The Commercial Agency Law: Opening Kuwait's Market through Liberalization of the Principal-Agent Relationship

Author:Abdulwahab A. Sadeq - Abdullah Al Hayyan
Position:Kuwait University, School of Law - Kuwait University, School of Law
Pages:293-311
SUMMARY

As with many nations, Kuwait limits entry into its markets by requiring alternative means including joint venture, partnership, and agency agreements. As a result, even small changes to laws regulating these agreements can have an enormous impact on foreign firms’ access to Kuwaiti markets. The Kuwaiti Commercial Agencies Law has dramatically changed the commercial landscape. While this law has... (see full summary)

 
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e Indonesian Journal of International & Comparative Law
ISSN: 2338-7602; E-ISSN: 2338-770X
http://www.ijil.org
© 2020 e Institute for Migrant Rights Press
THE COMMERCIAL AGENCIES LAW
oPeNiNg KuwaiTs marKeTs Through
LiberaLizaTioN of The PriNCiPaL-ageNT
reLaTioNshiP
Abdulwahab Abdullatif Sadeq
Kuwait University, School of Law
abdulwahab.sadeq@gmail.com
Abdullah Al Hayyan
Kuwait University, School of Law
As with many nations, Kuwait limits entry into its markets by requiring al-
ternative means including joint venture, partnership, and agency agreements.
As a result, even small changes to laws regulating these agreements can have
an enormous impact on foreign rms’ access to Kuwaiti markets. e Kuwaiti
Commercial Agencies L aw has dramatically changed the commercial landscape.
While this law has been subjected to intense scrutiny, the potential impact of the
changes particularly regarding agency law, has escaped full exploration. is
paper analyzes the legal consequences of the agency law and concludes that the
liberalization of principal-agent relationship will profoundly impact foreign in-
vestment in Kuwait’s markets. While far from complete liberalization into its
markets, the greater relative bargaining power of investor-principals has the po-
tential to increase foreign investment in Kuwait.
Keywords: Principal, Agent, Commercial Agencies Law, Distribution, Exclusive
Agency, Foreign Direct Investment.
VII Indonesian Journal of International & Comparative Law 293-311 (April 2020)
294
Sadeq & Al Hayyan
INTRODUCTION
Recent changes to the Kuwaiti Commercial Agencies Law have dras-
tically changed the agency market in Kuwait, altering the duties and
rights of agents and principals alike. On 13 March 2016, Kuwait enact-
ed Law No. 13 of 2016 (“Commercial Agencies Law”),1 which replaced
Law No. 36 of 1964 (“Old Agencies Law”). While the full impact of
these changes to the law have not been fully apprehended, it is clear
that the relationship between agents in Kuwait and their principals,
particularly foreign principals, has already inuenced the behavior of
these parties.
Kuwait’s commercial markets have been relatively closed o. ere
are, however, several methods through which a foreign principal
may conduct business and actively market its products or services in
Kuwait. Most commonly, a foreign entity uses local intermediaries to
sell services or products in a territory. is indirect sale system can be
done either by an agent or a distributor. In other words, some business
activities, such as commercial agency, could be conducted through an
intermediary to sell or procure products in a certain territory.2
Before the Commercial Agencies law was enacted, there was
an environment which existed where agents in Kuwait had become
complacent. is complacency was fomented by foreign entities
resistance to changing or even criticizing their agents’ performance.
ese companies are now considering replacing their agents. e
Commercial Agencies Law denes a “commercial agency” as a legal
right granted to a trader or entity in the state to sell, promote, or
distribute goods or products or provide services in his capacity as agent
or distributor or franchisee or product licensee or the original supplier
against prot or commission.3 Moreover, the Court of Cassation in
1. e Executive Regulations of the Commercial Agencies Law was issued in
2017 by virtue of the Ministerial Resolution No. (565) of 2017.
2. Robert T. Jones, Practical Aspects of Commercial Agenc y and Distribution
Agreements in the European Community, 6 I’ L. 107-27 (Jan. 1972).
3. Article 1 of the Commercial Agencies Law: In implementing the provisions of
this law, commercial agency means each agreement under which a legal right
is granted to a trader or company in the State to sell or promote or distribute
goods or products or provide services in his capacity as agent or distributor

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