Common Law and EU Law
In England and Wales, the legal framework for all types of agency arrangements, including commercial agency relationships, is found at common law.
There was little regulation of commercial agency relationships prior to the introduction of the EU Council Directive 86/653/EEC on the Co-ordination of the Laws of the Member States Relating to Self-Employed Commercial Agents (“the Directive”), implemented through the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”). A main purpose of the Directive was to strengthen the position of the commercial agent in relation to the principal. The Regulations follow the wording of the Directive closely.
Within the wide common law framework, there are commercial agency agreements that are subject to the Regulations and commercial agency agreements that are not. Determining whether an agreement is within or outside the scope of the Regulations is important to identify what regulatory provisions might apply.
The Regulations implement the EU Directive into domestic law, however the impact of Brexit on the Regulations going forward remains uncertain.
The Regulations give “commercial agents”, which are defined here more narrowly than at common law, stronger rights than those implied at common law.
The scope of the application of the Regulations is set out in Regulation 1(2). The Regulations apply to the relationship between commercial agents and their principals and apply to the activities of commercial agents in England and Wales.
The primary rights afforded to agents under the Regulations are:
- Rights to a minimum notice period for termination , and
- A right to compensation or indemnity on termination.
Parties are unable to contract out of the majority of the terms of the Regulations, and many can only be excluded if this operates in the agent’s favour. Some flexibility is permitted, in that Regulation 1(3) allows the parties to expressly agree that the agency agreement is to be governed by the laws of another Member State. The agent however, still benefits from the protection of the Directive by way of the implementing legislation in that Member State’s jurisdiction. Where the parties agree to the application of the law of a non-EU country to their agreement, the Regulations are intended to override that choice in respect of activities carried out by the agent within Great Britain.
The Regulations do not apply where an agent is appointed for a territory outside the EEA, even where English law (or that of another EEA Member State) governs the agency agreement.