UK government refuses to downshift on regulating commercial agents

An MOT of the CARs

The UK government has decided to keep The Commercial Agents (Council Directive) Regulations 1993 (as amended) (CARs) in place without making any changes. This decision follows a consultation (an MOT if you will) initiated last year to assess the relevance and impact of the CARs in the post-Brexit business landscape and the potential for deregulation in this area.

 

A Quick Recap

For those who might need a refresher, the CARs (derived from the EU Agents Directive) govern the relationship between businesses (principals) and their commercial agents.  In broad terms, commercial agents are intermediaries who have the authority to negotiate, or to negotiate and conclude, contracts for the sale or purchase of goods on behalf of their principal.

The regulations act as a structured framework providing statutory protections for commercial agents, including the right to a written contract, fair remuneration, and a lump sum payment on termination (among other rights). Importantly, certain rights under the CARs cannot be overridden by mutual agreement, ensuring a baseline of protection with or without a written contract in place. The aim of the regulations was to provide a safety net for agents, ensuring they don’t get left high and dry if deals they are working on don't go according to plan.

 

Purpose of the Consultation

Last year, the Conservative government initiated a consultation to evaluate whether the CARs continued to meet the needs of UK businesses following Brexit. They felt that the regulations were overly burdensome on businesses, which prefer the freedom to negotiate their own terms. The government therefore proposed to reverse (please forgive another automotive pun!) to the pre-CARs position in the UK, when the relationship between principal and agent was governed by a mix of contract law and the common law of agency. This proposal aimed to enhance contractual freedom and simplify business negotiations. The consultation sought feedback on the advantages and disadvantages of disapplying the CARs for new agency arrangements.

 

Summary of Feedback

The consultation received a number of responses, predominantly from commercial agents (70%), with input from principals (8%) and other stakeholders. Unsurprisingly, there was a clear divide between the opinions voiced by agents and principals. Agents were all for keeping the CARs, praising the clear framework and the security it provides against larger companies and EU-based principals. Principals, on the other hand, saw the CARs as bureaucratic red tape that hindered their ability to freely negotiate commercial arrangements.

 

CARs not Written-off yet

After reviewing the feedback, the government concluded that there wasn’t a strong enough case to change the current regulations. Unsurprisingly, given that the majority of feedback was provided by commercial agents, the responses indicated that the CARs provided an effective and necessary level of protection for commercial agents, who often do not have the same degree of commercial leverage to negotiate with the larger businesses that they represent. While the feedback did highlight some concerns with the CARs hampering free negotiations, the government did not consider that there was enough evidence to suggest that this was a major issue.

Although the reasoning for this decision is understood, some may see this as a missed opportunity. On the one hand, both principals and commercial agents can take some comfort in the fact that their existing contracts remain fit for purpose, but on the other, many businesses who routinely work with commercial agents would have welcomed reduced regulatory oversight on their commercial dealings. This decision may be interpreted by some as an area where the UK could have seized a Brexit advantage by moving away from an over-regulated environment (which was the subject of so many discussions almost a decade ago) but in this case, the opportunity has driven by.