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. In addition, under Sharia rules, the loss of earnings or other consecutive damages in Saudi Arabia is not refundable. As a result, compensation is decided on a case-by-case basis by the Saudi courts and in accordance with Sharia law and the agreement. This announcement is a timely reminder to trademark owners to be aware of the legal environment that applies in Saudi Arabia to the registration of commercial agency contracts and trademark licenses. In addition to the obligation to register agency agreements under the Agency Act, the Saudi Trademark Act (such as Royal Decree No. M/21 of 28.05.1423H) (the Trademark Act) requires trademark licenses from the Saudi Trademark Office. The law and regulations do not require that certain restrictive agreements be established in the agreement. However, there are minimum requirements for the registration of an agreement, which include: The Saudi Arabian Commercial Agency Act (as by Royal Decree No. M/5 of 11.06.1389H, in accordance with 25.08.1969), and its enforcement provisions (the Law on Agencies) require all commercial agents to register their agreements with the Ministry. 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.
This is a separate registration requirement under the Agency Act. In the event that a commercial agency agreement contains a license to use a trademark, the agreement (or a short-form agreement) should be registered with the Ministry and the Saudi Trademark Office. 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. » The law stipulates that only a Saudi national or an entirely Saudi unit has the right to act as a commercial agent in Saudi Arabia, and the agreement must be registered with the Department of Trade Agencies of the Ministry of Commerce and Industry. Traditionally, only GCC citizens and businesses (from Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the United Arab Emirates) are allowed to conduct commercial and retail activities in the kingdom, including real estate, without a local Saudi partner. However, in June 2016, the SAG Council of Ministers formally approved the full foreign ownership of retailers and wholesalers, removing the 25% local ownership requirement to date. To date, more than half a dozen companies have used the new regulation, including several U.S. companies. U.S.
exporters are not required to appoint a local Saudi agent or distributor to sell to Saudi companies. Nevertheless, we recommend that all newly marketed companies find a qualified local partner through one of our matchmaking services. Relationships between agents and distributors are governed by the regulations of the trade agency of the Ministry of Trade and Investment (MOCI).