The Commercial Agencies Law No.13 of 2016 (“CAL”) has now come into effect and aims to arrange, clarify and clearly set out the formalities and requirements surrounding agency law in the State of Kuwait (“Kuwait”). CAL replaces the older CAL No.36 of 1964 which was criticised for causing foreign principles to be locked out of the Kuwaiti market due to the complex formalities in setting up and monitoring agency agreements in Kuwait.
Much of the old law has remained the same leading to criticisms that CAL is not sufficiently far-reaching. Instead of reforming agency laws in Kuwait, CAL focuses on procedure and clarifying the extensive formalities required to have an agent in Kuwait.
One notably change under CAL is the deletion of the exclusivity principle. CAL provides that importing or providing any goods or products now cannot be limited to a sole agent or distributor, even if there is an exclusive arrangement in place. This means that principles may appoint multiple agents or distributers in the territory, with the aim of encouraging fair competition and protection of consumer rights in combating monopolies. Authorities hope that CAL will help promote Kuwait to foreign principles and encourage more international trade, it remains to be seen if it will have the desired effect.
The definition of a commercial agent has also been changed to include ‘Franchisee’ and a ‘Licensee’, who are now required to abide by the same laws and regulations as agents and distributors.
Other key points arising from CAL:
- The agent or distributor of a commodity or product inside the State of Kuwait is now obliged to provide maintenance and repair services of such products.
- Any goods or products imported by a third party should meet international quality standards and meet the same specifications applied by the Gulf Cooperation Council.
- All commercial agents must be registered with the Department of Commercial Agencies within two weeks of appointment at the Commercial Agency Registration Department. The Ministry of Commerce has 30 days within which they may reject an application.
- CAL enables an incumbent agent or distributor the right to claim compensation for the termination of an agency for incurred losses and damages if the principal elects to terminate the agency contract without any valid or justified reason during its term.
- An agent must notify the Kuwaiti Ministry of Commerce if they intend to renew an agency agreement, even if the contract provides for automatic renewal. The Ministry must also be notified within three months of appointing a manager the name of the manager.
- An agent or distributer may request that the Ministry of Commerce de-registers an agency’s registration within three months if an agency term ends.
- Penalties have been clarified and extended to those who provide inaccurate information.
- Arbitration has been given more formal recognition.
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