The Commercial Agents (Council Directive) Regulations 1993 (“CARs”) are a product of the UK’s previous EU membership. They govern contracts entered into between a business (as principal) and a commercial agent (that is, a self-employed intermediary who has authority to negotiate the sale or purchase of goods on the principal’s behalf or on the principal’s behalf and in its name). A number of provisions in the CARs are mandatory so the parties cannot exclude them from the contract, including the right to a written contract, certain provisions relating to commission and the agent’s right to compensation on termination in certain circumstances.
On 16th May 2024, the former Conservative government launched a consultation on the deregulation of the CARs to help reduce burdens on business. The consultation responses were polarised. Agents generally welcomed the security provided by the CARs, particularly with EU principals. Some raised concerns that scrapping the CARs may make it harder to negotiate with principals and could also affect the attractiveness of the commercial agent profession. On the other hand, principals were more critical of the CARs, arguing, for example, that they limited the ability to negotiate, applied only to contracts for the sale of goods and created an unequal relationship between agents and principals. Some principals also argued that the CARs prevented termination of underperforming agents.
Despite the polarised feedback, the government concluded that the CARs work well for agents. Although it acknowledged concerns from principals that the CARs impair their ability to negotiate freely, there is insufficient evidence to suggest that this is a major issue or that there is a strong case for change. Accordingly, the Department for Business and Trade has confirmed that the CARs will remain in force without amendment on the basis that they contribute to a stable and predictable business environment by ensuring a balanced relationship and offering essential protections.
Principals are unlikely to welcome the news, and it is important that they are mindful of how CARs may impact they legal and financial position when entering into new agency arrangements. Although it is not possible to contract out of CARs completely, there are contractual steps that principals can take in order to mitigate risk.