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Commercial representation in Lebanon is governed by Legislative Decree No. 34 of 5 August 1967, which defines the commercial representative and the sole distributor, sets the form of the contract and the exclusivity clause, affirms the representative’s independence, and provides the indemnity owed on termination. Competition Law No. 281 of 15 March 2022 then made a material change to this regime: an exclusivity clause no longer binds third parties even when registered, parallel imports are now lawful, and the old customs-blocking mechanism has been repealed. This guide states the law as it stands today and makes clear what survived and what changed.

Arabic version: التمثيل التجاري والوكالة الحصرية في لبنان: ماذا تغيّر بعد قانون المنافسة 281/2022؟

French version: La représentation commerciale et la distribution exclusive au Liban : ce qui a changé après la loi sur la concurrence de 2022

Introduction

A commercial representation contract is the agreement by which a manufacturing company or trader (the principal) grants an independent person (the commercial representative) the right to promote its products and conclude its transactions in a defined market, against a commission or a trading margin. It is one of the most common vehicles by which a foreign company reaches the Lebanese market: a foreign manufacturer typically enters Lebanon through a local representative or distributor who knows the market and handles distribution and after-sales service.

The contract carries a specific statutory protection for the representative, the most important being the right to an indemnity on wrongful termination. Because that protection places burdens on the foreign principal, the legal characterisation of the relationship (is it a protected commercial representation, or merely a succession of sales?) sits at the heart of any dispute. Competition Law 281/2022 amended an important part of this regime, so it is now essential to separate the rules that remain in force from those that have been repealed or replaced.

The provisions stated in this guide are those in force after the amendments made by Decree 9639/1975, Law 671/1998, and Competition Law 281/2022.

1. What is commercial representation?

A commercial representative is the agent who, in the ordinary course of an independent profession and without being bound by a contract of employment, negotiates the conclusion of sale, purchase, leasing or service transactions in the name and for the account of producers or traders (Article 1 of Legislative Decree 34/1967). The distinguishing feature is independence: the commercial representative carries on a free commercial profession, unlike an employee who is tied to the employer by a relationship of subordination and falls under the Labour Code.

The statute also treats as a commercial representative a trader who resells, for its own account, goods it has purchased under a contract giving it the status of sole representative or sole distributor on an exclusive basis (Article 1). This is the exclusive distributor who buys from the manufacturer and resells for its own account, yet benefits from the protection of Decree 34/1967 because the contract conferred sole-distributor status. This is where exclusivity matters as a constitutive condition: a distributor who does not hold sole-distributor status on an exclusive basis remains an ordinary trader, outside the special protection.

Article 1 also requires the commercial representative to be Lebanese and to have a commercial establishment in Lebanon; where the representative is a company, the majority of its partners and capital must be Lebanese (and in a joint-stock company: registered shares, with two-thirds of the board Lebanese). This requirement has a direct practical bearing on a foreign company’s choice of representative in Lebanon.

2. The contract: form, duration and the exclusivity clause

Any commercial representation contract concluded after the Decree came into force must be in writing, and may be for a fixed or an indefinite term (Article 2 of Legislative Decree 34/1967). Writing is the condition for proving the contract and invoking its provisions; its absence weakens the position of anyone claiming the status of commercial representative. An annual fee is levied on each commercial representation contract registered with the Ministry of Economy and Trade (Article 2, as amended by Law 671/1998).

The contract may include the exclusivity clause that confines the representation to a single representative, and the law also permits a guarantee clause (the representative standing surety for those it contracts with on the principal’s account) or a goods-deposit clause (Article 2). The exclusivity clause is the core of the exclusive relationship: by it the principal undertakes not to appoint another representative in the same market.

The scope on which this clause operates against third parties, however, changed fundamentally after Competition Law 281/2022, as detailed below. As between principal and representative, the exclusivity clause remains in force and continues to produce its contractual effect.

3. The representative’s independence

The commercial representative is independent in conducting its agency and organising its ordinary commercial activity, and is specifically entitled to carry on commercial business for its own account, to accept new principals without referring back to its principal (provided the new representation neither conflicts with nor competes against the first), and to engage sub-representatives or employees whom it pays itself and whose relationship is confined to it rather than to the principal (Article 3 of Legislative Decree 34/1967).

This independence is the practical indicator that the relationship is commercial representation rather than employment: the representative runs its own business and bears its risks, and may represent other brands so long as they do not compete with the principal’s. Principals therefore commonly include a non-compete clause defining the competing brands the representative may not carry.

4. What changed after the 2022 Competition Law?

Competition Law No. 281 of 15 March 2022 (in its Article 5, opening with the words “notwithstanding any other provision”) made a material change to the exclusive commercial representation regime, on four fronts:

1. The exclusivity clause no longer binds third parties, even when registered. Before 2022, the exclusivity clause took effect against third parties once the agent declared it by registration in the commercial register. Today, the exclusivity clause does not bind third parties even if the agent has declared it by registration in the commercial register (Article 5 of Competition Law 281/2022). Exclusivity now produces its effect only in the contractual relationship between principal and representative, not against third parties.

2. Parallel imports are now lawful. Every Lebanese person, natural or legal, now has the right to import any product of goods that has an exclusive representative in Lebanon, whether for personal use or for trade (Article 5 of Competition Law 281/2022). A parallel importer who imports for trade must provide the consumer with the services, warranties and after-sales guarantees defined by the manufacturer in the registered representation contract. This is a structural shift: an exclusive representative can no longer prevent others from bringing the same goods into the market.

