Commercial Agents Regulations in the UK

The Commercial Agency Regulations 1993 implement an EC Directive which aims to reinforce the legal protection of commercial agents. A significant feature of the Directive is that it provides commercial agents, on the termination of their agency relationship, the right to claim a lump sum payment. [1] However, there has been some uncertainty surrounding the concepts which are used in determining the lump sum payment. The Directive allowed Member States to choose between ‘indemnity’ or ‘compensation for loss’ as based on the German and French laws, yet it offered little guidance on the meaning of the terms or how they should be calculated. [2] As the British Government did not choose between the two terms, it has been for the parties to choose and in the absence of choice, compensation has applied. It has then been for the courts to clarify the nature of damages and compensation.

This dissertation therefore seeks to explore the attempts by the courts to clarify the application of the compensatory rules. The hypothesis driving the focus of the dissertation is that the judiciary have raised more questions than answers when interpreting and applying the Commercial Agents (Council Directive) Regulations 1993 in the UK.

Research Issues and Aims

The main aim of this dissertation is to establish whether or not there are now clear and workable guidelines in place as to the measure of the compensatory payment under the Regulations.

Secondary aims include:

Highlighting the strengths and weaknesses of the Regulations themselves;

Examining the clarity of the courts’ approach;

Exploring inconsistencies between case law;

Noting any potential for further difficulty in the future application of the Regulations.

Research Methodology

The research methodology to be adopted throughout this dissertation is that of a combined analysis of primary and secondary materials. This will incorporate elements of critical literature review, along with detailed and critical legislative and case law evaluation.

Timetable (for client to alter/complete – note if written by professional writer this timetable could be significantly shorter)

Month 1: Research

Week 1 – read, understand and make notes on the relevant part of the Commercial Agents Regulations.

Weeks 2 and 3 – utilise LexisNexis and Westlaw to find cases which have interpreted the Regulations. Read and make notes on these cases, highlighting significant differences between them and tracking the development of the law.

Week 4 – utilise legal databases and hardcopy sources to find relevant academic comment on the compensatory rules contained in the Regulations. Make notes on these opinions, noting any divergent views and any weaknesses pointed out regarding the Regulations or the courts’ approach.

Month 2: Plan and Draft

Week 1 – Organise research into relevant chapters.

Week 2 – Draft Introduction and Chapter One.

Week 3 – Draft Chapter 2.

Week 4 – Draft Chapter 3

Month 3: Draft and Re-Draft

Week 1 – Draft Chapter 4

Week 2 – Draft Conclusion

Week 3 – Read and make notes on dissertation, areas that read well or need strengthening, check that all content is referenced properly. Ensure that no points are left unclarified or are missing completely. Consider whether further evaluation is required.

Week 4 – Edit and improve the dissertation.

Month 4: Final Edit

Proof read. Correct any remaining errors. Write abstract. Finalise references. Complete bibliography, table of cases, table of legislation, table of contents and formatting.

Hand in.

Key Literature

Bankes, C., “Termination of agreements with commercial agents: the effect of the Commercial Agents Directive in the United Kingdom” (1994) ICCLR 247

This journal article provides an overview of the then recently enacted Regulations and in particular focuses on the compensatory payment rules. The author notes that there are (in 1994) areas of uncertainty to be resolved. He notes that the Regulations were the result of negotiation between different Member States. The author suggests that ‘damage’ may be assumed to have ‘a much wider meaning [than] English lawyers understand by ‘damages’. The concept of ‘indemnity’ as developed from German law is also considered.

O’Neill, A., “Compensation, commercial agents and comparative law” (1997) SLT 141

This article provides a more in depth analysis of the origin and interpretation of ‘indemnity’ (German) and ‘compensation’ (French). It then goes on to provide a brief overview and discussion of early case law on the interpretation of the Regulations. This author suggests that as a general rule the guideline for compensatory payment should, where there is no fault on the part of the agent, be two years’ gross commission regardless of questions of mitigation or proof of actual loss.

