For a lot of international businesses looking to branch into the UK market, they will initially engage a commercial agent to represent the company to generate local sales for the business.
This can, on the surface, appear to be a risk-free option for a company that wants to dip their toe in the UK market, without the burden of the big overheads associated with opening a new office.
However, overseas companies, particularly those from outside the EU, overlook the protection that commercial agencies have when the agreement is terminated.
For example, if an international company may decide to set up their own sales team inhouse after an initial successful prior of growth using a commercial agent. A principal wishing to terminate the commercial agent’s agreement is likely to be faced with a claim for compensation. This often comes as a surprise to principals operating in other English-speaking countries, such as the US, Australia and Canada, who may have assumed their laws will be similar.
Although the UK is no longer part of the EU, the commercial agent compensation laws continue to be based on EU regulations. This means that a commercial agent can ask for compensation for the value of the business. This applies even if they had not initially created that business – which can come as a complete shock to some international businesses.
A well structured contract, and careful monitoring of the arrangement during the life of the agency, can simplify the process of terminating a commercial agent agreement. We are able to draw on our experience of assisting parties that have faced compensation claims to advise parties when negotiating new agreements so they minimise the risk of large claims.
To find out more about commercial agent compensation, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.