French Agency Law vs the UK Commercial Agents Regulations 1993

Same Directive, two very different outcomes

France and the United Kingdom both derive their commercial-agency law from the same source — Council Directive 86/653/EEC of 18 December 1986 — and, unusually, both made the same headline choice under it. The Directive offered Member States two systems for the payment due to an agent on termination: a capped goodwill indemnity, or compensation for the damage the agent suffers. Most of Europe took the indemnity; France, the United Kingdom and Ireland took compensation. On paper, then, France and the UK look closely aligned on this fundamental choice.

In practice they diverge sharply, because the two jurisdictions measure "compensation" in opposite ways. France treats it as reparation of the agent's lost future income from the clientele it built up with the principal, and its courts have settled on a customary benchmark of around two years of gross commission, with no statutory ceiling. The United Kingdom, since the House of Lords decision in Lonsdale, treats it as the market value of the agency as an asset — what a hypothetical purchaser would have paid for the right to step into the agent's shoes — which for many agencies produces a markedly lower figure. The same word, "compensation", conceals two different amounts of money.

The shared origin — and the UK's post-Brexit position

The French regime lives in Articles L 134-1 to L 134-17 of the Commercial Code (Code de commerce), with the termination compensation in Article L 134-12. The United Kingdom's regime lives in the Commercial Agents (Council Directive) Regulations 1993, which transposed the Directive into domestic law and remain the governing instrument today.

Brexit did not change this. Although the United Kingdom left the European Union, the 1993 Regulations were retained in domestic law, and after a government consultation that considered disapplying them to new contracts, the government confirmed in 2025 that the Regulations would remain in force without amendment, having found no sufficient case for change. A principal contracting with a UK agent today therefore still faces the 1993 Regulations, and the body of case law built on them, exactly as before. The comparison between France and the UK is thus a live one, not a historical curiosity.

It is worth noting that the compensation choice these two countries share was, historically, a minority one within Europe: alongside Ireland, France and the United Kingdom were the states that opted for compensation rather than the goodwill indemnity, while the great majority of Member States took the capped indemnity. That places the France–UK comparison in a special category — two compensation jurisdictions with a common statutory choice but a radically different judicial method for turning that choice into a number.

The French measure: lost future income, uncapped

Under Article L 134-12, the French commercial agent is entitled, on the cessation of its relations with the principal, to compensation in reparation of the harm suffered. The harm the courts have in mind is the loss, for the future, of the income the agent would have continued to derive from exploiting the common clientele — the customer base the agent developed and which now stays with the principal. Because this is a loss projected into the future, and because the statute prescribes no method and no ceiling, French practice has crystallised around a customary award of roughly two years of the agent's gross commission, calculated on the last years of the relationship, and rising towards three years for very long or particularly valuable relationships.

The French figure is generous by design and resistant to reduction. The compensation is a matter of public policy: the parties may agree indemnities that add to it, but a clause substituting a smaller, different payment is of no effect, and the amount cannot be capped in advance in a way that leaves the agent short of full reparation. The base is broad, taking in the whole of the remuneration received before termination. The result is that a French agency of any maturity carries a substantial, foreseeable exit cost for the principal — and a correspondingly valuable right for the agent.

The breadth of the base is worth spelling out, because it is another point of contrast with the UK. The French courts calculate on the totality of the remuneration the agent received before the relationship ended — including remuneration of a fixed or lump-sum character, and including commission on sales made at the principal's request outside the agent's allotted sector — without distinguishing between clients who pre-existed the contract and clients the agent brought or the turnover it developed. Because the compensation repairs the loss of the future income the agent would have drawn from the common clientele, the courts do not deduct the commissions the agent goes on to earn, after termination, by canvassing all or part of that same clientele for another principal; nor do they take into account the tax charged on the indemnity, or the earnings the agent forgoes because of a post-contractual non-compete. The base is, in short, constructed to capture the full value of what the agent is losing.

