The Law of Commissions

Introduction

Situated on the North-West coast of the Arabian Gulf, the shores of the State of Kuwait have witnessed maritime activities since the time of its existence. This tiny state sharing its borders with Iraq on the one hand, and the Kingdom of Saudi Arabia on the other, has always been under the spotlight of the world map. The birth of modern Kuwait took place in the late 1930's with the discovery of oil in the region. The oil boom saw the advent of modern technology to the State of Kuwait, giving a spurt to its economy and marking a significant increase in its business and commercial activities.

Being primarily a trading economy, Kuwait depends extensively on imports from all parts of the world, ranging from pins to Patriots. This movement of goods and services from overseas to the Kuwaiti markets results in the appointment of local mediators (commercial agents). These mediators or middle-men play a very powerful role in the Kuwaiti market. The significance of mediation has urged the Kuwaiti legislature to enact laws and regulations, protecting the interests of the mediator and giving them the upper hand in the business of commercial agencies. The local mediators often capitalize on the advantages conferred by the laws particularly, under the Commercial Code and the Law Regulating Commercial Agencies. The Explanatory Memorandum to the Commercial 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. It is obvious, therefore, that the Kuwaiti legislature aims to protect the local agents commission and profits to the maximum extent possible. Commercial agents under Kuwaiti law enjoy a high priority in the list of creditors. In fact, some jurists refer to them as the "supra creditors."

Although, it is widely open for a commercial agent to do business in any field, yet, there are a few restrictions attached to this rule. Defence contracts executed between the Kuwaiti government and the government of the contracting country prohibit interference of commercial agents. There is a considerable area of doubt, in cases where a defence contract is executed between the Kuwaiti government and a non-governmental entity. In such cases, there may be interference of a commercial agent. This is often disputed and the issue continues to remain unsettled even in the Court of Cassation (the highest Court in Kuwait). Our opinion, however, is that such transactions provide room for a commercial agent.