The Government has responded to its consultation on deregulating the Commercial Agents (Council Directive) Regulations 1993, confirming that the Regulations will remain in force without amendment.

We previously reported on the consultation here. It sought views on proposals by the previous government to remove the operation of the Regulations in the future.

The Regulations, introduced in 1993, govern the terms of engagement between a business and its commercial agents, who are self-employed intermediaries with continuing authority to negotiate the sale or purchase of goods on behalf of the principal, or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

The Regulations were introduced to provide protections for these agents in the event that the contract between them and their principal ended. They include requirements that, for example, the commercial agent and principal both act in good faith, the commercial agent is entitled to written contract terms, and commercial agents have the right to compensation as a result of termination of a contract where the agent is deprived of commission.

As it was explained when the consultation was announced, the previous government felt that the Regulations, introduced at the time as a result of membership of the EU “sit at odds with the legal systems which operate in the UK under which the relationship between principal and agent is governed by a mixture of the domestic rules on agency and contract law”. It further explained that “having regulations that take precedence over contractual terms is arguably unusual in the UK for business-to-business transactions. The existence of the [Regulations] can therefore lead to confusion for those who may not be aware of the Regulations or are not sure whether or not they apply to them”.

The consultation therefore sought views on whether the Regulations “work for UK businesses” and if, in fact, returning to the position before their introduction would be preferable, namely that the courts would rely on the law of contract and agency to determine any dispute.

According to the Government’s response, those who responded to the consultation largely divided into two camps: many commercial agents valued the protections that the Regulations afforded them; whilst some principals viewed them as a bureaucratic constraint upon their ability to negotiate alternative terms with commercial agents.

Responding to these views, the Government has concluded that, on balance, the Regulations should remain in place. It explains that the Regulations work well for commercial agents, providing important protections particularly when they are negotiating with larger principals. Whilst it notes the concerns voiced by some principals about the Regulations limiting their ability to negotiate freely with their commercial agents, it says that there is not a sufficiently strong evidence base to suggest this is major problem.

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