Commercial Agents (Council Directive) Regulations 1993
by Liam
The Commercial Agents (Council Directive) Regulations 1993, of which many companies and individuals remain unaware, have been in force since 1993.
They give some, fairly limited, statutory protection to self employed intermediaries (agents) who sell goods as agent for a company (the principal). For example they provide for a minimum period of notice of termination of the contract and specify certain minimum obligations of the parties. Probably the most important right they give is the right for agents to claim from principals money after the termination of the agency agreement as compensation for not receiving income in the future from business which they have helped to build up.
The French have assessed this compensation on the basis that two years’ worth of income is reasonable unless shown otherwise. The House of Lords in Lonsdale v Howard and Hallam have held that this approach should not be taken in England. Instead, compensation should be assessed based on the income stream the agent would have generated. This can be assessed by valuing the agent’s business.
For agents, it is worth noting that not knowing about these regulations could be costly. If the agent does not tell the principal within a year of the termination of the agreement that he intends to pursue his right to compensation (or another smaller payment called indemnity which is limited to one year’s income), he will lose that right!
For principals, we are able to help reduce your liability under these regulations and help to ensure that you will only have to pay indemnity not compensation. An important saving as indemnity is limited to a year’s income and compensation has no limit!
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