Commercial Agents

Article 1 of Law 36 provides that non-Kuwaitis may not act as commercial agents in Kuwait, and Article 10 provides that those who violate the rule are subject to three months' imprisonment and/or a fine.

The relationship between the Kuwaiti agent and the foreign principal must be direct. Article 2 of Law 36 provides that commercial agencies are not enforceable unless registered in the Commercial Register.

The Code's provisions set out the general rules governing commercial agencies and the types of commercial agencies.

The first type is a contracts agency.⁸ In a contracts agency, the local agent, by contract, undertakes to promote the principal's business on a continuous basis in the territory and to enter into transactions in the name of the principal in return for a fee. The contract must be in writing and must include the territory covered, the agent's fee, the term, the product or service that is the subject of the agency, and any relevant trademarks.⁹ The term of the contract must be at least five years if the agent is required to set up showrooms, workshops or warehouse facilities.

The second type of agency is a distributorship,¹⁰ under which the local agent is the distributor of the principal's product in a defined territory in return for a percentage of the profit. Distributorships are governed by the same general rules as contracts agencies if the distributor is the sole distributor for the whole country. These rules provide protection to both types of agents.

The Explanatory Memorandum to the Code states that in view of the importance of commercial agencies to the Kuwaiti economy, and in view of the fact that the foreign party in such transactions is usually more powerful than the Kuwaiti, the legislature deems it necessary to protect the local agent. The following protective measures are provided:

• Commercial agencies must be registered in order to be enforceable
  
• Kuwaiti law is the governing law in matters pertaining to public policy
  
• The principal may not terminate the agreement without proving breach of contract by agent; otherwise, the principal is liable for paying compensation to the agent.¹¹
  
• The principal may not refuse to renew the agency agreement when it expires withour paying the agent equitable compensation for non-renewal if the agent proves that he committed no breach and that his activities led to the successful promotion of the principal's products.¹²
  
• The agent may sue both the principal and any new agent that the former may appoint in the Kuwait if the termination is proved to be the result of their concerted action.¹³

The third type of commercial agency is the commission agency, which is provided for in Articles 287 through 296 of the Commercial Code. In this type of agency, the agent enters into contracts in his/its own name.¹⁴ The principal's name may not be disclosed without his permission,¹⁵ but this rule is difficult to adhere to in practice since most manufactured products bear the principal's name.

8. Kuwaiti Commercial Code (KCC), Art. 271.
9. KCC, Art. 274.
10. KCC, Art. 286.
11. KCC, Art. 281.
12. KCC, Art. 282.
13. KCC, Art. 284.
14. KCC, Art. 287.
15. KCC, Art. 292. This rule is of historical importance only and may be enforced only in the case of fungible goods for practical reasons.