HC Deb 29 October 1986 vol 103 cc421-9 10.16 pm
The Minister for Trade (Mr. Alan Clark)

I beg to move, That this House takes note of European Community Document No. 4554/79, Amendment to the proposal for a Council Directive on the co-ordination of the laws of the member states relating to self-employed commercial agents, and of the Explanatory Memoranda by the Department of Trade and Industry, dated 13th March 1984 and 4th July 1986; and supports the Government's intention to agree to the adoption of this directive. This proposal deals with the legal relationship between a principal and his "commercial agent", who is defined in the latest text of the draft directive as a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person … or to negotiate and conclude such transactions on behalf of and in the name of that principal. The directive is proposed under article 57(2) and article 100 of the treaty of Rome. Its main purposes are to reduce differences in the existing laws applied in member states and to strengthen the position of commercial agents in relation to their principals. As now drafted, the directive would require a principal to provide specific documentation and information to the commercial agent, impose various requirements relating to the commercial agent's entitlement to commission, require written contracts on request with minimum periods of notice, and give commercial agents a right to compensation at the cessation of a contract.

I should emphasise that we are now concerned only with self-employed agents negotiating the sale or purchase of goods. The directive does not apply to services, so the wide range of service agencies — travel agents, literary and theatrical agents, advertising agents, stockbrokers and so on—are not affected.

Sir John Page (Harrow, West)

Will my hon. Friend give way?

Mr. Clark

I will, but before I do I should like to say that we are dealing with something the technicality of which makes it essentially arid. I am always delighted to engage in an exchange of views with my hon. Friend, but I hope that my giving way to him will not be regarded as a general precedent—[Interruption.] I hope the House will acknowledge that I am always ready to give way in normal circumstances, but I feel that it is desirable to proceed as expeditiously as possible today. With that cautionary note, I give way to my hon. Friend.

Sir John Page

I am extremely grateful to my hon. Friend for giving way. Realising the aridity of the subject, I wish to dip my mug into the oasis of his great knowledge. My hon. Friend referred to "stockbrokers and so on." As the author of what is known as the Page Act, the Insurance Brokers (Registration) Act 1977, I should like to ask whether insurance brokers are "and so on".

Mr. Clark

I do not know the answer to that.

Mr. Bryan Gould (Dagenham)

Yes, they are.

Mr. Clark

I am grateful for the hon. Gentleman's assurance. I was going to proceed. Although I do not know, and I could not give a categoric assurance—and "categoric" is the right word—none the less it looks as if "and so on" would include insurance brokers, and I accept the hon. Gentleman's assurance on that.

Furthermore, the directive includes an option to exclude persons whose activities as agents are deemed by national law to be secondary. Thus, we can make provisions to ensure that the many part-time agents selling goods from mail order catalogues will not be affected. Also, there are some specific exclusions—for example, for company directors, as agents of the company, for receivers, operators in the commodity market, and contracts of unremunerated agency.

In this country there are different opinions on the need for the directive. The principals, represented by the Confederation of British Industry and other trade organisations, together with bodies representing lawyers, remain opposed in principle and to certain detail. In contrast, the manufacturers' agents, represented primarily by the United Commercial Travellers Association section of the Association of Scientific, Technical and Managerial Staffs, and the Manufacturers Agents Association continue to support its early adoption. Indeed, they would like a directive with stronger provisions.

Estimates suggest that there is a total of about 20,000 manufacturers' agents in the United Kingdom. It is believed that a very high percentage operate as one-man businesses, although some agencies are handled by major international business houses. Those making a case for manufacturers' agents say that small agents find it difficult to obtain written contracts and to get all the information they need to verify that they are being paid the correct amount of commission, and that some suffer because their commission is not paid when it is due. They have complained that agents can be used to build up sales in an unpromising market and then put aside, without compensation, when the business has reached a level where the principal can set up his own sales organisation. About half the member states now have laws concerning the relationship between agent and principal, but in the United Kingdom the absence of a legal requirement for a formal contract incorporating basic safeguards has led to insecurity and uncertainty for a group of people who are doing a useful job, particularly as regards helping in the establishment of new and usually small manufacturing businesses.

