- Termination with notice: In Germany statutory minimum notice periods apply, in England a ‘reasonable’ notice period.
- Termination for breach (good cause): Possible in the event of a serious breach of contract, often the subject of legal disputes.
Consequences of termination:
- Commercial agents in England can choose between damages and compensation, whereby damages are unlimited.
- In Germany, there are fixed regulations for commercial agents (Section 89b German Commercial Code, or “HGB”) and, under certain conditions, also for distributors.
After Brexit, new UK regulations may provide less protection for commercial agents. Companies should therefore draft contracts carefully.
There are significant differences between German and English law when it comes to the termination of commercial agency and distributorship agreements. While German law also grants distributors a claim for compensation under certain conditions, this is not provided for under English law, where at most a claim for damages may exist, but this presupposes fault on the part of the entrepreneur. In addition, the legal situation in the UK will remain in flux after Brexit: a possible abolition of the Commercial Agents Regulations (CAR) could further reduce the protection of commercial agents. When drafting contracts, entrepreneurs should therefore pay particular attention to the choice of law and jurisdiction agreements in order to avoid legal uncertainties.
The most important points in brief:
- differences between commercial agent and distributorship agreements
A commercial agent brokers business on behalf of a company and receives a commission, whereas a distributor buys and sells products on his own account and lives off the trade margin. In Germany and the United Kingdom, there are statutory regulations for commercial agents which (even in the United Kingdom still essentially) are based on EU Directive 86/653/EEC, while distributorship agreements are not specifically regulated by law in either country. - Consequences of the termination of commercial agency agreements
In Germany, there are precise statutory rules on the termination of agency agreements, including compensation claims under Section 89b HGB, if the agent has brought long-term benefits to the company. In the UK, the CAR grants either damages or compensation and the individual case depends on the contractual agreements. Distributorsin Germany are also entitled to compensation under certain conditions, whereas in the UK they can only claim damages. - Brexit and future developments
After Brexit, it is foreseeable that the United Kingdom will sooner or later deviate from the previous EU-based regulations. There is discussion of completely abolishing the Commercial Agents Regulations, which would mean that commercial agents in the United Kingdom would have less protection.
Important: From a German point of view, there is already the possibility of excluding the indemnity claim for commercial agents and distributors dealers with a contract territory in the United Kingdom.
