A new era for commercial agency? – Government decides to Retain the Commercial Agents Regulations

Earlier this year in mid-February, the Department for Business and Trade ("DBT") announced the outcome of a 16-month consultation into whether the Commercial Agents (Council Directive) Regulations 1993 ("CARs") should be disapplied to new contracts between principals and their agents.

The opportunity to review the legislation came about due to The Retained EU Law (Revocation and Reform) Act 2023. The CARs arose out of European law (in particular the features of agency law in France and Germany) and were incorporated into English Law as the result of an European Union Directive over 30 years ago.

Over that time, contracting principals and agents – and, in cases of disputes, their legal teams and the English Courts – have grappled with the inherent tensions between the codified regime of the CARs and long established English common law principles of agency and contract law.

Some commentators had believed the UK's exit from the European Union and the subsequent consultation would provide a platform for the Government to phase out the CARs in future agency contracts. This expectation was fortified by the fact the consultation was not concerned with exploring alternative options to the CARs.

The result of the consultation was that the DBT resolved to leave the CARs in place unamended, and so we can now say this is one piece of decidedly European law which has 'survived' the long march of Brexit. The decision should also be seen as a vindication of the economic benefits of the commercial agency model which drives entrepreneurial growth of businesses across all sectors, promotes inward investment and often achieves a particular regional focus to benefit all parts of the UK economy.

The decision is good news for commercial agents who have, broadly speaking, benefited from the structures of the CARs in practice through such provisions as minimum notice periods and statutory entitlement to compensation on termination. Principals – and especially those familiar with the CARs here and elsewhere in the European Union – may also welcome the certainty of the continuation of a three-decades regime as opposed to a step into the unknown.

However, the consultation perhaps also represents a missed opportunity for principals to avoid a piece of legislation in future contracts that is often viewed by principals as too agent-friendly, for example by offering the same protections to commercial agents regardless of resource or size, and running contrary to English common law norms of freedom of contract in commercial relationships.

It is perhaps a testimony to how valuable the CARs and the status quo are to commercial agents that of the those who responded to the consultation, 70 per cent were commercial agents. Only 8 per cent were principals, with the remainder describing themselves as 'other'. Some principals may be based outside of the jurisdiction, which may account for their underrepresentation, but whatever the reasons for the difference in engagement, the force of commercial agents won the day with a Government department that may also have seen the attraction of taking the path of least resistance that avoided any possible disruptive political or economic fallout from moving away from an established piece of EU legislation at a time when there is so much else on the Government's plate.

It may not quite be business as usual. The English Courts are no longer bound by previous CARs rulings from the European Court of Justice ("ECJ") which previously allowed for Europe-wide decisions on the interpretation of the Directive to be applied in the UK. While previous ECJ rulings will likely be persuasive to the English Courts in future cases, it is open to parties to advance arguments to challenge what was previously settled law. It will be interesting to see if there is any meaningful departure by the English Courts moving forward.

In turbulent times, this is at least one issue that has been settled with certainty and allows commercial parties to move forward. Whilst exiting from the European Union means that the Government can reconsider and review the CARs in future contracts at any time, such an opportunity is not now likely to arise for a considerable period.