The Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) give commercial agents important rights, and in particular the right to receive compensation or indemnity on termination of the agency agreement.
One issue which we are often consulted on is whether the Regulations apply to an agent who works for a foreign company, and/or is working outside of the UK. Foreign companies, particularly those based outside of the EU, are often unaware of the Regulations, and can have an unwelcome surprise when they terminate an agency agreement and are faced with an unexpected compensation claim.
The rules which determine whether the Regulations apply are complex and depend on what your contract says, whether your principal is located inside or outside the EU, and whether you, the agent, work in the UK, the EU or outside of it.
If your contract states that English law will apply:
- If you work within the UK, then you will have the full protection of the Regulations.
- If you work elsewhere in the EU, then you will usually still have the protection of the Regulations, provided that the equivalent of the Regulations in that country permits the parties to choose that English law will apply. The Regulations derive from an EU directive, and all Member States are required to have similar laws.
- However, if you work outside of the EU, then the Regulations will not apply, unless your contract expressly states that they will. A general reference to English law applying is not enough.
- If you work both within the UK/EU and outside of it, the Regulations will only apply to that part of your work which is carried out within the UK/EU.
If your contract states that the law of your principal’s country will apply:
- If your principal is located within the EU, then their country’s equivalent of the Regulations will apply. As above, all EU countries have an equivalent of the Regulations in place, but there may be some differences, particularly in relation to how compensation and indemnity claims are valued, so you will need to take advice from a local lawyer.
- If your principal is located outside of the EU:
- It is not possible to contract out of the Regulations, and this means that even if the contract states that the law of your principal’s country will apply, you will still have the protection of the Regulations and the right to bring a compensation claim on termination of your agency agreement.
- But this is subject to the location of your work, as outlined above.
- The law of your principal’s country will apply to all other aspects of your relationship which are not governed by the Regulations.
All of the above may, of course, be affected by Brexit, although no immediate changes are expected.
Because the rules are complicated, we recommend that agents and principals working in an international context should always take legal advice before entering into an agency agreement, so that all parties understand which law will apply to their relationship and how the Regulations will interact with this.