The two-year benchmark is a custom, not a tariff, and the courts modulate it on the facts. A long or valuable relationship can attract close to three years; a short or immature one attracts less, and occasionally nothing. Awards in the reported case law have ranged from a few months' commission for very brief relationships to twelve months for a relationship of two and a half years, and the compensation has been refused altogether where the mandate was so short and the agent so inexperienced that no clientele had genuinely been constituted or brought. But the modulation runs in the agent's favour in one important respect: a principal cannot invoke the short duration of a mandate to reduce the compensation where that brevity is itself attributable to the principal's own early termination. The French award is thus fact-sensitive, but its centre of gravity — around two years — sits far above what a market valuation typically yields.

The UK measure: the market value of the agency

The United Kingdom starts from the same default. Under the 1993 Regulations, the agent is entitled to compensation rather than an indemnity unless the agency agreement provides otherwise; Regulation 17 is the governing provision. But the method of valuation is where the UK parted company with the continental approach. In Lonsdale v Howard & Hallam [2007] UKHL 32, the House of Lords held that the compensation is to be assessed as the value of the agency to the agent at the moment of termination — essentially, the price a hypothetical willing buyer would have paid for the right to receive the future stream of commission, valued on the assumption that the agency would have continued.

This asset-valuation approach has a decisive practical consequence: the compensation reflects the real, market condition of the agency. Where the agency was growing and profitable, the value — and hence the award — can be significant; but where the market was in decline, or the income stream was modest or precarious, the value a purchaser would pay is small, and the award falls accordingly. In Lonsdale itself, the trade in question (shoe-manufacturing) was in long-term decline, and the award was correspondingly low. The UK method is therefore evidence-led and often produces figures well below the French two-year benchmark, precisely because it asks what the agency was worth rather than applying a customary multiple of commission.

The gap in practice

The divergence is easiest to see through a stylised comparison. Take an established agent earning gross commission of, say, one hundred thousand euros a year on a stable, mature book of customers. In France, the compensation would gravitate towards two years of that commission — in the order of two hundred thousand euros — subject to adjustment for the length and quality of the relationship, and without any statutory ceiling. In the United Kingdom, the same agency would be valued as an asset: a court, usually assisted by valuation evidence, would ask what a hypothetical purchaser would have paid at termination for the right to that future commission stream, discounting for the risk, cost and effort of earning it and for the prospects of the particular market. Depending on those factors the figure might be a year's commission or less, and if the market were contracting it could be a good deal less.

Two features of the comparison deserve emphasis. First, the French method starts from the agent's loss and the UK method from the agency's saleable value, and those are not the same quantity — an agent can lose an income it could not have sold. Second, the UK method rewards evidence: a well-prepared valuation, showing a durable and transferable income stream, can lift a UK award, whereas a thin evidential record will depress it. The French benchmark, by contrast, is more predictable and less dependent on expert valuation. For a principal budgeting the cost of ending an agency, this means the French exposure is easier to estimate in advance, and generally larger; the UK exposure is more variable, and often smaller.

The UK indemnity alternative — and where it mirrors the Directive

The 1993 Regulations also preserve the Directive's other option. If, and only if, the agency agreement expressly so provides, the agent is entitled to an indemnity instead of compensation. That indemnity follows the Directive's model closely: it rewards the agent for new customers brought or business significantly increased, from which the principal continues to derive substantial benefit, and it is capped at one year's remuneration calculated on the average of the preceding five years (or the actual term, if shorter). Importantly, choosing the indemnity does not bar a further claim for damages; it operates within the Directive's structure.

This gives the UK a flexibility France does not offer. A UK principal that prefers a predictable, capped exposure can stipulate the indemnity in the contract and know the ceiling in advance. A French principal cannot switch to the capped indemnity at all — France fixed the compensation system in its statute, and the parties cannot contract into the one-year indemnity cap instead. The availability of a capped, contractually chosen indemnity is one of the genuine structural differences between the two regimes, and a reason UK agency drafting looks different from French.