Against that, the CBI and other organisations representing the principal continue to regard the directive as unnecessary. They have commented that the agent is not necessarily the weaker party and that the directive might not be in the best interests of small companies which use agents. Concern has also been expressed about the requirements of the directive regarding the provision of information to agents, carrying the risk of disclosure of commercial secrets.

Throughout the discussions with the Commission and other member states we have continued to refer to the problems caused for the United Kingdom by this directive and we have maintained a general reserve. Many of these reservations related to the original draft of the directive, which has since been heavily modified during lengthy negotiations within the Council working group.

I am glad to tell the House that, in recognition of the United Kingdom's problems, I have obtained the proposal that the United Kingdom should be granted a transitional period of four years, in addition to the three-year period provided for in article 36(1), for implementation into national law. The effect would be that there would be a seven-year period before any implementation in the United Kingdom was obligatory as regards new contracts.

The proposal under consideration is complex. The objective is to strike a balance between the needs of the agents and the concern of the principals. We now have a draft which addresses itself to the limited area of the activities of manufacturers' agents and we no longer need to worry about its implications for agents' activities operating in many other areas. Also, much detail has been eliminated and the drafting improved. In particular, the United Kingdom has been offered, as a concession, a significant additional transitional period which will give us time to consult about the ensuing adjustment to our agency law.

On balance, and given the differences of view within the United Kingdom itself, my conclusion is that the present draft, with a specific derogation for us, represents a reasonable result, which I recommend to the House. Subject to securing a specific derogation, I propose to lift our general reserve and seek adoption of the draft directive by the Council at its next session.

10.26 pm
Mr. Bryan Gould (Dagenham)

This is a somewhat curious parliamentary occasion, in the sense that the Minister for Trade has proposed legislation. Normally, I imagine that when legislation is proposed by the Government a substantial case is made, some enthusiasm is displayed, and some sign is given that the Government have put their weight and hard work behind a measure. I think that I was not alone in detecting a certain lack of enthusiasm by the Minister for the measure.

There is a powerful case to be made, although the Minister did not make it. It is a British case rather than an EEC case. It has been made over many years by ASTMS, among others — in fact, my own union has done so—and I am sure that it will be developed by my hon. Friend the Member for Warrington, North (Mr. Hoyle). I propose to do no more than summarise the case.

In many of the relationships between principal and agent with which we are concerned, the agent is the weaker party. Very often, the agent has great difficulty in getting written confirmation of his contract.

Mr. Alan Clark

I said it.

Mr. Gould

The Minister says that he said it. However, he read from a brief, rather than investing it with his personal authority and enthusiasm. Very often, agents do not get written contracts, and they have difficulty in enforcing the terms of the contract. Sometimes, they have difficulty in receiving their commission. Often, they are left with responsibility for bad debts. Sometimes when they have worked long and faithfully for a principal and have built up an unpromising business, they are discarded at the moment the business becomes more attractive and profitable. Therefore, the agent is left in a position of great uncertainty and insecurity.

If the Government had truly believed the case and had adopted it as their own, the Minister would not have dragged his heels for so many years. He would have stood at the Dispatch Box proposing some British or United Kingdom legislation to deal with that mischief. If he had done so, I think that all hon. Members would have given the legislative proposal a much more enthusiastic and warmer welcome than is possible given the form and the manner in which the Minister put his case tonight.

If there were a piece of British mischief to be dealt with, we should have had British legislation to do that. In that way we would have overcome a number of the difficulties that arise because we are now required to endorse in what has hitherto been a matter of private contract the application of a continental code which in many respects is inappropriate and far too rigid for the purpose.

Mr. Hugh Dykes (Harrow, East)

Does not this instrument have a double advantage in that it helps weaker agents vis-a-vis stronger principals not only those acting within the United Kingdom but those acting between the national frontiers of the member states?

Mr. Gould

The hon. Gentleman is right, but of course that would apply whether or not we were legislating along these lines. If we had our own legislation which achieved a more British and therefore a more appropriate system, we would have the harmonisation which is desirable. Equally, principals operating through agents in the EEC countries could take advantage of the provisions in the directive. Few people would disagree — even my hon. Friend the Member for Warrington, North would agree —that some aspects of the proposal are inappropriate and should he changed, and that there are difficulties in applying to the British situation the very rigid concepts of a continental code.

