Last year, the outgoing Conservative government consulted on scrapping the sometimes controversial Commercial Agents Regulations (the Regulations) as part of a "Brexit benefit" but the current Labour government has decided the Regulations are here to stay.

What are the Regulations?

The Regulations derive from EU legislation and were introduced to establish certain rights and obligations to ensure commercial agents would be treated fairly. However, the Regulations have been controversial over the decades and were opposed by the UK government in power at the time.  Some argue the Regulations are complex, and having derived from a mix of French and German law, are difficult to align with English law principles. Before 1993 and the Regulations, if there was a dispute about a principal-agent relationship based on UK law, the courts would rely on the contract and the common law of agency to determine the case.

The Regulations apply to the relationship between a business (principal) and a commercial agent who negotiates the sale or purchase of goods on the principal's behalf or negotiates and concludes the sale or purchase of goods on the principal's behalf and in its name. The Regulations require a written contract, certain provisions relating to commission, termination, and perhaps most importantly, the agent's right to compensation on termination/expiry in certain circumstances. They cannot be fully excluded.

What's next?

The Labour government has now published its response to the DBT consultation which raised questions around the Regulations. The response states that the consultation showed a polarisation of views, particularly between commercial agents and principals. Unsurprisingly, commercial agents valued the Regulations for the security they provided when negotiating and ending contracts. Some principals viewed the Regulations as bureaucratic, preventing them from negotiating alternative terms with commercial agents, including less beneficial post termination payments to agents.

The government has decided that the Regulations will remain in force without amendment. It feels that on balance, feedback from the consultation shows that the Regulations work well for commercial agents and the regulations were well understood by respondents. It says that they provide protections to commercial agents when negotiating contracts with principals who are, in many cases, businesses larger than the commercial agents themselves. Although a few principals did comment that the Regulations did not allow for contracts to be negotiated freely between commercial agent and principal, there was not a sufficiently large body of evidence to suggest that this is a major issue and that there is a strong case for change.

While the Regulations have been complex to implement, it is unlikely that removing them would have made anything better.  Businesses would very likely have found the situation even more complicated, especially as EEA and EU countries retain the equivalent regulations so their mandatory laws would apply in any case if you were appointing an agent in Europe, meaning businesses might have had to deal with, and address, two completely different commercial agent regimes, rather than one broadly aligned regime.