This article discusses about the procedure for becoming an Exclusive Distributor in the UAE of a foreign company, signing an Exclusive Distribution Agreement with the foreign company and the precautions to be taken so that you can setup a successful distributorship of a foreign company in UAE.
The U.A.E. Commercial Agencies Law regulates and governs the appointment of commercial agents, sales representatives, and distributors in the U.A.E. This law allows foreign investors/companies to appoint a commercial agent to represent their interests in the U.A.E. instead of establishing a permanent presence.
This law defines a commercial agency as any arrangement whereby a foreign company is represented by an agent to “distribute, sell, offer, or provide goods or services within the UAE for commission or profit”.
Exclusive Distribution Agreement
You should enter into a non-exclusive distribution agreement with a Foreign Company whereby you can restrict them from appointing any other agents for the same products. Further, you can also add royalty clause and clauses that allow appointing sub-agents.
Primary requirements and characteristics of commercial agencies
i. Commercial agents must be UAE nationals or companies incorporated in the UAE. and owned entirely by U.A.E. nationals. You can setup a business in Dubai to start an agency venture.
ii. Commercial agents must be registered with the U.A.E. Ministry of Economy and Commerce to engage in commercial agency activities;
iii. The agency agreement must be registered in order for the agent to avail himself of the protections afforded under the law and to have the agency relationship recognized under U.A.E. law;
iv. Commercial agents are entitled to have an exclusive territory encompassing at least one Emirate for the specified products;
v. Unless otherwise agreed, commercial agents are entitled to receive commissions on sales of the products in their designated territory irrespective of whether such sales are made by or through the agent;
vi. Commercial agents are entitled to prevent products subject to their agency from being imported into the U.A.E., if the agent is not the consignee;
vii. Commercial agents are entitled to receive compensation from the principle if the agency is terminated without substantial justification or if the agency is not renewed by the foreign principle and the agent may be able to preclude the foreign party from appointing a replacement agent in such circumstance.