THE VIEW OF A EUROPEAN LAWYER DEALING WITH ARAB COUNTRIES Barcelona - 13 June 2009 2009 IDI Annual Meeting THE VIEW OF A EUROPEAN LAWYER DEALING WITH ARAB COUNTRIES Paolo Lombardi

THE PARTIES OF THE CASE: The company W, having its seat in Italy. This company manufactures and sells chocolates. The company R, having its seat in Kuwait. This company commercialises different kind of foods in the Arabian countries.

Main clauses of the contract named Commercial Agency Agreement: The company W appoints the company R as its commercial agent (sole agent) for all its chocolate products in Kuwait. The company R shall act as sole distributor of the products of the company W in Kuwait. The duration of the agreement is five years starting on the date of its signature. The agreement is automatically renewed for similar periods, unless a party notify the other, by registered letter, of its wish to terminate the agreement at least ninety days prior to the expiry of the current period hereof. All the products of the company W shall be paid by documentary letters of credit.

Main clauses of the contract named Commercial Agency Agreement: The company W shall indemnify the company R for any losses, damages or profit lost in the event where the company W supplies any third party with any of its products in Kuwait. The company W shall not grant any distribution or importation right concerning any of its products to any third party in Arabian countries without previously reaching an agreement with the company R on the matter. The Courts of Cremona (Italy) shall have jurisdiction to settle any dispute arising from or after the performance hereof and the judgments issued by such Courts shall be equally enforceable in Kuwait and Italy.

E-mail sent by the company R to the company W: “Dear Sirs, since one year we notice that there have been a lot of changes in your company rules (e.g.: new rules for minimum order of each item, the products must be ordered by pallet and not by carton like before and we are getting less quantities in the containers, a lot of price increases). After a long discussion in our company, we are sorry to inform you that we decided that we are no longer interested in importing your products in Kuwait starting from today. Best regards and good luck to you”.

Questions of the company R: The termination of the contract made by e-mail is valid, considering that one of the clauses of the contract states that the contract should be terminated by registered letter ninety days prior to the expiry of the current five years period? The company W is entitled to appoint a new distributor in Kuwait? The company R is entitled to ask to the company W for goodwill indemnity or similar compensations, considering the termination of the commercial relationship?

Kuwaiti principles of Law concerning the case: Kuwaiti Commercial Code provides for some rules concerning indemnities on behalf of distributors in case of termination of the contract. Choice of law clauses are in principle valid, but it is not clear whether the choice of foreign laws prevails in case of Kuwaiti mandatory rules. Jurisdiction clauses are not valid according to Kuwaiti rules of private international law. Kuwait ratified the New York Convention 1958 on recognition and enforcement of arbitral awards.

Settlement agreement suggested to the company R: The companies W and R mutually agree that the contract and any commercial relationship between them are terminated. By the signature of the settlement agreement the companies W and R shall not have any claim between them for whatever reason, in particular as regards the commercial relationship existed between them before the signature of the settlement agreement. The settlement agreement is governed by the laws of Italy.

Settlement agreement suggested to the company R: All disputes arising out of or in connection with the settlement agreement shall be exclusively settled by arbitration under the Rules of Arbitration of the Chamber of National and International Arbitration of Milan (Italy). The settlement agreement supersedes and replaces any other preceding agreement, written or verbal, that might have taken place between the companies W and R on the subject. No addition or modification to the settlement agreement shall be valid unless made in writing.

This settlement agreement is enough in order to solve the problems of the company W?

Uncertainty factors: Commercial relationships in Arab countries show some uncertainties even where they are governed by a written contract Uncertainty factors: The distinction between agency contracts and distribution contracts. The rules of private international law.

Conclusion

Thank You! Barcelona - 13 June 2009 2009 IDI Annual Meeting Paolo Lombardi