Commercial Agents Directive here to stay

European Commission recommends that the Commercial Agents Directive is maintained in its current form following recent consultation.

In July last year the European Commission targeted the Commercial Agents Directive for review, given it had never been evaluated since its entry into force in 1986.

The general objectives of the Directive, adopted back in 1986, were to create a single market for commercial representation of agents and their principals and eliminate barriers to cross-border activities. Specifically, the Directive harmonises rules on: the rights and obligations of commercial agents and their principals; remuneration of commercial agents; and the conclusion and termination of agency contracts, in particular any indemnity or compensation due to commercial agents when a contract ends.

The consultation launched in July last year sought to establish whether the Directive is still fit for purpose today. It was evaluated against five main criteria: (1) effectiveness; (2) efficiency; (3) relevance; (4) EU added value; and (5) coherence with other policies.

The Commission has now concluded that the Directive continues to meets its objectives and functions well. Its benefits outweigh its costs and it remains relevant and continues to have EU added value today. Based on these findings, the Commission recommends that the Directive is maintained in its current form.

Businesses therefore must continue to have regard to the Directive (and, in the UK, the Commercial Agents Regulations) when looking to expand their sales networks. The Directive and Regulations impose significant obligations on principals in their dealings with commercial agents, particularly in respect of commission, minimum termination notice and compensation on termination, and a failure to comply with the legislation could prove costly.

A copy of our guidance on the implementation of the Directive in the UK can be found here: http://www.stevens-bolton.com/uploads/protection-for-commercial-agents-2013.pdf

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