3. The exception now covers food, pharmaceuticals and medical supplies. Exclusivity does not bind third parties as regards any food products, pharmaceuticals, food supplements and medical supplies, without exception (Article 5 of Competition Law 281/2022), whereas under the former regime the exception was confined to foodstuffs within a narrower mechanism.

4. The old customs-blocking mechanism is repealed and a narrower one put in its place. The Competition Law repealed paragraphs 3, 4 and 5 of Article 4 of Decree 34/1967 (which had governed the bar on representing a condemned company and the broad customs block). It retained a narrower customs-blocking mechanism: a former representative may, where a final judgment for indemnity is annotated on the company’s register sheet, notify Customs of the judgment so that the condemned company’s goods are not cleared, provided the bar does not exceed three years from the date of the final judgment (Article 5 of Competition Law 281/2022). The customs block has not disappeared, but it is now conditional on a final indemnity judgment and capped at three years.

Finally, these provisions do not apply to claims filed before Competition Law 281/2022 came into force (Article 5), so earlier disputes remain governed by the former regime.

Takeaway: legal scholarship and the leading works on commercial representation published before 2022 remain authoritative on characterising the contract and on the indemnity, but they are no longer accurate on the effect of the exclusivity clause against third parties, on parallel imports, or on the customs-blocking mechanism. Caution is required before relying on them on those points.

5. Indemnity on termination (what did not change)

The protective core of the regime remains untouched: a commercial representation contract is deemed to be concluded in the common interest of the parties, so that its termination by the principal, without fault by the representative or another legitimate cause, entitles the representative, notwithstanding any agreement to the contrary, to claim an indemnity matching the harm suffered and the profit lost (Article 4 of Legislative Decree 34/1967).

The representative is also entitled, even where the contract ends on expiry of its term, to claim a court-assessed indemnity where its activity led to a visible success in promoting the principal’s brand or in increasing its clientele, and the principal declined to renew, depriving the representative of the profit it would have drawn from that success (Article 4). This is what is known as the goodwill or clientele indemnity (indemnité de clientèle): a reward for the commercial value the representative built up that reverts to the principal once the relationship ends.

This rule is mandatory: the indemnity may be claimed “notwithstanding any agreement to the contrary”, so a principal gains nothing by stipulating its waiver in advance. This part of Article 4 was not touched by Competition Law 281/2022, and it remains the most important point in practice in most commercial representation disputes.

6. The competent court

Notwithstanding any agreement to the contrary, the courts of the place where the commercial representative carries on its activity are competent to hear disputes arising from the commercial representation contract (Article 5 of Legislative Decree 34/1967). This is a protective head of jurisdiction that secures the Lebanese representative’s right to litigate before the courts of its place of business; a foreign principal cannot invoke a foreign jurisdiction clause to oust it once the relationship is shown to be commercial representation governed by Decree 34/1967. Hence the importance of characterisation: where the status of commercial representation is absent (for want of exclusivity, for instance), this special head of jurisdiction falls away with it.

Practical points

For the foreign company (the principal):

1. Define the nature of the relationship clearly in the contract. The label “representative” or “sole distributor on an exclusive basis” triggers the protection of Decree 34/1967, including the termination indemnity. If you intend a simple succession-of-sales relationship, avoid conferring exclusive status, whether expressly or by implication.
2. Writing is essential. Article 2 requires the contract to be in writing. Set its term (fixed or indefinite) and its termination mechanism clearly.
3. Mind the mandatory indemnity. Article 4 lets the representative claim the indemnity “notwithstanding any agreement to the contrary”, so it cannot be waived in advance. Price that cost in when planning an exit.
4. Exclusivity no longer shuts out parallel imports. After Competition Law 281/2022, the exclusivity clause does not stop others importing the same goods. Do not promise your representative protection from the parallel market that the law no longer provides.

For the Lebanese representative or distributor:

1. Document the exclusivity in writing. Sole-distributor status on an exclusive basis is the constitutive condition of the protection; its absence places you in the category of an ordinary trader with no indemnity.
2. Keep evidence of clientele building. The goodwill indemnity (Article 4) is conditional on proving success in promoting the brand or growing the clientele. Retain what evidences that growth.
3. The customs-blocking mechanism is now narrower. After 2022 it is available only to a former representative holding a final indemnity judgment, and for no more than three years. Do not rely on a customs block as leverage before a final judgment is obtained.

Conclusion

Legislative Decree 34/1967 organises the commercial representation contract in Lebanon around four pillars: the definition of the representative and the sole distributor (Article 1), the form of the contract and the exclusivity clause (Article 2), the representative’s independence (Article 3), and the indemnity on termination together with the protective head of jurisdiction (Articles 4 and 5). Competition Law 281/2022 preserved the protective core of the regime (the indemnity for wrongful termination and the goodwill indemnity), but it removed the effect of the exclusivity clause against third parties, made parallel imports lawful, and narrowed the customs-blocking mechanism.

The practical upshot is that both the foreign principal and the Lebanese representative must read the relationship through the lens of the regime in force today, not through pre-2022 sources alone. In every dispute, the legal characterisation of the relationship (protected commercial representation, or a simple sale?) remains the key on which both jurisdiction and indemnity turn.

This article is for general legal information and is not a substitute for advice on a specific situation. To discuss a commercial representation contract or a dispute concerning one, you may contact Kallas Law Firm.