Doing Business in the Middle East through a local distributor
Registration of a company in Middle Eastern countries often require high amounts of paid-up capital and a local joint venture partner. A simpler, more cost-effective way of doing business within these countries is to trade through a local agent.
Since 2003, Healy Consultants has consequently assisted our Clients in securing a reliable local distributors and agents in the Middle East including: Saudi, UAE and Qatar Services we can also offer include i) conducting due diligence on the potential partners ii) drafting and negotiating terms and conditions of the agency agreement iii) securing an import license (if required) and iv) other business support services.
How we proceed
- Before contracting an agent or distributor, Healy Consultants will assist our Client to i) secure confirmation of interest from multiple professional agent companies ii) negotiate the best terms and conditions with the agents iii) obtain detailed due diligence on our Client’s preferred agent including passport copy, resume, professional reference letters;
- Thereafter, Healy Consultants will draft on behalf of our Client a quality agency contract. We usually include the following clauses in the document: i) the agent will not interfere with the business’s management or activities and ii) he will be paid a lump sum and/or a percentage of profits or turnover and iii) the agency agreement is for a fixed term and expires on a future agreed date, unless both parties agree renewal and iv) select binding arbitration as the method of dispute resolution with the arbitration centers in Europe or North America;
- If needed, we engage a local lawyer or accountant to critically review legal agency agreements. We also recommend our Clients to visit the country for a face to face meeting with the agent before signing the agreement and starting to do business.
Agency rules for different Middle East countries
- In Saudi Arabia, the legal agency contract is covered by the Kingdom’s commercial agency law. The Saudi agent or distributor must register the contract with the Ministry of Commerce and Industry, failure could result in fines and other penalties, the foreign company may be barred from participating in public sector tenders;
- In Qatar, the Qatar Commercial Agents Law No.(8) 2002 regulates the appointment of commercial agents, sales representatives, and distributors within Qatar. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the Qatar for commission or profit;
- In Dubai and Abu Dhabi, the UAE Commercial Agencies Law regulates the appointment of commercial agents, sales representatives, and distributors within the country. A commercial agent is appointed to distribute, sell, offer, or provide goods or services within the UAE for commission or profit.
Things to note about engaging agents or distributors or sponsors
- Middle Eastern nationals prefer to do business with someone after they are properly introduced and have met face-to-face. An agent can act as a “go-between” to vouch for the reliability and credibility of both parties;
- Whilst English is widely spoken in business and government circles, all correspondence with the government authorities is conducted in Arabic and the agent will be able to offer help in this aspect;
- Disputes with agents and distributors can cause serious problems for foreign investors. It is essential for our foreign investors to take steps to protect themselves including i) completing thorough due diligence of the proposed agent and ii) retaining legal counsel to review and approve a well-drafted agency agreement.