Law 173 Dealer Protection in the Dominican Republic: What Foreign Suppliers Risk by Registering a Distributor

A foreign manufacturer terminates its Dominican distributor after years of disappointing sales, and receives a claim for damages calculated under a statutory formula, in a Dominican court whose jurisdiction cannot be contracted away. This scenario, familiar to trade lawyers across the region, is the work of Law 173 of 1966, one of the hemisphere’s strongest dealer protection statutes.

The law’s mechanics turn on a single act: registration. Contracts with Dominican agents, distributors or representatives are ordinarily governed by the Civil Code’s freedom-of-contract principle and the Code of Commerce, the parties choose their terms. But once the local counterpart (the ‘concessionaire’) registers the relationship under Law 173, a protective statutory regime overrides the contract.

A registered concessionaire gains rights the supplier never negotiated: the right to block the supplier or third parties from directly importing, promoting or distributing the registered products in Dominican territory; the right to sue both the supplier and any replacement distributor for damages, with unjust-termination indemnity calculated under the formula of Article 3; automatic renewal of the contract regardless of any expiration clause; and protection against unilateral termination except for ‘just cause’ as the statute itself defines it. Dominican courts hold exclusive jurisdiction over disputes.

The definition of ‘grantor’ is broad by design: it captures foreign principals whether they contract with the Dominican distributor directly or through intermediaries acting in the principal’s interest. Corporate layering rarely defeats it.

Here is the nuance many foreign suppliers learn too late: for relationships formed after DR-CAFTA’s entry into force, the treaty modified how Law 173 applies to U.S. suppliers, new contracts with U.S. parties are generally governed by their own terms unless the parties expressly opt into Law 173. But this carve-out is nationality- and timing-specific, and non-U.S. suppliers, as well as legacy relationships, remain fully exposed. Assuming the exception applies without verifying it is one of the most expensive mistakes in Dominican market entry.

The strategic decision, then, comes before the first shipment: whether to structure market entry through a subsidiary, an unregistered contractual distributor or a registered concessionaire changes the exit cost by orders of magnitude. Our trade team advises foreign suppliers on Dominican distribution agreements, Law 173 exposure analysis and termination disputes, contact us before you sign, not after you terminate.

Do you want more information about our advisory services and Law 173 Registration in Dominican Republic? Contact Us.

ABOUT THE AUTHOR: Felipe Castillo is a Partner leading the Foreign Investment, Real Estate & Tourism areas at Arthur & Castillo Advisers and Consultants in the Dominican Republic. He specializes in foreign investment, real estate and international business (Master in International Business, Entrepreneurship and Finance Studies from Georgetown University in Washington, D.C. & Masters in International E- Business in Universitat Pompeu Fabra in Barcelona) with more than 20 years of experience in Foreign Investment, Free Trade Zones, International Business and Cross Border Real Estate practice. He is a Certified Business Bankruptcy Expert and English and Spanish Interpreter.

Email: fcastillo@aclaw.com

Disclaimer: This publication is not intended to provide advice or suggest a guaranteed outcome as individual situations will differ and the situation may have changed since publication. For specific advice on the information provided and related topics, please contact the author.

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