UNITED KINGDOM: New judgement on the agent's compensation.

Edward MILLER | UK | 2007-08-07

Edward MILLER

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The key points are:

  • the agent’s entitlement to compensation on termination of an agency contract is in an amount which is equal to the value of the agency at termination, or in other words, the amount a third party would be prepared to pay for the transfer of the agency to him on the basis that the agency would continue in accordance with its current terms;
  • the judgment also states that where the agency is terminated because the principal is closing down the relevant business, no compensation should be paid because the value of the agency would then be nil;
  • where the agent is not under a post termination non-compete obligation, the value of the agency to a hypothetical third party buyer, and therefore the amount of compensation should be reduced;
  • the value of the agency and therefore compensation should be determined in accordance with net not gross commission;
  • given that the agent will be the claimant of any compensation payment, it is for the agent to prove, if necessary by independent valuation, the value of his agency;
  • the House of Lords declined to refer the matter to the European Court of Justice.

  

Edward Miller, IDI Country Expert for the United Kingdom.

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