Egypt

Before addressing the main contractual figures for trade in Egypt, general considerations should always be made that should be kept in mind before entering into a contract. First of all, a good rule of thumb, è is to be able to regulate with the contract all parts relevant to one's sphere of interests, and this; regardless of the’legal system in which one is acting. In fact, è it is advisable to centralize on oneself the direction of contract drafting, regardless of the legal landscape and the language applicable to the particular case. In fact, it will beè difficult to impose effective and efficient contract management if the foreign economic operator uncompromisingly adapts to the casualities of local market law and practice.

It should also be recalled that in the Arab world the principle that 'quod non est in actis non est in mundo' applies, so it is recommended, when drafting contracts, to regulate exhaustively in writing such important aspects as the subject matter, territorial scopes, exclusive rights, the’amount of various commissions/royalties/retributions, obligations of the parties, duration and termination of the relationship, clauses aimed at regulating any partial nullity of the contract, applicable law, jurisdiction and contract language.

In any case, when drafting a contract, è it is then always necessary to check whether the choice of applicable law can, then, in fact, find concrete application before the court that will be, likely, seized in case of dispute. Indeed, è there is a widespread tendency on the part of the courts of many countries (including those of economically advanced countries) not to apply foreign law, even in cases where they would be bound to do so under the rules of their own private international law. This tendency è determined mainly by the difficulty for judges to document themselves in relation to foreign law and the lack of preparation and international aptitude, in general terms, of judges in many countries.

This is why reliance on arbitration clauses is recommended, and this is so in view of the merits normally inherent in an arbitral decision: composition of the arbitration panel with competent professionals in the field, binding decision in a single instance, speed of the process, and the possibility of enforcing the award abroad (e.g., Italy and Egypt are both signatories to the 1958 New York Convention).

Finally, it should be pointed out that the private autonomy of the parties è limited by the mandatory or necessary enforcement rules in force in each country. These are norms usually placed on the basis of the contractually weaker party or placed on the basis of particular values considered fundamental by the various legal systems and, therefore, not derogable. In the face of such mandatory rules or rules of necessary application, the content of the contract agreed upon by the parties yields and the court è obliged to apply the mandatory rules in place of those agreed upon by the parties.

In Egypt è also known as the dealership contract. The dealer purchases products from a particular manufacturer and resells them to the end consumer in his own name and for his own account. The dealer therefore stands, like the agent, in a lasting contractual relationship with a particular manufacturer, however, he differs from the agent because the latter acts in the name and on behalf of the principal.

Egyptian law, like most other legal systems, does not regulate such a contract, deeming it to be governed for the most part by the rules provided for the agency contract (in Egypt, in fact, the distribution contract is normally called 'agency').

Therefore, in the absence of specific legislation, the regulation of the contract è left to the free will of the parties. However, it is advisable to carefully regulate, in writing, every aspect: the granting, or not, of exclusivity/unilateral or reciprocal, the indication of the distributor's obligations, the terms and conditions for the supply of products, the protection of trademarks and patents, any causes giving rise to an immediate termination of the contract, the applicable law and the competent court.

In fact, è it is likely that, in the absence of specific contractual provisions, the court, Egyptian or otherwise, with jurisdiction to resolve a dispute, may liken this contract to an agency contract, with regard to such crucial aspects as the causes for termination of the contract and the recognition of severance pay.

Egyptian law on agency contracts is regulated in part by the Agents Law (l. No. 120/1982), and in part by the Commercial Code (L. No. 17/1999, effective Oct. 01, 1999). While the Law on Agents is limited to administrative prescriptions (registration, bookkeeping and the like), Articles 148 et seq. of the Commercial Code dictate the most important substantive conditions for the agency relationship.

. According to the agency contract, a commercial agent, permanently assumes on behalf of the other, called the principal, the task of promoting the conclusion of negotiations or concluding such negotiations himself, and this towards the payment of a commission, usually consisting of a part of the turnover resulting from the directly promoted or concluded negotiations.

A distinction is made between the agent for the promotion of negotiations ("Commission agent" or in Arabic "wakîl bi-l- umûlât") and the agent for the conclusion of negotiations ("Contract Agent" or in Arabic "wakîl al-'uqûd"). The natural person agent must hold Egyptian citizenship. In the case, on the other hand, of the legal person, it must be wholly, or for the majority share, owned by Egyptian nationals and have its head office in Egypt.

The agent does not have to be independent; however, it cannot be an employee of a state-owned enterprise or its agency or subsidiary company, nor can it be a public official. In addition, the agent cannot be a relative in the direct line of a member of the legislature or executive branch or an executive-level public servant.

