultation with industry stakeholders and many months of consideration within the Department for Business and Trade.

Context of the Consultation

In October 2023, the Government launched a review under the theme of reducing business burdens post-Brexit, which included in May 2024 questioning the future of the Regulations. The confusion surrounding the consultation’s objectives—whether to review the way regulators regulate or to review regulations themselves—raised significant debate in itself. Irrespective of this,  the Commercial Agents Regulations themselves are important in governing the relationship between commercial agents and principals, and the potential for deregulation sparked considerable concern among industry experts.

Key provisions of the Regulations

The Commercial Agents Regulations establish a framework that defines the rights and obligations of both agents and principals, providing:

·         Legal clarity for the formation and termination of agency contracts.

·         Guidelines on agent remuneration, including protection against unfair adjustments and ensuring payment of commission.

·         Conditions under which an agent can claim indemnity or compensation upon the termination of an agency contract.

Importance of the Regulations

The Commercial Agents Regulations implemented into British law the EU Agents Directive (a separate set of Regulations was made for Northern Ireland). The objective of the EU Agents Directive was to harmonise the national laws of the EU member states to help facilitate internal EU trade – the well-known concept of freedom of movement of goods – whilst recognising the inherent imbalance in the principal-agent relationship.

Benefits of maintaining the Regulations

For agents

The Regulations provide important certainty and legal recourse. For agents, this means certain statutory entitlements if there should be sudden or unjustified contract terminations and consequential loss of commissions. These entitlements are foundational in safeguarding the interests of agents, allowing them to operate with a level of confidence and stability – provided, of course, that agents are prepared to enforce their entitlements.

For principals

While considerably less publicised, the Regulations also afford significant statutory rights to principals beyond common law provisions. Regulation 3, for example, provides specific protections that help principals manage their commercial relationships effectively and, if necessary, terminate agency agreements. Moreover, the Regulations facilitate certainty in contractual relationships which can reduce the need for extensive negotiations.

Real-world relevance

The decision to retain the Regulations supports a stable and predictable legal framework, important for both agents and principals. Deregulation could have increased contractual risks and lead to demands from agents for either higher commission or contractual compensation or both, with likely increased costs for those businesses which use agents.

Given that the EU Agents Directive is mandatory within the EU, the Government’s decision means that for the time being and for the future (unless there should be significant divergence in legal interpretation between the UK courts and the European Court of Justice), UK companies will be able to appoint agents within the EU with the agency agreement stated to be governed by, for example, English law and with the English courts determining disputes without this being challenged by the national courts of EU member states. Conversely, UK agents can request their EU principals to have their agency agreements be governed by, for example, English law with the English courts determining disputes. This also benefits EU companies by ensuring consistent laws for their agents within the EU.

It is also the case that if the Government had decided to deregulate the Regulations, the Northern Ireland Executive would face a tough decision: either follow the UK government to avoid further disruption to the UK internal market, or maintain the status quo and benefit from Northern Ireland’s unique position as a part of the UK and EU under the Windsor Framework agreement.

Furthermore, the integrity of English law in international contracts, crucial to the UK's soft power, would have been depreciated by deregulation.

Conclusion

The decision by the Government to keep the Commercial Agents Regulations intact is beneficial for both agents and principals. The Regulations ensure a balanced relationship, offering essential protections and contributing to a stable and predictable business environment. This decision supports the UK's reputation as a fair market, advantageous to both domestic and international commercial activities. It also helps its growth agenda!

Stephen Sidkin is a partner at Fox Williams LLP (www.agentlaw.co.uk; www.foxwilliams.com