LAW ÀLA MODE Issue 10 – Summer 2013 Commercial agency in the Gulf Co-operation Council Countries Protecting your confidential information Gucci loses the first Italian battle against Guess Crowd-sourced funding and the fashion industry Ethical trading: the impact of the Bangladesh factory collapse on retailers Three-dimensional marks in the fashion industry: a Turkish perspective Fashion, Retail and Design Group Contents COMMERCIAL AGENCY IN THE GULF CO-OPERATION COUNCIL COUNTRIES 04 A threat to your brand? Protecting confiDential information in the fashion inDustry 06 An employment perspective Gucci loses the first Italian Battle against Guess 08 TRAGEDY IN ASIA – REFLECTIONS FROM THE SHOP TO THE SEWING MACHINE 10 The implications of the Bangladesh factory tragedy, at local level and for the international retail community THREE-DIMENSIONAL MARKS IN THE FASHION INDUSTRY 12 The Turkish courts lay down tests INTERNATIONAL RETAIL EXPANSION INTO THE UK 13 Options for structuring your business when expanding into the UK STANDING OUT FROM THE CROWD 14 Crowd-sourced funding and the fashion industry INTA FASHION RETAIL AND DESIGN GROUP EVENT – MAY 2013 16 Our annual global gathering of industry clients and contacts to discuss branding issues facing the sector Real estate in the Fashion inDustry – MAY 2013 17 We report on a recent event looking at the legal aspects of opening shops in Europe, Australia, the US and Asia Terminating poorly performing employees in Germany 18 A burdensome challenge BUSINESS ROUND UP 19 The news and the views CALENDAR 20 Front cover: Made in Italy limited edition shawl “Red Ghost” from the series “Happy ghosts”. © Chiara Cola 2013. www.chiaracola.com. Image Courtesy Chiara Cola Digital Art 02 | Law à la Mode Image courtesy Chiara Cola Digital Art Editorial It is two years since our Italian team last had the pleasure of The collapse of a factory in Bangladesh has been heralded as editing Law à la Mode. Italy remains at the heart of the fashion South Asia’s worst industrial disaster to date. From both and design world and is more welcoming than ever to new the Asian and Western European perspectives, we look at the talented young designers who wish to join its hub of creativity impact of the tragedy on retailers (page 10). and innovation. Our employment professionals from Germany and the UK Putting our Italian fashion and design foot forward, we give their insight into two topical employment law issues couldn’t miss the opportunity to give you an insight into (pages 6 and 18). the latest decision in the Italian trademark infringement and We are also excited to bring you a Turkish perspective on the unfair competition law suit between Guccio Gucci S.p.A. increasing demand for three-dimensional marks (page 12), and Guess? Inc (page 8). an analysis of the structuring options available to an overseas Spring 2013 also saw several members of the DLA Piper business when deciding to enter the UK market (page 13) global Fashion, Retail and Design group gathering together and and look at the commercial agency rules in the UAE and the sharing their knowledge during two events: one in Dallas at other Gulf Co-operation Council countries (page 4). the 125th INTA Annual Meeting (page 16) and one in Milan We do hope you enjoy this Summer edition of Law à la Mode. in May (page 17). If you have any comments, please get in touch with the An increasingly popular method for fashion businesses seeking Fashion, Retail and Design group via our email address: to raise financing for their ideas or products is crowd-sourced [email protected]. funding. We explore this in our article on page 14. ItaliaN Editorial Team Giangiacomo Olivi (Partner and Co-Chair of the Fashion, Retail and Design Group) Stefania Baldazzi Sara Balice Giulio Coraggio Giulia Zappaterra www.dlapiper.com | 03 Commercial agency in the Gulf CO-operation Council Countries A THreat to YOUR braND? by Katie Withers (Dubai) As economies in the Middle East continue to grow, so does are licensing in to the GCC. Similarly, all require agency the demand for famous brands, particularly in the fashion agreements to be registered, confer benefits on nationals only sector. However, fashion brand owners wishing to license their and require compensation to be paid upon termination. trademarks within the Gulf Co-operation Council (GCC) countries – whether through a franchise or a traditional THE UAE legal laNdscape licensing arrangement – should be aware of potential exposure under the commercial agency rules. Before looking at UAE commercial agency, it is important to understand the key features of the legal system. First, UAE This article focuses on the commercial agency rules in force laws are drafted and published in Arabic. English translations in the UAE. Similar rules apply in the other GCC countries of common legislation are available, but the Arabic version (Bahrain, Oman, the Kingdom of Saudi Arabia, Kuwait and will prevail. The UAE is also a civil law jurisdiction, meaning Qatar). Although each has a separate legal system and that laws are codified. No doctrine of precedent applies, different rules, the policy behind their approach to commercial meaning that courts are not bound to follow the decisions of agency is the same, namely to confer advantages on (mostly higher courts, and, for the most part, those decisions are not local) agents against their principals who, for the most part, publicly available. 