KUWAIT: an interesting judgement on exclusive distribution.

Adib A. DIB | KUWAIT | 2012-10-17

Adib A. DIB

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The plaintiff is a Kuwaiti company acting as an exclusive distributor since 1977 for a US pharmaceutical company, the latter terminated prematurely the distribution agreement without valid justification and sufficient prior notice, to this extent the distributor has sued the principal / manufacturer claiming for a fair compensation as per the local laws and front the Kuwaiti court.

The defendant has raised a preliminary formal defense stating that the Kuwaiti court has no jurisdiction over the subject dispute, since the parties have agreed that all disputes or claims arising out of or in connection with the agreement including the breach, termination shall be finally settled under the Rules of arbitration of ICC by one arbitrator appointed in accordance with the said rules. The seat of arbitration shall be in Zurich Switzerland and the governing law is the Swiss laws.

In the light of the forgoing the court has adjudicated that:

‘Whereas with regard to the pleading made by the First Defendant Company that the court has no competent jurisdiction to look into the case due to the existence of the Arbitration Clause, we state that whereas it is established pursuant to the provisions of Article (173) of Procedures Code ‘It is allowed to agree on the adoption of arbitration in a certain dispute. Also, it is permissible to agree on arbitration in all the disputes which may arise from the execution of a certain contract, and the courts shall have no competent jurisdiction to look into the disputes in respect of which the parties have already agreed to resort to arbitration.

Therefore, it is not permissible to waive the pleading on the non-jurisdiction of the court, whether explicitly or implicitly. The arbitration shall not include the summary matters unless the parties have expressly agreed to otherwise. Also, the provision of Article (285) of the Commercial Law stipulates that:

‘As an exception from the rules, the Court within whose jurisdiction lies the place of the contract performance shall have jurisdiction over all disputes arising from the agency contract’….

Therefore, Article (285) provides for the jurisdiction of the court within whose jurisdiction lies the place of the contract performance shall have jurisdiction over all disputes arising therefrom. And this is what is adopted by the civil laws; and the jurisdiction of the court within whose jurisdiction lies the place of the contract performance is located, came as an exception from the rules of jurisdiction as provided for in the Procedures Code. However, this exception shall not prevent the disputed parties in the signed contract to agree to the arbitration in enforcement to Article (173) of Procedures Code which rules by the permissibility of agreeing to the arbitration in a certain dispute or in all the disputes arising from the performance of a certain contract instead of the court of competent jurisdiction.

[Cassation Appeal No. 328/1997/Commercial in the session dated 15.02.1998].

Whereas having considered the foregoing and whereas the Plaintiff Company has filed its case against the Defendant and demanded the court to issue a judgment in the subject of the case by proving the continuity of the distribution relationship until the expiry of the agreement term and to reject the termination of the agreement by the Defendant Company otherwise to pay a fair compensation; and

Whereas it is obvious from the perusal of the copy of the Distribution Agreement signed between the Plaintiff and the Defendant Company, as referred to herein, that it provides in Clause No. 22 that: All the disputes, conflicts or claims which may arise out of or in connection with this agreement, including the breach or termination or its ineffectiveness, shall be finally settled pursuant to the rules of arbitration applicable at the International Chamber of Commerce by the Court of Arbitration in Zurich, Switzerland; and the arbitration procedures shall be conducted in English language; and

Whereas the Defendant Company adhered to the pleading that the court has no competent jurisdiction to look into the case due to the existence of the Arbitration Clause, prior to deciding in the subject. Accordingly, this case, in its part related to the subject matter, is out of the jurisdiction of this court and, thus, the competent jurisdiction shall be given to the Arbitration board in enforcement to the above arbitration clause.

Consequently, the above pleading should be deemed as being consistent with the sound reality and the law; and therefore the court rules by the non-jurisdiction of the court to look in the case, in its part of the subject matter due to the existence of the Arbitration Clause.

FOR THESE REASONS:

The court hereby rules as follows:

First: By the non-jurisdiction of the court to look in the prompt demand;

Second: The court has no competent jurisdiction to look into the case due to the existence of the Arbitration Clause and the court binds the Plaintiff Company by the expenses.’

 

 

 

Adib A. Dib, IDI agency & distribution country expert for Kuwait.

 

 

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