Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
If a commercial agent is registered as such in the commercial agents’ registry of the Ministry of Business and Trade, then the agent, its principal and the relevant agency agreement would be subject to the provisions of the Agency Law which provides, in particular, for compensation of the local agent in case of termination of the agency agreement.
The importance of this recent Cassation Judgment is that it provides confirmation from the highest level of the justice system in the country that any commercial agency which has not been registered in the commercial agents register in accordance with the provisions of the Agency Law shall not be recognised and any legal action relating to a dispute between the parties of a commercial agency agreement (even if it was entered into prior to the entry into force of the Agency Law) shall not be heard by the court.
Following the termination of a Commercial Agency agreement between a foreign company (the Defendant) and its local Qatari agent (the Claimant) entered into prior to the entry into force of the Agency Law in 2002, the Claimant initiated court proceeding claiming unpaid dues and compensation from the Defendant. The Claimant argued that the engineering services agency agreement that was entered into between him and the Defendant should be characterized as a commercial agency agreement and that said agreement was terminated in breach of the provisions of the Agency Law, hence the Claimant alleged that he was entitled to unpaid due commissions and compensation in accordance with article 9 of the Agency Law.
The Court of First Instance accepted the case and rendered a judgment giving the Claimant part right to a part of his claim. Following the First Instance judgment, both parties appealed against the findings of the Court of First Instance. The Court of Appeal overruled the judgment of the Court of First Instance, and decided, in favour of the Defendant, by rejecting the claim considering that the commercial agency was not registered in the special register of the Ministry of Business and Trade and therefore, in accordance with Article 16 of the Agency Law, the commercial agency relationship shall not be recognised and any legal action relating to a dispute between the parties of a commercial agency agreement (even if it was entered into prior to the entry into force of the Agency Law) shall not be heard by the court . The Claimant then appealed to the Court of Cassation on the basis that the Court of Appeal misinterpreted the laws and that Article 16 of the Agency Law applies only vis a vis third parties and shall not apply to the relationship between the agent and the principle and it’s a public policy rule.
The Court of Cassation decision:
The Court of Cassation rejected the appeal of the Claimant on the basis of the following:
In the light of the above, the Court of Cassation upheld the judgment of the Court of Appeal and rejected the Claimant’s demands.