Insights Commercial Agents Regulations: Government extends deadline for responses to consultation

The Department for Business and Trade has announced that the deadline for responses to its consultation on the deregulation of the Commercial Agents (Council Directive) Regulations 1993 (“the “Regulations) has been extended. The consultation was launched by the previous government earlier this year, and sought views on the proposal to remove the operation of the Regulations in the future.

The Regulations were introduced in 1993 and govern the terms of engagement between a business on the one hand and a commercial agent of that business on the other. The Regulations define such commercial agents as self-employed intermediaries who have 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 end. They also included 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 the commission.

When the consultation was announced, the then Minister for Enterprise, Markets, and Small Business explained that the Regulations “are a product of our membership of the EU. The UK government opposed the underlying directive when it was introduced. Its provisions 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.”

The Government therefore sought to address “whether [the Regulations] work for UK businesses”, and considered whether the position in law should be restored to that which existed prior to the introducintroduction of the Regulations, namely that the courts would rely on the law of contract and agency to determine any dispute.

As the consultation explains, “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. From the perspective of a genuine self-employed person who doesn’t have access to sophisticated commercial advice, the regulations could make a difference in correcting the power imbalance when contracting with a large firm.”

The consultation therefore proposes to “bring forward legislation to prevent new CAs being created in future under the [Regulations]…Should the government proceed with this proposal, the provisions of the [Regulations] will continue to apply to those principal-agency relationships where the C[Regulations] already apply”. It invites views on, for example, whether this proposal would affect the ability of commercial agents and principals to enter into contractual agreements, the incidence of legal disputes, and the ability to enter into agreements with international parties.

The consultation will now close on 1 August 2024, and can be found here.