What does the retention of the Commercial Agents Regulations mean for UK contracts?

On 13 February 2025 the Department for Business and Trade (DBT) announced that it will not be repealing the Commercial Agents (Council Directive) Regulations 1993 (the CARs).

The CARs derive from an EU-wide directive and have been in place for around 30 years. Brexit provided an opportunity for Britain to diverge from the EU legislation, and DBT ran a consultation on whether to discard the CARs from British law (Northern Ireland has its own version of the CARs). However, the CARs will now be retained without amendment.

What do the CARs do?

The CARs define the terms of engagement between a business (principal) and its commercial agent. Commercial agents are self-employed intermediaries who have authority to negotiate the sale or purchase of goods on behalf of the principal.

The CARs essentially form a default contract between a business and the commercial agent, implying terms into the arrangement such as a duty of good faith, minimum notice periods, and payment terms for commission. Most significantly, they entitle commercial agents to claim a payout on termination in most circumstances, to reflect the goodwill which the agent has contributed to the principal’s business.

Who does the decision benefit?

The CARs are heavily biased in favour of agents, and 70% of respondents to the consultation were agents. A key factor in the decision to keep the CARs appears to be the role they play in evening out negotiating power between agents and the much bigger businesses they represent.

What should principals do as a result?

All new agency contracts should be drafted in compliance with the CARs and with an understanding of the likely liability at the end of the arrangement. Choices can be made in the drafting which minimise potential liabilities.

Prior to terminating or pushing through changes to an agency agreement, principals should take legal advice to avoid breaching the CARs and to minimise liability to the extent possible.

Broader implications

Generally, English law permits ‘freedom of contract’ – parties can agree their own contract terms with limited controls imposed by statute. The CARs create a marked distinction from that position.

Given this opportunity for deregulation, this decision will be of broader interest as an example of where the UK Government has chosen to remain aligned to the EU regulatory position, rather than ease the burden on UK business.

However, preserving the status quo provides stability for commercial parties and consistency with key European trading partners.

If you have questions or concerns about the Commercial Agents Regulations, please contact Lucy Pringle.