* LEGAL
ARTICLE *
Does termination of Commercial Agencies entitled Kuwaiti Agent to a
compensation??
Commercial agencies is
considered as on of the main paths of foreign companies to enter into the
Kuwait Market. Commercial Agencies in Kuwait are governed by Law No. (36) of
(1964) on the regulation of Commercial Agencies, and Articles (260-296) if the
Kuwaiti Commercial code. The law provides registration of Commercial Agencies
with the Ministry of Commerce & Industry to be enforceable in Kuwait.
Types of Commercial Agencies:
The Kuwaiti Law
recognizes three types of Commercial Agencies, which are as follows:
Firs type: The first type of Commercial
Agencies is a Contracts Agency as per Article (271) of the Commercial Code.
Under this type, the local agent shall promote the principal's business in the
territory as well as conducting transactions in the name of principal I return
for a fee.
In accordance with
Article (274) of the Commercial Code, the agreement of Contracts Agency shall
include: the territory covered, the Agent's fees, the Agency Term, the product
that is subject of the agency, and any relevant trademark. Contracts Agent may
not represent more than on principal if those are competing in the same
activity. If an agent establishes showrooms, workshops, or warehouse
facilities, the contact shall be valid for a period not less than five years.
Second Type: the second type of Commercial Agencies is a distributorship
agency. Under this type of agency, local agent acts as a distributor for the
principal's products I a certain territory.
Third Type: as per Articles (287) to (296) of the Kuwaiti Commercial
Code, the third type of Commercial Agencies is the Commission Agency, under
this type of agency, an agent enters into contracts in its own name, and the
principal's name may not be disclosed without its consent.
Compensation of an Agent:
The Kuwait legislator
considers in regulating commercial agencies, the effort of the local agent in
promoting the product of the principal and the expenses that an agent may
incur. As such the Kuwaiti Law limits
the authority of principal to terminate or refuse renewal of the agency by the
default of an agent. Otherwise, the principal has to pay equitable compensation
to an agent.
The legislator also,
differentiates I entitlement to compensation between termination and
nor-renewal of agency. In the first case, an agent is entitled
to a compensation if principal fail in proving an agent's default while in the second case,
an agent bears the burden of proof: an agent shall prove that he is not in
default.