04 | Law à la Mode UAE AgeNCY Law MINimisiNG risK Federal law No 18 of 1981 (the Agency Law) provides for The key point to note about the Agency Law is that it may not registration of commercial agency agreements at the Ministry be possible to de-risk a proposed commercial arrangement of Economy. To qualify, the agreement must involve “the entirely. The measures that may be taken by licensors representation of a principal by an agent for the distribution, comprise either practical steps to prevent registration under sale, offer or provision of a commodity or service inside the the Agency Law, or alternatively, drafting to minimise risk. UAE.” This is broad enough to capture many commercial Practical steps: examples include refusing to notarise or arrangements, and not merely ‘agencies’ in the traditional translate the agreement into Arabic. Specifically, an agent may sense, including sale or distribution of goods under a register an agreement without the licensor’s express consent. trademark, or a franchisee appointment. However, the agreement appointing the agent must be signed, To be capable of registration, the agent being appointed must notarised and translated into Arabic before being submitted be either a UAE national or a company 100 percent owned by to the Ministry. The absence of one of these steps is likely to Emiratis. This reflects the policy decision to create favourable prevent registration. conditions for local businesses wishing to license in brands The disadvantage for the licensor is that the agreement from outside the GCC. While the criteria for qualification cannot be relied upon in the UAE court unless and until it is as an agent is extremely narrow, the agreements which may notarised (and, if necessary, legalised) and translated. Even if benefit from registration are deliberately broad. the agreement selects a foreign law and jurisdiction, difficulties The Agency Law applies only to exclusive appointments and with local enforcement may arise. permits the principal to appoint a different agent in each Drafting to minimise risk: the most effective way to avoid emirate. Once an agreement is registered, the agent will be registration under the Agency Law is to make the agreement entitled to certain benefits that cannot be excluded. non-exclusive. However, in many contexts (such as franchising) a non-exclusive agreement will be commercially unacceptable. ADVANtages of registratioN for If so, the best option is usually to address the possibility of THE ageNT registration in the agreement itself. For example, by requiring The Agency Law confers the following enhanced rights the licensee to confirm that registration is not required, and to on agents: presumption of territorial exclusivity; right to agree to de-register and to pay a financial penalty in the event compensation on termination (even in fixed term agreements); of breach. right to commission on all sales in the territory (even those While clauses such as this may dissuade a licensee from not made by the agent); right to block the import of branded registering, once again, the risk arises in relation to products covered by the registered agency where the agent is enforcement. Specifically, the UAE courts are likely to treat not the consignee. any agreement which seeks to avoid the Agency Law as null The UAE courts have exclusive jurisdiction to hear disputes and void. Even where a foreign judgment or award is obtained, arising out of a registered agreement, and these courts will there is a risk that it will not be enforced locally to the extent apply UAE law. This is the case irrespective of the choice of inconsistent with local law. law and jurisdiction clauses negotiated between the parties. The future of commercial agency? Risk-averse licensors Most licensors wish to prevent registration. Although carrying are looking for ever more creative ways to avoid the out agency activities without registering could expose the potentially onerous effects of the Agency Law, but successful licensor to a fine, in most cases application of the Agency Law enforcement is the biggest challenge. It seems unlikely that presents a higher risk. any GCC country will liberalise its agency laws, or reduce the benefits available to registered agents, unilaterally. Accordingly, the Agency Law seems likely to remain in its current form for the foreseeable future, and licensors should be aware of their potential exposure in the event of registration.