Introduction

Egypt’s strategic location, large consumer base, and growing industrial sectors have made it a gateway for international companies seeking to expand their reach in the MENA region. Whether through local agents or exclusive distributors, businesses often enter into agency and distribution agreements to market, sell, or represent products and services in Egypt.

While these arrangements can offer great commercial value, they also carry legal and contractual risks. Egyptian law distinguishes between commercial agency and distribution, and both relationships are governed by specific legal provisions that impact enforceability, exclusivity, termination rights, and compensation. This article outlines the key legal framework and practical considerations for structuring agency and distribution agreements under Egyptian law.

1. Legal Framework and Definitions

In Egypt, agency and distribution agreements are governed by the Egyptian Commercial Code and the Civil Code. The law does not treat agency and distribution as identical, even though they are often used interchangeably in practice.

A commercial agent is defined as a person or entity authorized to act on behalf of a principal to conclude contracts or promote products in Egypt. Commercial agency relationships must be registered with the Commercial Agents and Intermediaries Register at the Ministry of Trade and Industry.

A distributor is typically an independent contractor who purchases goods from the supplier and resells them in a defined territory. The distributor acts in its own name and does not require registration as a commercial agent. The distinction affects how the relationship is regulated, particularly regarding liability, termination, and compensation.

2. Key Contractual Clauses

Properly drafted agency or distribution agreements should address several essential elements to avoid disputes:

Scope and Territory: Define whether the agent/distributor has exclusive or non-exclusive rights, and clearly specify the territory covered.

Duties and Obligations: Clarify the agent s or distributor’s responsibilities (e.g., marketing, sales volume targets, reporting), and any obligations of the principal, including training, supply guarantees, or pricing.

Compensation and Commission: State how fees or commissions are calculated, whether fixed or variable, and whether any bonuses or incentives apply.

Intellectual Property Use: Address whether the agent/distributor is authorized to use the principal’s trademarks, brand names, or proprietary materials. 

Term and Termination: Define the duration of the agreement, renewal mechanisms, and grounds for early termination.

3. Termination and Compensation Rights

Termination is often the most sensitive issue in agency and distribution agreements in Egypt. Under Egyptian law:

For registered commercial agency agreements, early termination without a legitimate cause may expose the principal to the risk of paying compensation to the agent. This is especially relevant where the agent has developed significant goodwill, market presence, or clientele on behalf of the principal. The compensation is intended to reflect the value of the agent’s contribution and lost future earnings.

In distribution agreements, while the risk of mandatory compensation is generally lower, distributors may still seek damages if the termination is abrupt, abusive, or done in bad faith, especially where exclusivity or long-standing relationships exist.

To minimize exposure:

·       Contracts should clearly define what constitutes a “legitimate cause” for termination.

·       Advance notice periods should be included.

·       Principals should document any performance issues prior to taking termination steps.

4. Dispute Resolution and Applicable Law

Given the potential for disputes, especially regarding termination or unpaid commissions, it is essential to include robust dispute resolution clauses. Many international suppliers prefer arbitration (e.g., CRCICA or ICC), while others opt for Egyptian courts, particularly when enforcement in Egypt is anticipated.

The choice of governing law also matters. While Egyptian courts may apply foreign law if chosen, they will not enforce provisions that violate Egyptian public policy, especially in registered agency relationships.

Conclusion

Agency and distribution agreements remain vital commercial tools for accessing the Egyptian market. However, they require careful legal structuring to ensure enforceability, protect against unfair termination, and reduce the risk of post-contractual liability.

Whether you are a foreign principal entering the Egyptian market or a local distributor negotiating exclusive rights, legal advice is essential to structure your relationship in a way that is both compliant and commercially sound.