AGENCY & SERVICE AGREEMENTS

Only Kuwaiti individuals or firms may act as commercial agents in Kuwait, while foreign individuals or firms, except for GCC nationals, are not allowed to carry on commercial activities in the country except through a commercial agent. All arrangements between a foreign entity and its local agent are governed by Articles 260 to 296 of the Commercial Code.

Terms of An Agency Agreement
An agency agreement must be in writing and must be registered with the MCI. Its terms must cover the activities to be undertaken, the scope of the agent's authority, his remuneration, and the duration of the agency (if limited). Generally speaking, the parties to an agency agreement have full freedom of contract, but a few provisions of the Code override what the parties might wish to agree and any terms which contradict these provisions are void.

If an agent is required to erect premises then the contract must be for at least five years. The principal is obliged to provide the agent with all that the agent requires for the promotion of the principal's products and services. The agent must preserve confidentiality even after the agreement is terminated.

The agent is entitled to his remuneration (a) on all matters concluded by him, (b) on transactions which would have been concluded but for some act of his principal, and (c) on transactions concluded either directly by the principal or by others acting on behalf of the principal in the area of the agent's operations, unless otherwise agreed in writing.

Termination Compensation
If a principal terminates an agency when his agent is not at fault, the agent may seek compensation for loss of income. And, if an agent abandons his agency at an unsuitable time and without reasonable cause, his principal may seek compensation for damages. Any clause to the contrary in an agency agreement is void.

Even where an agency is for a fixed term, the law expects it to be renewed on expiry. If the principal does not renew it, the agent may seek fair compensation (even if the contrary is stated in their agreement) provided the agent has not been at fault nor negligent in his performance. If a principal replaces his agent and the termination was due to collusion between the principal and the new agent, the new agent will be held jointly responsible with the principal for settling any compensation due to the former agent.

There is no set legal formula for calculating compensation on termination. However an action for compensation must be started within 90 days of the end of the agency.

Service Agreements
To open a branch in Kuwait, a foreign firm must enter an agency agreement with a Kuwaiti sponsor or service agent. Under such an arrangement the agent is merely the foreign entity's legal representative in the country and does little more than take care of licensing formalities, obtain visas for the principal's executives and emplo-yees, and represent the principal officially. The agent will expect a fee for his sponsorship and the use of his licences.

Registration Procedures
An agency agreement is not enforceable under Kuwaiti Law unless it has been registered in the Commercial Agencies Register at the MCI. Application for registration must be made within two months of the agency being created. Before applying to the MCI, the agreement must be registered with the KCCI.

The application for registration can only be made by the Kuwaiti agent. It must be made on two original copies of the official MCI form and must be accompanied by:

  • an original copy of the agency agreement
  • a translation of the agreement into Arabic
  • a copy of the agent's commercial licence
  • a copy of the agent's nationality document or registration in the commercial registry
  • a certificate of registration from the KCCI.

If the agency agreement was executed overseas, the original must be attested at the principal's location by an official authority and the Kuwaiti consulate. Where it was executed in Kuwait, it must be notarised by a Kuwaiti Notary Public.

Upon registration, the MCI gives the agent a signed and stamped copy of the application, and advertises the registration in the official gazette.

Amendments to the agreement must also be registered and when an agency terminates it must be removed from the register. The register may be searched by the names of agents, the names of principals and the trade names of goods.