Many companies would love to appoint sales agents in Europe. The agency model has a wonderful simplicity. Why go through all the palaver of the intermediary taking title to the product and making a commission when it is resold, when you can just reward the intermediary with a commission-based fee? The agency model also means that suppliers have better control of their channel. And it frees up capital that intermediaries would otherwise have to invest in inventory. You can also dictate your sales prices without falling foul of UK/European law.

But EU legislation appears to have deterred many companies from using the agency model. The Commercial Agents Regulations 1993 are designed to protect salesmen. Agents are now given greater protection and the entitlement to a payment upon termination of their agency contracts* has put off many companies.

However, I think there are ways that agency can be made to work. Note, for instance, that the UK Commercial Agents Regulations 1993 legislation does not cover marketing agents. These are agents authorised to promote and market products and solicit orders for them, but who do not have authority to negotiate and enter into contracts on behalf of their principal. It is therefore important that the marketing agent's role is clearly defined to avoid it becoming a sales agent.

Note that the Regulations specifically apply to the provision of goods, not services. So, if you are selling pure telecoms connect time, it appears that you should be safe, although this has yet to be tested in our courts.

Application service providers are on less safe ground as they typically sell a licence with the service and agents selling a mixed service and product offering may well be caught, subject of course to software being "goods." But that is the subject of another article in its own right!.

*If you would like a more detailed briefing note on the two types of termination payment envisaged by the Regulations and information on when such payments are triggered, please e-mail Paula at paula.staunton@osborneclarke.com

Taking the pain out of downsizing

Downsizing your European operations is often a messy and expensive business. Vincent Galea looks at how to avoid the pitfalls.

The closure of a business, the closure of a site/branch or a reduction in headcount will be a redundancy situation and may trigger EU Directive 98/59/EC. This Directive aims to approximate the laws of EU countries relating to collective redundancies. Simply selling off a particular subsidiary is unlikely to be a quick fix.

EU Directive 77/187/EEC aims to approximate the laws of EU countries relating to safeguarding employee rights on a "transfer of undertakings". The Directive protects against unfair dismissal and safeguards an employee's period of continuous employment and their contractual rights.