In the last decade, Dominican Judges have adopted a new interpretation of certain provisions of the Dominican Agency Law 173 of 1966, a law which is considered of public policy and very protective of local agents and distributors. Particularly, the courts’ have changed their interpretation of the law on exclusivity of distribution agreements and competent jurisdiction to hear Law 173 cases.
Contrary to previous precedents, if a distribution agreement states that it is not exclusive, it will be interpreted strictly as such, regardless of the fact that the local distributor may have been acting as if it was the exclusive distributor. Also, the arbitration clauses and choice of foreign jurisdiction clauses that may be contained in distribution agreements are now valid and enforceable in the Dominican Republic. Of special importance is this new approach regarding the competent jurisdiction for Law 173 matters.
Since 1969, the Supreme Court of Justice’s decision holding that matters related to Law 173 could not be submitted to foreign arbitrators or judges due to its public policy nature, was considered to be a rule of law. However, in a ruling as of October 8, 2010, the Civil and Commercial Chamber of the Court of Appeals of the National District held that an arbitration clause contained in a distribution agreement -even if Agency Law 173 was to be applied- was valid and enforceable. The Court of Appeals held that the public policy nature of Agency Law 173 does not prevent the parties from submitting their disputes to arbitration because the Agency Law 173 itself indicates that jurisdictional matters would be governed by ordinary law (derecho común), and Dominican ordinary law allows the parties to waive their right to access to the judicial courts and submit their disputes to arbitration.
Then, in 2012, the Supreme Court of Justice held that the Court of Appeals acted in accordance to the law when it held that it lacked jurisdiction to hear a Law 173 matter given the choice of Barcelona (Spain) courts in the distribution agreement.
This current line of reasoning of the Dominican courts when interpreting the provisions of Law 173, is more aligned with principles of good faith and legal certainty, and with the interests expressed by the Dominican government of promoting foreign investment.
For an English Translation of Law 173, please click here.