Saintier, S., “A remarkable understanding and application of the protective stance of the Agency Regulations by the English courts” (2001) JBL 540

This article notes the development of the law relating to the compensatory rules contained in the Regulations. It examines the interpretation of ‘commercial agents’ and the application of the Regulations. The article then goes on to track the case law to the date of writing (2001) and generally praises the courts’ approach to what the author perceives as two problems: the differences between provision for indemnity and compensation; and, the interpretation of ‘termination’. The author considers that the courts, when considering the awards to make, have generally demonstrated understanding and provided clarity. However, the author then opines that the case of Jeremy Duffen v FRA Bo SpA ‘raises doubts’.

Macgregor, L., “Compensation for commercial agents: an end to plucking figures from the air?” (2008) Edin LR 86

This is a case comment on Lonsdale v Howard & Hallam Ltd and the author notes the differences in approach between the Scottish courts in King v Tunnock and the English House of Lords approach in Lonsdale. The rejection of the French method for calculation of compensation is commented upon.

Key Cases

Douglas King v T Tunnock Ltd 1996 SCLR 742 (Scottish case)

Commercial agent not entitled to compensation payment despite a claim calculated on the basis of the 10 years expected until retirement. Payment made only in respect of lieu of notice. This was wrongly decided.

On appeal [2001] ECC 6 the court confirmed that the French law approach should be adopted and a benchmark figure of two years’ gross commission was applicable.

Skingsley v KJC Carpets Ltd (1996, unrep but see O’Neill 1997)

Agency unilaterally and summarily terminated. As no indemnity provision, compensation provisions of the Regulations were applicable. The judge considered the German approach to compensation and found that the fact that the agent might have acquired new customers was irrelevant and found that the correct approach was to calculate the earnings of the agent over four future years. This decision may be criticised on the basis that German law concerned ‘indemnity’ and not ‘compensation’.

Graham Page v Combined Shipping and Trading Ltd [1996] Tr LR 357

Court of Appeal case which considered the nature of damage for the purposes of the Regulations. The Court of Appeal held, in relation to a claim for a freezing injunction, that the claimant had a good arguable case for a claim in respect of damages for the whole unexpired portion of his contract, which amounted to four years, which was being terminated because the principal was to cease trading.

Duncan Moore v Piretta Ltd [1999] 1 All ER 714

The contract contained an indemnity. Upon termination the court took a wide view of ‘agency contract’ and considered that the relationship as a whole was relevant. The court also considered that in order to meet the requirement that the agent had ‘brought new customers’ that agent need only have been ‘instrumental in obtaining’ clients (similar to the German interpretation). Finally, the court found that the argument that the extent to which the agent had made good his loss of commission should be taken into account should be rejected as irrelevant.

Jeremy Duffen v FRA Bo SpA [1999] ECC 58 and [2000] 1 Lloyd’s Rep 180

In this case the court appeared to move away from the application of French rules in relation to compensation. The judge considered that the relevant period for which compensation should be awarded was until the earliest time at which the agreement might have expired. The judge interpreted the criteria relating to compensation payments narrowly and moved away from the French system which did not require an examination of how much business was brought to the principal or mitigation.

Londsdale (t/a Lonsdale Agencies) v Howard & Hallam Ltd [2007] UKHL 32

In the Court of Appeal it was held that, contrary to King v Tunnock, the fact that the principal’s business was in decline was relevant to the value of compensation. The Court of Appeal refused to consider the French approach as a guideline. The House of Lords upheld the Court of Appeal’s decision and rejected the Scottish, King v Tunnock, approach. It held that the French approach was relevant as to determining what the agent should be compensated for, ie damage. However, in determining the measure of compensation the House of Lords held that the French approach should not be followed. Instead, it was held that the method for calculating compensation was that the compensation should be assessed by reference to the open market sale value of the agency and that the court should take account of what the parties were likely to have expected to happen after termination of the agreement.

Proposed Chapters

Introduction

This will provide a basic introduction to the area and demonstrate the rationale, hypothesis and research aims of the dissertation.

Chapter One: The comparable UK law relating to agents not falling within the Commercial Agents (Council Directive) Regulations 1993.

