Law of commercial agencies is meant to protect all parties
For decades the business community in Saudi Arabia, trade bodies and legislators called on authorities to take the necessary measures to open up the local market for foreign investors and devise a foolproof mechanism to ensure transparency and protect the rights of local traders and businessmen.
The sole purpose of this call was to ensure the availability of goods of the finest quality and services in line with international standards.
Fortunately, the current Saudi leadership positively responded to the call and is taking various measures to boost foreign direct investments in the local market by offering incentives to international companies without compromising the interests of the local business community.
In today’s article we shall discuss some of the relevant rules and regulations and the role of different commercial agencies dealing with the issue.
It is important to understand the concept of the commercial agent.
A commercial agent is an intermediary who enters into a contract with a company or represents it in its country of origin to carry out business dealings with others on its behalf with others and receives profits, commission or other forms of remuneration in return.
A commercial agent of a company in the Kingdom must be a Saudi national, a natural or legal person (i.e. an individual or a registered commercial entity). Non-Saudis are not allowed to work as commercial agents in the Kingdom.
If the agent is a company, its capital must be entirely in Saudi Arabia, and the board of directors and managers must be Saudi citizens.
It is very important to understand the terms and conditions and legal mechanisms that govern commercial agencies in the Kingdom.
Before setting up a commercial agency, one should understand the basic principles of doing business in the Kingdom and keep in mind the penalties in case of the violation of any legal aspect, exit mechanisms and laws dealing with conflicts and arbitration.
Saudi Arabia’s Ministry of Commerce also provides model contracts to assist agents and distributors to set up their business without any hassle. The sample contracts clearly mention the terms and conditions and obligations of contracting parties toward each other and state the rights of consumers.
If a violation of any law is committed by a foreigner or a Saudi company with one or more non-Saudi partners, the scope of the penalty will be expanded in addition to the fine, which includes liquidation of the business and the possibility of deprivation from trading permanently or for a specific period, and the Interior Ministry may also order the deportation of the foreigner from the country.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif