The New UAE Commercial Agencies Law

Key items

Who can act as a commercial agent?

The New Law retains the general position under the Old Law where commercial agents need to be UAE nationals or companies wholly owned by UAE nationals, or where the commercial agent is a UAE public or private joint stock company owned at least 51% by UAE nationals. The New Law extends this scope to potentially allow international companies, including those not owned by UAE nationals, to engage in commercial agency activities related to their own products without the need for a commercial agent in the UAE.

Helpfully, the New Law clarifies that a principal may appoint separate agents for each Emirate or have one agent covering all of the UAE.

The act of registration

The position under the Old Law is retained whereby the relevant agreement must be notarised and registered with the UAE Ministry of Economy Commercial Agencies Register before the New Law applies to the arrangements.

Termination, deregistration and compensation payable to the agent

Under the Old Law a practical problem arose for principals wishing to deregister a commercial agent where the related contract had expired or otherwise been terminated in accordance with its terms. Practically speaking it was not possible for principals to remove a commercial agent from the Commercial Agencies Register other than by way of mutual agreement or court order. The New Law clarifies that a commercial agency agreement may be terminated by either party for convenience based on the terms of the relevant agreement or upon the agreement’s expiry. In theory it should be possible for a principal to request the Ministry of Economy to remove a registration from the Commercial Agencies Register.

However, following such termination or expiry the principal (or replacement agent) is obliged to pay a “fair value” for the assets of the outgoing agent which were subject to the relevant agreement. If the parties cannot agree the “fair value” then this will be a matter decided by the UAE Courts.

Additionally, an agent may claim damages from a principal for the damages they have incurred as a result of the agreement expiring (unless the agreement expresses otherwise). Where the agreement terminates for convenience based on the terms of the agreement, the agent may also claim damages for lost profits if the agent can prove they contributed to the visible and significant success of the principal’s products or an increase in the number of customers. 

Import bans and status of goods during a dispute

A significant drawback with commercial agency arrangements under the Old Law was the ability of a disgruntled registered commercial agent to impose import bans on the relevant registered products whilst a dispute as to termination was ongoing. Historically this meant that certain brands (some of them of high international profile and of importance to the UAE economy) could be blocked from entry into the UAE whilst a dispute ran its course. A result of this was a registered commercial agent could obtain additional leverage in negotiating a settlement. The New Law provides that whilst a dispute is ongoing, and subject to approval of the UAE Ministry of Economy and on a temporary basis, goods may be imported into the UAE or a new agent may be appointed. However, as noted above, the principal will be liable to pay compensation to the previous agent if any court issues an award of compensation.

Governing law and disputes forums

The New Law retains the position that commercial agency agreements must be subject to UAE law. 

However, in a significant departure from the Old Law, parties may elect to refer their disputes to arbitration, and the parties can elect to seat such arbitration outside the UAE. That said, parties may only resort to arbitration after referring the case to the Commercial Agencies Committee. The New Law provides the Commercial Agencies Committee with a maximum period of 120 days to decide on a dispute from the date of submission.

Application of the New Law in regard to existing commercial agency agreements

The ability under the New Law of a principal to terminate a commercial agency agreement, which is in force as at the date of issuance of the New Law, due to its expiry or for convenience is not available (i) until the lapse of two years from the date the New Law comes into force or (ii) until the lapse of ten years from the date the New Law comes into force but only where the relevant agreement has been registered for more than ten years with the same commercial agent and where the volume of the agent’s investment exceeds AED 100M.

Timing

The New Law was published in the UAE Official Gazette on 15 December 2022 and will come into force six months later. The New Law also provides that the Minister of Economy will issue executive decisions regarding implementing the provisions of the New Law.