This chapter will consider the law as it applies to agents who do not fall within the scope of the application of the Regulations and any provision under English law for ‘compensatory’ payments on termination of the agency relationship. This provides a useful comparison when examining the provisions of the Regulations.

Chapter Two: The Commercial Agents (Council Directive) Regulations 1993

This chapter will examine the nature of the compensatory rules as enacted and will highlight the areas of uncertainty which have fallen to be interpreted by the courts. For example, the nature of ‘damage’ in the Regulations was left uncertain, the ‘indemnity’ concept was affected by a requirement that it be paid to the extent that it was ‘equitable’ and only minimal guidance as to the circumstances in which ‘compensation’ would be payable was provided.

Chapter Three: The courts’ approach to interpretation of the Regulations and the compensatory rules.

This chapter will consider the relevant case law in the area and examine any differences and developments in the way in which courts have approached the issue of compensatory payments.

Chapter Four: Future prospects and proposals for reform

Finally the dissertation will examine whether there are any remaining difficulties in the interpretation of the relevant part of the Regulations and may make relevant reform proposals.

Conclusion

Indicative Bibliography

Bankes, C., “Termination of agreements with commercial agents: the effect of the Commercial Agents Directive in the United Kingdom” (1994) ICCLR 247

Connal, R.C., “Compensation under the Commercial Agents (Council Directive) Regulations 1993″ (2007) SLT 211

Ellington, P., and Carr, B., “The UK Commercial Agents Regulations 1993 (Council Directive 86/653/EC)” (1995) IBLJ 51

Gardiner, C., “The EC (Commercial Agents) Directive: twenty years after its introduction, divergent approaches still emerge from Irish and UK courts” (2007) JBL 412

Macgregor, L., “Compensation for commercial agents: an end to plucking figures from the air?” (2008) Edin LR 86

Mair, A., “Windfall bonus for commercial agents” (2001) ICCLR 47

O’Neill, A., “Compensation, commercial agents and comparative law” (1997) SLT 141

Paciorek, S., and Davies-Jones, J., “The secret agents” (2000/01) Euro Law 68

Parker, B., “Compensating commercial agents” (2006) CLJUK 502

Power, V.J.G., “European Union: European Court of Justice – commercial agents” (2001) ICCLR N33

Randolph, F., “Recent cases involving the Commercial Agents Regulations” (2001) ICCLR 127

Reynolds, F.M.B., “Commercial Agents Directive” (1994) JBL 265

Saintier, S., “New developments in agency law” (1997) JBL 77

Saintier, S., “Good faith: Commercial Agents Regulations 1993″ (1998) Comp Law 248

Saintier, S., “Evaluation of recent English cases in the light of the civil inspired directive” (1999) Comp Law 149

Saintier, S., “A remarkable understanding and application of the protective stance of the Agency Regulations by the English courts” (2001) JBL 540

Saintier, S., “Guidelines for compensation of commercial agents” (2006) LQR 379

Saintier, S., “The principles behind the assessment of the compensation option under the Agency Regulations: clarity at last?” (2007) JBL 90

Saintier, S., “Final guidelines on compensation of commercial agents” (2008) LQR 31

Sasse, S., and Whittaker, J., “An assessment of the impact of the UK Commercial Agents (Council Directive) Regulations 1993″ ICCLR 100

Singleton, E.S., “New agency law: compensation for agents” (1994) Comp Law 50

Smith, S.C., “Death of the salesman” (2000) SLT 289

Indicative Table of Cases

Douglas King v T Tunnock Ltd 1996 SCLR 742 and [2001] ECC 6

Duncan Moore v Piretta Ltd [1999] 1 All ER 714

Graham Page v Combined Shipping and Trading Ltd [1996] Tr LR 357

Jeremy Duffen v FRA Bo SpA [1999] ECC 58 and [2000] 1 Lloyd’s Rep 180

Londsdale (t/a Lonsdale Agencies) v Howard & Hallam Ltd [2007] UKHL 32

Skingsley v KJC Carpets Ltd (1996, unrep but see O’Neill 1997)