The agent may not be a member of the legislative or executive branch. Both legal entities and natural persons who undertake the activity of agent must be registered in the register of agents or the register of brokers, maintained at the Ministry of Economy and Foreign Trade.

If the principal foreign legal person invests the agent with the power of representation, the agency contract must be validated by the Egyptian Chamber of Commerce or other similar institution or, in cases of stipulation abroad, by the Egyptian consulate.

Requirements, commissions and obligations

With regard to the agency contract, Egyptian law provides that the requirement of written form is binding. First of all, it is advisable to regulate aspects such as scope by territory, by attaching the geographical map; subject matter of the contract, by attaching the product description; and exclusivity, by attaching the list of clients.

The scope of the contract is not binding. It should be noted that, in the absence of agreements to the contrary, the agent always has an exclusive right, so in the same region or for the same branch of stores the principal may employ only one agent. The amount of the commission and the manner of its payment may be freely determined by the parties. However, it should be noted that in Egypt the most usual forms of remuneration turn out to be either the one bearing the "on collection" clause, by which the agent is entitled to assert claims in the principal's interest, or the "star del credere" clause, by which the agent bears the risk of the successful outcome of the procured business. In principle, however, the commission is due from the time of payment of the price to the principal by the third party whom the agent has contacted.

In addition, the agent's obligations should be well regulated, particularly with regard to confidentiality on secret/confidential negotiating information of the principal, non-competition upon termination (indemnity for the period of non-competition yes/no), and specific regulation with regard to ascertaining the solvency of procured clients, in addition to specific regulation of general duties to inform about market developments. In addition, it is necessary to make explicit the agent's obligation to comply with the directives given to him, as well as his liability for damage to goods delivered to him by the principal.

Agency contracts can be concluded for a fixed or indefinite term. Egyptian law does not provide for a probationary period. In cases of open-ended contracts, neither the Agent Law nor other special laws restrict the right of contractors to freely set a termination period. However, under Egyptian law, at the very least, a reasonable term (3-6 months) must be guaranteed, or termination is permissible only if the agent is culpable. Term contracts can be terminated before the final term has elapsed only upon a serious reason, that is, if there is "serious and unacceptable behavior" on the part of the agent. Any contractual clause derogating from this right is void.

With regard to jurisdiction, for disputes between the principal and the agent in charge of concluding negotiations, Egyptian procedural law determines the jurisdiction of the court of the place where the agent has his seat or residence, and this also with regard to international jurisdiction. In the case, however, of a suit brought by the agent against the principal, jurisdiction may be waived by the agreement of the parties. In the absence of an agreement between the parties, Egyptian courts will always admit a suit brought by an Egyptian agent.

The contractual figure called franchising/commercial affiliation falls under the broader category of distribution contracts, and can be defined as a relationship between subjects, between them autonomous and independent, namely the franchisor and the franchisee, with whom a collaboration is established in order to distribute goods and/or services. The franchise contract, like the distribution contract, is also not è regulated by law.

Marketing in Egypt through franchising è has been made of greater interest following Egypt’s accession to the Madrid Convention on Industrial and Commercial Trademarks and the passage of the law 13/6/2002 on the protection of intellectual property rights.

The purpose that prompts a company to use this contractual formula in Egypt lies in the possibility of having a major presence in the market, for example, through the creation of several points of sale of products with the same image (brand diffusion) and through a distribution of goods with the same characteristics and quality. Conversely, the franchisee, while conducting an independent business, can’take advantage of the franchisor’s technical assistance and use its “proven” distribution network and well-known image. The franchisee must pay the franchisor, for the use of the trademark, know–how, distribution and organizational network, a fee, and cannot’transfer the contract except with a written consent of the franchisor.

The clauses characterizing a franchise contract, in addition to being the normal provisions containing the premises, the indication of the parties, and the subject matter of the contract, also regulate the licensing of the franchisor's trademark and know-how, as well as the obligation, on the part of the franchisee, to maintain uniformity with the franchise network. Other clauses provide for the’set-up of sales outlets, resale prices, secrecy, non-competition, exclusivity, mutual obligation of information and any modalities on orders and supply of the contracted goods, including delivery terms and warranty for any product defects.

Finally, the contract must regulate the duration of the relationship and the effects of its termination, as well as the circumstances that determine the early termination of the contract and the indemnity of termination, in addition, of course, to the indication of the applicable law and the competent court (or arbitration).