Most countries, capitalist economies in particular, see foreign investments as essential to their development and have promoted FDIs, albeit with variant legislative contexts. Foreign investors primarily look at the domestic laws and regulations to ensure that their own investments will be managed in a safe and stable investment environment.
Kuwait government has been eager to promote direct and indirect foreign investments, which has reflected on higher economic growth rates and better competitiveness. The country has also amended several FDI related statutes to help attract foreign investments and create a more attractive investment climate that encourage foreign investors operate their projects in a flexible and safe investment environment. One of the most important laws that have the greatest influence on FDIs is the new Commercial Agencies Law No. 13 of 2016 that promotes investment, economic and doing business opportunities to foreign investors.
Before we discuss the key amendments to this law, first, I would like to address the following:
Commercial Agencies under old Law no. 36 of 1964:
- Monopoly and the exclusivity of the agency agreement:
The agency agreement under the previous law used to be given to one exclusive agent throughout the agreement, and it would cause the principal to struggle in ending the agency agreement despite the fact that the agent was failing to meet his/her obligations.
- The difficulty in ending the agency contract:
The only way to end the agency agreement was by mutual consent, through litigation or the expiration of the contract, which had caused many principals to struggle with the mismanagement of the agency agreement by their agents and damaging the principal’s business reputation, which forced principals to resort to court despite the lengthy process it would take until a court ruling is made.
- The agency agreement could not be given to another agent until a court ruling is made:
The principal had no right to give the agency agreement to another until the court decides on the case, which caused foreign investors to depart from Kuwaiti market, on one hand, and allowed some agents to totally monopolize their respective agencies.
Such factors have prompted the Legislature to make certain amendments to Kuwait’s Commercial Agencies Law, and the result was the issuing of the new Commercial Agencies Law No. 13 of 2016.
Key points that new Commercial Agencies Law No. 13 of 2016 highlights:
- The non-exclusivity of the agency, regardless of its nature: the Law provides that that importing or providing any goods or products cannot be limited to its agent or distributor even if in the case of exclusive agency, and notwithstanding if the agreement provides the right to use the trade mark. This shall be subject to the importer of such goods and products’ fulfillment of the terms and conditions set forth in the said Law and its bylaws.
- The Law shall not recognize any commercial agency that has not been duly registered with the Department of Commercial Agencies and shall not look into any lawsuits that may be brought in the same regards.
- The Law requires that the agency is registered by the agent or distributor within two weeks at the Commercial Agency Registration Department, and must publish the same in the Official Gazette and in two daily newspapers in case when the product or goods have another agent which open the door to have more than one agent; otherwise, the registration of the agency will be suspended until such publication is completed.
- In case the term of the agency ends for any reason whatsoever, the agent, or the distributer, or he/she who acts on their behalf, or their heirs or managers of their respective companies, may request the Ministry of Commerce and Industry to deregister the agency’s registration within three months from the date of expiration of the agency (regardless of the reason for that). Such persons, when modifying or editing the information of the agency, should apply for marking such changes in the register within a period of three months.
These developments portray the shift in the Kuwaiti market from a challenging market (particularly to foreign investments) to a financial hub aiming to attract new investors and operators, and also benefit existing market players.