Earlier this year, the Saudi Ministry of Trade and Industry (the Ministry) reminded importers and distributors of products in Saudi Arabia (known as commercial agents) that they must register their agreements. The ministry also provided for an additional delay until September 22, 2015. Officers who did not register their agreements on that date should expect fines. The law and regulations do not require that certain restrictive agreements be established in the agreement. However, there are minimum registration requirements, which include: 1. The contract must be concluded with the original manufacturer of products or service owners who are the subject of the Agency or its representative in its country of origin directly, without intermediaries outside its country of origin, for registration; and agency agreements are governed by the law on the commercial agency of royal decree no. M/11 of 20.2.1382H (corresponding to 22 July 1962G) (the “law”) and its regulations (the “regulations”). While under Saudi law, there is nothing to prevent the parties from settling their agreement with a foreign law or referring disputes to foreign courts or arbitrations, Saudi courts generally do not respect the consent of the parties and impose Saudi law when the dispute is referred to the Saudi courts. 2. The agreement specifies the obligations of the parties to the parties and to consumers, the object, territory, termination mechanism and obligation for the client to provide spare parts, maintenance and guarantees for the duration of the contract and one year after. The definition of a sales agent within the meaning of the law is broad and covers representatives, distributors and franchisees.
The regulations apply to “any person who enters into commercial activity contracts with a manufacturer or his representative in his or her country, whether as a representative or distributor in any form of agencies or means of distribution of profits, commissions or organizations of any kind, including shipping, aviation or country agencies and any other agency that would be decided by the Minister of Commerce and Industry.” As a general rule, Saudi courts do not grant compensation for termination or non-renewal, including “good will” unless there is a breach of contract or the contract expressly provides for such compensation.
