The Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053) apply to all commercial agents and give commercial agents certain rights on termination.
Under the Regulations where an agency agreement is terminated by the principal the agent will have the right to “compensation” or an “indemnity” in certain circumstances. The agent may also have a common law right to claim damages in respect of the termination.
There are a number of differences between compensation and indemnity payments. The key differences are as follows:
We regularly advise agents on their rights to payment on termination of agency agreements. In practice the amount payable for an indemnity is often lower than the amount of compensation payable; although, in some cases the indemnity payment can be higher (for example in the case of new agencies). Where an agent has a right to claim compensation, or an indemnity, on termination of the agency agreement a claim should be made by the agent promptly. A claim for indemnity, or compensation, must be made within a year of termination otherwise the right to make a claim will be lost. It is therefore imperative that agents who receive notice of termination from their principal seek advice and make a claim promptly.
Commercial agents should also be mindful of the impact of Brexit. When the UK leaves the EU, the protections currently provided to commercial agents under the Regulations are likely to be removed and it is unclear what protections (if any) will be available for agents in the future on termination.
Given the uncertainty around the impact of Brexit, UK based commercial agents would be well advised to review their existing contractual arrangements (if they have not already done so) with a view to identifying whether it is possible to incorporate stronger contractual provisions to give them better protection on termination, alongside any statutory protection that may exist, before any changes take effect. Commercial agents may also wish to consider reviewing the choice of law clause contained within their agency agreements, which could also be amended to mitigate against the risks associated with Brexit.
If you require any further information about the termination of commercial agency agreements, compensation & indemnity payments, the impact of Brexit on commercial agency law, or choice of law clauses generally please contact Rachel Brown in our Litigation and Dispute Resolution team on 0207 216 5562.
This news was posted on 14 November 2017