Principals and Agents: UK Consultation to Deregulate the Commercial Agents Regulations

The Department for Business and Trade has extended the deadline for responses to be submitted to its consultation on the deregulation of the Commercial Agents (Council Directive) Regulations 1993 (the CARs), as part of a plan to review the needs of UK businesses following the UK’s exit from the European Union (EU).

The CARs were derived from EU law and currently govern all agency relationships where the agent satisfies the criteria of a commercial agent and undertakes its activities as an agent in Great Britain. The CARs impose various conditions on principals and agents that cannot be contracted out, intended to balance the power between agents and their principals.

The CARs impose certain rights and obligations that cannot be derogated from, including:

• An agent’s right to ask for a written agreement;
• A minimum notice period for termination, increasing up to three months from three years of agency onwards;
• Specific entitlements regarding pay and commission;
• Both agents and principal should act dutifully and in good faith; and
• The right of an agent to receive monetary compensation upon termination of the agency.

The consultation was introduced as part of a review of retained EU laws to consider greater contractual freedom by allowing agents and principals to contract without being bound to the CARs stipulations. However, responses to the consultation will need to consider the impact of freedom of contract when there is all too often an inequality of bargaining power between the contracting parties.

The proposed deregulation of the CARs would mean that the CARs would still apply to agency agreements already in place, but future agency agreements would allow agents and principals to set their own contractual terms entirely. The government’s proposals claim that “Deregulating would simplify the UK’s legislative framework, reduce court time spent on interpreting these regulations, and most importantly make it simpler for businesses to contract with each other.”

The deadline to respond to the consultation has now been extended to 1 August 2024 and is open to anyone who wishes to respond (see here). Following the recent UK general election result, it remains unclear whether the newly elected government will support further deregulation of agency agreements or instead choose to remain aligned with EU laws.

If you are concerned that these proposals and future changes to the CARs may impact you or your business, please get in touch with our team.

By Shane Hubbard and Millie Pierce