I remind the House of the history of this matter. The legislative history begins in a sense in 1976, although the campaign began well before then. On 2 May 1978, in the debate eventually held on the recommendation of the Scrutiny Committee, the Minister's predecessor stood at the Dispatch Box and argued vehemently on the Opposition's behalf against any such measure. He put a powerful case. Since the Conservatives arrived in office, as far as I can tell they have devoted all their energy to cutting down, holding back and frustrating the measure in various ways. Some of the proposals they have succeeded in implementing are to be welcomed. The fact that it is now possible to limit the ambit of the measure so that it does not cover part-time mail order agents is helpful.

There are still substantial doubts, which the Minister did not fully allay. There are doubts as to whether we really need this law, and as to whether the absence of total harmonisation on these matters throughout the EEC truly has in any real sense operated as a barrier to trade. Even those who oppose the measure — the principals, represented by the CBI, and the chambers of commerce — are already using agents in EEC countries under this body of rules. In a sense this meets the point raised by the hon. Member for Harrow, East (Mr. Dykes). It is not immediately clear why, for our own internal purposes, we should change law which in many respects has worked perfectly well, is suited to our conditions and is in the interests of harmonisation, and have to comply with the EEC directive.

It is worth pointing out—this point has been made in recent years, although perhaps not in the earlier debate —that when the Commission looked at the directive in an earlier form it commented: The substance, presentation and drafting contained defects such as to render it unsuitable even as a basis for negotiation. It is hard to conceive of a more damaging stricture. Doubts remain as to the measure's legal basis in the treaty and the case for harmonisation. There are questions about whether this is not just harmonisation for harmonisation's sake.

Even at this late date in the saga, when the Minister, with all the reluctance which he demonstrates so charmingly, is prepared to say that he will let the measure pass under various conditions, the Government's position is that their approval is conditional on the derogation which gives them not just the three-year transitional period but an additional four years. In other words, the Government are recommending to the House a measure that will not take effect for another seven years—when, I am glad to say, they will long since have departed from the scene.

That means that so little confidence do the Government and the Minister have in this measure that he is not prepared to say that the Government put their authority behind it and so will see it into law. The Minister is instead saying that the Government do not like this measure but they have been compelled to yield by all sorts of pressure by our EEC colleagues, but they will yield in such a way that it will be their successors — I do not suppose the Minister hopes that they will be successors of a different party, but he must at least recognise that possibility—to pick up the pieces.

That raises the real question—if the Minister and the Government are so unenthusiastic about this measure that they are not prepared to make a United Kingdom case for legislation, and if they put all their energies into frustrating what the EEC proposes, and even now will defer implementation of the measure for seven years, why is the Minister recommending the directive in the first place? The answer is shameful. It is that this is not legislation by conviction and commitment, but legislation as a result of pressure—legislation by proxy. It is not the Minister putting forward these proposals.

We deserve a case to be made by somebody who believes in this measure, and whose auhority is behind it, and the Minister has not put such a case. That is not good enough for the House of Commons, and I think that I know that the Minister in his heart of hearts agrees. He must concede that, in that great mish-mash of pressures such as the British presidency and the internal market, this is yet one more of those comparatively small issues that, one by one and reluctantly, we concede and concede. That is no way to proceed with a legislative programme, and the Minister has not done the House a service in bringing the measure forward in this way.

10.37 pm
Sir John Page (Harrow, West)

I am honoured to be given a second helping on this important debate. Earlier, I showed paternalism for insurance brokers, who I now understand are excluded from this measure. From a constituency point of view, I have something further to say. In my constituency there is a magnificant Edwardian building in which I know that my hon. Friend the Minister would take a great interest, which used to be known as the Royal Commercial Travellers' School. For many years, until seven or eight years ago, it was the headquarters and the ethos of commercial travellers. They are also Conservative travellers, because to a man they support the ideas of private enterprise that I embrace. The Conservative commercial travellers had their base in my constituency.

I listened with interest to the speech of the hon. Member for Dagenham (Mr. Gould), and I was surprised that he bothered to chide my hon. Friend the Minister for saying that there should have been United Kingdom legislation. I cannot imagine anything more stupid or more wasteful of time, energy and work in the Department than to reproduce United Kingdom legislation that might, at any possible time thereafter, be subsumed or inhaled by EEC legislation. It is much more sensible to go straight from the present loose agency arrangements to embracing the EEC idea.

