LSHC Horizons Brochure 2024 - Flipbook - Page 5
Hogan Lovells | 2024 Life Sciences and Health Care Horizons | ESG and Supply Chain
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Distributing products in the Middle East Gulf region
The growing populations and huge health care
investment in the countries of the Arabian
Gulf make it an increasingly attractive market
for the sale of pharmaceutical products and
medical devices. International companies will
be considering appointing distributors in the
region or changing distributors.
While each Gulf Co-operation Council (GCC)
country has its own rules, there are a number
of important and some unique features to these
arrangements, which should be borne in mind:
• All GCC countries make a distinction
between arrangements that are registered
and those that are unregistered. Broadly,
registered arrangements require consent
from the agent/distributor before they can be
terminated, which often requires negotiation
and payment of compensation to the agent
before a termination is agreed.
• Registered agencies are exclusive, and failure
to agree can lead to exclusion from the
market pending resolution. Court action will
be required where there is a failure to agree,
which can lead to exclusion from the market
pending conclusion of such proceedings.
• In some circumstances, registration cannot
be avoided, which is typically the case with
medicinal products. Some customers,
particularly Government (which tend
to be the largest customers in the GCC
countries) may insist upon registration
before agreeing to contract, and in some GCC
countries unregistered arrangements are
unenforceable.
• As a general rule, registration should be
avoided where it is possible to do so without
compromising the business. If it cannot be
avoided, then certain mitigations should be
considered, including:
– limiting the products/territory the subject
of the arrangement to that necessary for
the business in hand;
– include clear and measurable key
performance indicators (KPIs) so that
underperformance can be easily proved to
aid termination/limit compensation;
– where possible, include pre-agreed
amounts payable to reduce the risk of
significant compensation claims;
– consider carefully your regulatory
strategy for the region. Having your
local distributor hold product licenses/
registrations can give rise to delays and
costs when switching to a new distributor.
Imtiaz Shah
Partner
Dubai
Randall Walker
Partner
Dubai, Riyadh
Possibly as a result of these unique features,
and the general nature of the relationship
between principal and agent/distributor in
the region, disputes with commercial agents/
distributors were commonplace, with the life
sciences and pharmaceuticals sector being no
exception. The general protectionist stance
in favor of the local commercial agents and
distributors that had been adopted throughout
the region meant that successfully navigating
these disputes was difficult for the principal,
particularly with regards to termination of
the agent/distributor and replacement with
another.
This is, however, changing with the adoption
of new commercial agencies’ laws in the
region, rebalancing the relationship and
empowering principals to better manage their
relationships with agents and distributors.
The new law in the United Arab Emirates
(UAE), for example, enables parties to include
arbitration agreements in their contracts
and refer any disputes to arbitration. While
these developments are forward-looking and
largely apply to new agreements, they will
make it easier for parties to terminate their
agreements, including for the failure of the
agents/distributors to meet agreed
milestones and performance targets.
Bonella Ramsay
Counsel
London