Where they converge: notice, and the grounds that defeat the payment

Not everything diverges. On notice, the two regimes are almost identical, because both track the Directive. In France, Article L 134-11 fixes a minimum notice of one month in the first year, two in the second, and three from the third year onward. The UK Regulations set the same escalating minimum notice of one, two and three months by seniority. A cross-Channel principal will find the notice architecture familiar on either side.

The grounds that defeat the termination payment also broadly correspond. In France, a serious breach ("faute grave") by the agent deprives it of the compensation, and no compensation is due where the agent itself terminated without justification. Under the UK Regulations, no compensation or indemnity is payable where the principal has terminated because of the agent's default such as would justify immediate termination, nor generally where the agent has itself ended the agreement — subject to exceptions where the agent's termination is justified by the principal's conduct, or by the agent's age, infirmity or illness such that it cannot reasonably be required to continue. The vocabulary differs — "faute grave" versus "default justifying immediate termination" — but the underlying idea, that a defaulting or freely departing agent forfeits the payment, is shared.

Why the choice of law drives the number — and cannot be freely chosen

Given the gap between roughly two years' commission in France and a market valuation in the UK, the governing law of the contract is not a technicality; it is often the single most important determinant of the exit cost. A principal would naturally prefer UK law and a UK forum for an agent whose agency has little resale value, and an agent would prefer French law for an agency generating strong, stable commission.

But the choice is not free, because the agent's termination rights are overriding mandatory rules that attach to where the agent actually operates. Under the Court of Justice's decision in Ingmar, the Directive's termination protection applies where the agent carries on its activity in a Member State, whatever law the parties chose — so a principal cannot simply select UK or other law to strip a France-based agent of the French compensation. Conversely, a UK-based agent operating in the UK will, as a rule, be governed by the 1993 Regulations and the Lonsdale measure. The practical lesson for a cross-border appointment is to identify, at the outset, where the agent will really be working, because that — more than the governing-law clause — will decide which regime, and which figure, applies on termination. An agent that works partly on each side of the Channel calls for particular care, since the analysis may fragment by territory and produce exposure under both regimes at once.

Frequently asked questions

Do France and the UK use the same system for agent termination payments?

Both chose the compensation system under Directive 86/653, rather than the capped indemnity. But they value compensation differently: France awards around two years' gross commission uncapped (Article L 134-12), while the UK values the agency at market value under Lonsdale v Howard & Hallam [2007] UKHL 32.

Why is the French award usually higher?

Because France measures the agent's lost future income from the clientele and applies a customary two-year benchmark with no cap, whereas the UK measures what a buyer would have paid for the agency — which can be low for a static or declining business.

Can a UK agency agreement choose an indemnity instead?

Yes. If the contract expressly provides for it, the UK agent receives an indemnity capped at one year's remuneration (five-year average), on the Directive's model. France does not allow the parties to switch to the capped indemnity — its compensation system is fixed by statute.

Are the notice periods the same?

Effectively yes. Both regimes require one, two or three months' notice depending on the seniority of the contract (France, Article L 134-11; UK, Regulation 15), because both transpose the same Directive provision.

Did Brexit change the UK position?

No. The 1993 Regulations were retained, and in 2025 the UK government confirmed they would remain in force without amendment after consultation. UK agents keep their compensation rights and the Lonsdale valuation method.

Can a principal pick UK law to reduce a French agent's payout?

Not where the agent operates in France or the EU. The Directive's termination protection is an overriding mandatory rule that applies according to where the agent works, whatever law the contract selects (Court of Justice, Ingmar, C-381/98).

Key takeaways

How our French lawyers help with cross-Channel agency

This article is for general information only. It does not constitute legal advice, and it summarises the UK position for comparison; UK law questions should be confirmed with English counsel. Contact our French lawyers for qualified advice on the French-law aspects of a cross-border agency.