Mr. Gould

That is an interesting doctrine. As the EEC now has legislative power over the whole spectrum of governmental activity, what limits would the hon. Gentleman place on his doctrine?

Sir John Page

I think that the hon. Gentleman has lost the thread of my argument already. I was trying to follow his criticism that there should have been United Kingdom legislation of a different nature first. That seemed to be an unusual route. It seemed to be an unusual way of adopting an EEC position on this matter.

Wearing the hat of the commercial traveller in my constituency, and supporting his interests, I was rather disappointed at my hon. Friend the Minister's lukewarm reaction to the proposals. The time has long past when more careful legislation was needed to clarify the relationship between the self-employed agent and the principal. Although I have not studied the new legislation in depth, I understand that those on whose behalf I speak tonight, the commercial travellers organisations, welcome and support the proposals, although the CBI and the chambers of commerce are against them. Seven years is a long time for the new legislation to take effect, and I hope that it will not be necessary for the full seven years to pass before the ideas behind the legislation and the new responsibilities of companies towards their agents are recognised by both sides.

10.41 pm
Mr. Doug Hoyle (Warrington, North)

I must first declare an interest as president of ASTMS. There are many commercial travellers in the outer sections of the union. They are extremely concerned about the length of time involved. If many of them were present tonight—and some are—I am sure that they would be extremely disappointed with the way in which the Minister presented the proposal. He did not appear to have mastered his brief, and he did not appear enthusiastic about the proposals. This issue is no laughing matter to my members.

The year 1976 has been mentioned already, but this matter dates back to 1961, before we joined the EEC. When we were due to join the EEC in 1972, there was great hope that a conclusion would be reached on this directive, but that was put off as new members joined the Community.

My members have been waiting a long time for a measure which they believe will strengthen them. My hon. Friend the Member for Dagenham (Mr. Gould) rightly said that we understand why the CBI and chambers of commerce are against the proposals. However, the agents are in a weak position.

I should have thought that Tory Members would welcome the proposals. After all, the agents are the kind of people that the Tory party is trying to encourage. These people go out and try to get business. They stimulate enterprise. I am not sure that many of these agents will vote for the Tory party after the way in which the proposals were presented.

Having said that my members welcome the proposals, I must go on to say that there are some ways in which they believe they could be strengthened, because that would help them. My members need to be given a measure of security. The agents are in a precarious position. Often they go out, build up the business and then find that their agency has been terminated, after they have done all the hard work. The manufacturer tells the agent that his business is no longer needed.

We welcome the proposal for the contract. However, it is important that, instead of that contract being on request to defend the agent, it should be mandatory. Article 5 refers to complying with regional instructions given by a principal. When they are conducting their business, many of these agents do not have only one agency. They have several in order to make a living. Consequently, if they obey one principal, that might be in contradiction of the other agencies that they represent. It might not be in their interests. We must ensure that what an agent is asked to do is not in direct contradiction of his other agencies and is not detrimental to him.

Article 11 refers to remuneration tied to the place where an agent carries out his activities. Everyone knows that agents go out and about. Indeed, often their business is done, not in a building or office, but in a territory. The article should be widened to include an agents's territory.

Article 12 refers to commission on transactions. Anyone who has been involved in selling—as I have been — knows that one of the difficulties with commercial transactions is that often people place orders direct with the manufacturer. The agent does not then receive commission. Rather than referring simply to commission on transactions, the article should refer to all transactions, taking into account the work done by the agent in his territory. He should have the benefit from that work, even if the orders are placed direct with the manufacturer. That would be welcomed by many of my members.

Article 30 refers to giving entitlement to indemnity to the agent, but that can be reported upon to the Council only after eight years. That is far too long—it should be one year. If it is thought that that is too soon—and I noted the Minister's general reluctance about the directive—the period should be a maximum of three years.

Under article 32, relating to competition, an agent has the right to be consulted, and to be part of the agreement on the extent of the competition. If the contract is terminated, the agent should not be deprived of a living because of a restriction on competition. The agent may have been selling a particular article, and he may be prevented from going into his territory. That is not the right way to go about matters.

