August saw the closure of the Department for Business and Trade (DBT)’s consultation on the proposed deregulation of the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”).
The consultation was launched by the Sunak government as part of its review into EU retained law and was extended following the decision to call a general election. No announcement has yet been made regarding the outcome of the consultation and it remains to be seen whether the new Labour government will chart a different course to that intended by its predecessor.
Fox Williams contributed to the consultation by making a detailed submission to the DBT.
Our view, supported by our experience in advising on both UK and international agency agreements and working closely with lawyers across the European Union, is that there are compelling reasons to maintain the current regulatory framework and that calls for deregulation are wrong.
This article summarises our submission to the DBT:
The nature of UK trade
Although the UK has left the EU, businesses still operate within a European market context.
The UK’s largest economic trading partner is the EU. As a consequence UK businesses have more relationships with EU principals and agents than in any other part of the world.
The idea that the Regulations hinder the principle of freedom of contract is therefore a fallacy.
The EU Agents Directive on which the Regulations are based is mandatory law across the EU. More importantly at the present time (that is, in the absence, of material divergence between the laws of each of the UK and the EU) the courts of EU member states are:
- prepared to accept the application of English law to agency agreements between UK principals and EU commercial agents irrespective of whether an agency agreement provides for it to be governed under English law; and
- prepared to enforce agency agreements expressed to be governed by English law and the judgments of the UK courts.
It follows that if the Regulations were deregulated:
- UK principals would be faced with the prospect of their agency agreements being governed by the national law of the EU member state in which their agents are based; and
- British agents would be faced with the prospect of their agency agreements being governed either by English or Scots law and not having protection or the law of the EU member states in which their principals are based or opting for such EU member state law; and
then needing to obtain local law advice, increasing costs and barriers to trade.
There is also the often-overlooked complexity regarding the position of Northern Ireland, where the Northern Ireland Executive has seen no need to consider the proposed deregulation. Regardless of one’s view on deregulating the Regulations, it cannot make sense to increase divergence within the UK.
The international standing of English law
International commercial contracts are often governed by English law thanks to its long-established reputation for stability and predictability. Deregulating the Regulations would inevitably lead to less stability and less predictability, harming the UK both economically and in terms of “soft power”.
Stability and predictability are essential for businesses to operate smoothly. This clarity helps to reduce the scope of disputes, ensuring that principals and commercial agents are aware of their rights when negotiating contracts.
Perils of retrospective application
The recent consultation invited comments on whether the proposed deregulation of the Regulations should have retrospective effect.
Calls for retrospective deregulation add another dimension of concern. Such a measure could drastically alter existing contractual relationships, leading to widespread strain as businesses reevaluate negotiated agreements. It is for this reason that it is a generally accepted principle of English law that legislation having retrospective effect is a “bad thing”.
Protections for commercial agents and principals
The fact that the Regulations provide a number of protections to commercial agents is well known. Much less well publicised is the fact that the Regulations also provide a number of statutory rights for principals which go beyond those provided by English common law (see, for example, those provided by the Regulations concerning the duties of a commercial agent to his principal).
Statutory protections for both commercial agents and principals bring a degree of certainty to the contractual relationship. Removing these protections will immediately lead to a period of uncertainty, hindering the ability of all parties to contract and trade.
Support for business continuity in changing times
In times of economic uncertainty, maintaining regulatory frameworks such as the Regulations can help to bring businesses the benefit of continuity. They provide a consistent and familiar system that UK businesses can rely on across the EU as they navigate other challenges. Altering the current framework will bring an additional layer of unpredictability, considerably more contractual negotiation and increased legal fees.
Our view is that this is not what the UK economy needs to kickstart economic growth.
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