Commercial Agency Agreements in the EU

14 December 2005

A recent court case means that it will be harder for principals to avoid paying damages to their agents in the EU if they want to terminate their agency agreement.

Commercial agency agreements in the UK are governed by the Commercial Agents Regulations 1993.

The recent decision of PJ Pipe v. Audco India Limited clarified two issues:

1. A company is an 'agent' within the meaning of the law if it is involved in managing or conducting negotiation on behalf of a principal even though it does not have any authority to conclude commercial terms on the principal's behalf.

2. Compensation for premature termination of an agency agreement or breach of an agency agreement is a matter for the court to decide on the basis of "proportionate compensation" in all the circumstances. This approach is different from that in Germany or France where a formula is usually applied. In Germany, the compensation is usually based on one year's commission, and in France they apply two years' worth.

For more detail and a check list of points bear in mind when entering into agency agreements, send an email request to agencyagreements@contractstore.com