Legal Framework Of Agency Agreements Between USA Firms And Dominican Agents


Once the Free Trade Agreement signed by the United States and other Central American Nations on 05 August 2004 and ratified by the Dominican National Congress via resolution number 357-05, dated 09 September 2005 (hereafter "DR-CAFTA" for Dominican Republic and Central America Free Trade Agreement, or "Treaty") came into effect, a new legal schema applies to agency contracts between Dominican licensees and United States licensors.

This new legal schema radically transforms the regulatory framework of the licensor-licensee relationship foreseen by Law No. 173 on Importer Agents of Merchandise and Products, dated 06 April 1966 and its modifications, which had governed said relationship until DR-CAFTA came into effect, on the date 01 March 2007, and b) Law No. 424-06 for the implementation of said treaty, promulgated on the date 20 November 2006, modified by Law No. 493-06 of 22 December 2006.

From its beginnings, Law 173 had the purpose of granting judicial security to the Dominican licensee vis-à-vis the possibility that once the image, marks, products and services of the foreign licensor were positioned in the local market, then it would decide to unilaterally terminate the contract and exploit the distribution of its products and services in national territory on its own or by means of third parties to the detriment of the Dominican licensee and ignoring their acquired rights.

This system of legal protection for the Dominican licensee was based fundamentally on: first, the obligation of the foreign licensor to indemnify the Dominican licensee, following the compensation formulas enshrined in article 3 of Law 173, applicable in the case of unilateral termination of the contract or refusal to renew it, in both cases without just cause; and secondly, the inapplicability of the clause that "conventionally" limited the period of the life of license contracts, assimilating them into "contracts for an indefinite period" (Art. 2 Law 173). Such mechanisms and other aspects of the Law in question were invested further with the nature of a public order provision (Art. 8 Law 173), which imposed on Dominican judges the obligation of applying Law 173, even if the Dominican licensee had waived their benefits in the contract.

With the implementation and entry into effect of DR-CAFTA, in the specific case of United States licensors, the public order nature of Law 173 has been overturned, converting it to a rule of partial and supplemental application, if...

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