Understanding Commercial Agents and The Regulations

Am I Legally Considered a Commercial Agent, and Why Is That Important? 

Understanding whether you qualify as a commercial agent is essential because it determines your legal protections and obligations. Under the Commercial Agents (Council Directive) Regulations 1993 (the Regulations) a commercial agent is defined as: 

“A self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the principal), or to negotiate and conclude transactions on behalf of and in the name of that principal.” 

How Do You Recognise a Commercial Agent? 

Typically, commercial agents: 

• Are self-employed and not direct employees. 
• Receive commission payments based on sales generated on behalf of the principal. 
• Negotiate sales on behalf of the principal but are not parties to the sales contracts themselves. 
• Do not take ownership or physical possession of the goods. 
• Are distinct from distributors who buy and resell goods. 

Why Does Being a Commercial Agent Matter? 

If you meet the criteria of a commercial agent, you automatically gain substantial legal protections under the Regulations. These offer important rights, including the entitlement to receive compensation or an indemnity payment upon termination of the agency contract by the principal.  

What are the Commercial Agents Regulations 1993?  

The Regulations implement the European Commercial Agents Directive (86/653/EEC). Introduced in England and Wales on 1 January 1994, the Regulations were designed to harmonise laws across Europe concerning self-employed commercial agents. 

The Regulations protect agents by: 

• Setting out the principal’s obligations, including acting dutifully and in good faith. 
• Ensuring agents receive due notice and compensation upon termination. 
• Clarifying obligations and rights for both principals and agents. 

What Impact Has Brexit Had on Commercial Agency Law? 

Since Brexit, the Commercial Agents Regulations have been retained in UK law as "retained EU law". Currently, no immediate changes are anticipated. Nevertheless, it's important to stay informed, as future developments could impact your rights and obligations. 

When Do the Commercial Agents Regulations Apply to You? 

The Regulations apply to commercial agents who sell or purchase goods in Great Britain on behalf of their principals, where English law applies. Therefore, if you are a commercial agent in England and Wales (an agent) or if you engage commercial agents in England and Wales (a principal), the Regulations are likely to apply to you. There are a limited number of exceptions (see below). 

Do the Commercial Agents Regulations Apply to Goods, Services, or Both? 

The Regulations do not define what "goods" means, although goods are generally considered tangible items. 

The Regulations do not apply to agents who sell services. There is sometimes a fine line between what constitutes the sale of goods as opposed to services, and therefore it is not always clear whether the Regulations apply. 

Of particular relevance to agents is whether the sale of software is covered by the Regulations. Under English law, if software is sold on its own (for example, if it is downloaded or delivered digitally), in physical form (such as a hard disk), it can be. However, the position is less clear where software is downloaded or delivered digitally.

A recent ruling in the European Court of Justice specifically referred to the Regulations applying where the agency was for the supply of “computer software to a customer by electronic means where that supply is accompanied by the grant of a perpetual licence to use that software”.  The English courts are no longer bound by ECJ rulings itis anticipated that the English courts will follow this judgment. 

Whether the sale of software which is licensed on a subscription basis rather than accompanied by the grant of a perpetual license is covered by the Regulations is still unclear.