Commercial Agencies and Representatives in Kuwait
in Kuwait are governed by Law No. (36) of (1964) on the Regulation of Commercial Agencies, and Articles (260-296) of the Kuwaiti Commercial Code. Pursuant to Article (1) of the Law No. (36) of (1964).
There must be a direct relationship between the Kuwaiti agent and the foreign principal. Article (2) of Law No. (36) Stipulates that commercial agencies are not enforceable unless recorded in the Commercial Register.
Provisions of the code define the general rules governing commercial agencies and their types.
A - Contracts agency as per Article (271) of the Kuwaiti Commercial Code. In this type of agencies, the local agent undertakes to do the following by the contract:
a) promoting the principal’s business on a continuous basis in the territory.
b) entering into transactions in the name of the principal in return for a fee.
The agency contract must be written. Items of contract must define: the territory covered, the agent’s fees, the agency term, the product or service that is the subject of the agency, and any relevant trademarks. If the agent should establish showrooms, workshops, or warehouse facilities, the contract must be valid for a period not less than five years.
B - Distributorship agency Under this agency, the local agent may act as the distributor of the principal’s product in a defined territory and in return for a percentage of the profit as per Article (286) of the Kuwaiti Commercial Code. If the distributor is the only distributor in the whole country, distributorships are governed by the same general rules as contracts agencies.
As per the following protective procedures, these rules protect both types of agents:
1. Registration of Commercial agencies is required to be enforceable.
2. Kuwaiti law is the governing law in all public policy matters.
3. The principal may not terminate the agreement without proving violation of the contract by the agent. If contract violation is not proved, the principal should compensate the agent.
4. The principal may not decline to renew the agency agreement upon its expiration without paying the agent equitable compensation for the non-renewal, provided that the agent provides evidence that he is not at fault and that his activities successfully promoted the principal’s products.
5. The agent may file a suit against both the principal and the new agent appointed in Kuwait, if the principal colludes with another agent, and, for this reason, the agency contract is terminated.
C - Commission agency In this type of agency, the agent concludes contracts in his/its own name.
The principal’s name may not be revealed without his consent.
Pursuant to a “Commercial Representation Agreement”, a commercial representative is a Kuwaiti individual or entity engaged by a foreign company to represent its business interests in Kuwait. Usually, the authority scope of a commercial representative is more limited than that granted to an agent.
Fees of a commercial representative may be paid as either a fixed regular amount, a commission, or percentage of profits. Articles (297) to (305) of the Kuwaiti Commercial Code regulate the duties and obligations of commercial representatives.
The commercial representative must sign his name as well as the name of the foreign company, whenever executing documents on behalf of the foreign company. Within the signature, he must indicate that he is a commercial representative. A foreign company accepted full liability for all of the actions of its commercial representative, provided that all the actions are they are carried out or incurred within the scope of representation. Contrary to the agency agreement, a commercial representation agreement cannot be registered with the Ministry of Commerce and Industry.