Article 36 says that the measure should come into force in 36 months' time. We are talking, not about 36 months, but about seven years to bring in the directive. That is ludicrous. Either it is to be brought in, or it is not. This is typical of the approach to the directive. Anything can happen in seven years. It is far too long a period. Surely after all the time that we have been waiting for the directive —I referred back as far as 1961 — to achieve some measure of security for these hard-working people, to wait another seven years is far too long. It should be a maximum of 12 to 18 months.

The directive would not affect existing contracts. There is lack of security, because the contracts could be removed at any time and the agent deprived of all the work that he had done. Again seven years is far too long in this case. It is nonsense. The maximum should be three years.

The Minister must at long last grasp the nettle. Instead of waiting for seven years, this directive ought to be brought into force at once. It is important to ensure that contracts are mandatory, then justice will be done to the agents who have had to wait for far too long for this directive. That would provide security for a very hard working bunch of people. They are doing all that they possibly can to do what the Government are always talking about.

The Government say that they want to encourage small businesses, but in this case they are acting against the best interests of those who go out and sell the goods that they have produced. The Minister should give them some encouragement and bring this directive into force as soon as possible—not after seven years, but within 12 or 18 months.

10.52 pm
Mr. Alan Clark

By leave of the House, Mr. Deputy Speaker, I should like to reply to the debate.

There were certain inconsistencies in the argument of the hon. Member for Dagenham (Mr. Gould). He repeated some of the arguments that I used in recommending this directive to the House. He said that a powerful case had been made out for it and that it had been needed for a long time, but he also said that perhaps, after all, we did not need it, that we ought to have our own legislation and that this was not the right way to approach the matter. I do not want to trade guarded reproaches with him, but the inconsistencies in his argument betrayed a certain lack of enthusiasm for the directive.

I hope that the hon. Gentleman will forgive me for not having congratulated him upon his election during my opening speech. The hon. Gentleman and his hon. Friend the Member for Warrington, North (Mr. Hoyle) and I shared certain attitudes towards some of the elements in this whole affair when we were on the Back Benches. It is ironic to the highest degree that those two hon. Members, for whom I retain a high measure of personal respect, should be arguing for the speedy implementation of a Community directive and saying that there should be no delay.

The proposed derogation is highly satisfactory. It will give us time to listen to representations and to hear what the interested parties have to say. However, the hon. Member for Warrington, North says that, because this is a Community directive, it must be implemented soon. Is this not a rather unusual role for him to be playing?

Mr. Hoyle

The Minister is quite right. As colleagues, we have opposed many EEC proposals, but that does not mean that we should oppose all of them. Sometimes some good comes out of the EEC. It is not often that I find it, but I believe that there is some good to be found in this directive. Surely we have already waited for far too long. We understand the arguments on both sides. I appeal to the Minister as a reasonable person not to make us wait for another seven years. I ask him to bring this directive into operation as speedily as possible.

Mr. Clark

Seven years is the maximum period. Many of these contracts could be dealt with well within that period. Every hon. Member who has spoken — I pay particular tribute to my hon. Friend the Member for Harrow, West (Sir J. Page) who has a historic centre within his constituency—has done so from the point of view of the agents. I hope that in my introductory remarks I made it quite clear that the Government recognise the need to afford a measure of protection.

This directive in its new form has to represent a compromise between the interests of two essentially conflicting groups—the principals and the agents. We think we have that compromise at about the right level. There have been considerable changes. The hon. Member for Dagenham quoted the Law Commission strictures, but these changes, both in drafting and in content, have been made in the light of those strictures.

I hope that the House broadly agrees that the derogation is helpful. It will give us time to consider other representations, because there are other views on this, even though in this debate we have had the view of only one side. Given the general acceptance of the need to make progress in the internal market, the substantial improvements that have been made in the substance of this directive, as a result of negotiations at official level, enable it to be viewed as such a substantial move away from its predecessor that we can give it our full support.

Question put and agreed to.

Resolved, That this House takes note of European Community Document No. 4554/79, Amendment to the proposal for a Council Directive on the co-ordination of the laws of the member states relating to self-employed commercial agents, and of the Explanatory Memoranda by the Department of Trade and Industry, dated 13th March 1984 and 4th July 1986; and supports the Government's intention to agree to the adoption of this directive.