Barret McKenzie had acted as the agent of the fashion company, Escada, since December 1988. The agency agreement was summarily terminated by Escada in July 1998. The agent’s main claim was for compensation under the Commercial Agents Regulations determined in accordance with French principles. This is compensation equal to the commission earned by the agent during the two years prior to termination (or the average of the last three years multiplied by two) and is known as the benchmark system.

The High Court disagreed that this was how compensation should be calculated and attacked the application of the benchmark system as being unfair. The Court pointed out that the Regulations do not provide a formula to enable compensation to be calculated. This absence was contrasted with the calculation of an indemnity where the Regulations do provide some details.

The High Court went on to consider how compensation should be calculated and held that the starting point is the value of the agency and connections established by the agent at the time at or immediately before termination. On this basis the following factors are to be taken into account:

  • the duration of an agency and its history;
  • the agency agreement’s precise terms and whether it was in writing or oral and whether there was “any security of the agreement”;
  • whether the agency was dealing with a regular repeating client base or with one-off transactions with different persons.

However, it is uncertain whether the High Court intended these factors to be exhaustive. From the amount determined by these means, it was the view of the High Court that there is to be deducted the expenses incurred by the agent in earning the commission on which compensation is calculated.

This briefing note is for general information. For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team.(www.agentlaw.co.uk)

Written by Jane Elliot

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