In an effort to become a more desirable and competitive location for business, the UAE has amended its commercial agency law. The new law, which will go into effect on June 15th, gives businesses more control over the duration of registered agency arrangements as well as the termination of such agreements. A registered agency arrangement can be difficult to terminate under present legislation, and when it is, the local agent is frequently given compensation for loss and damages.
in this article, our lawyer will discuss with you the new commercial agency law in UAE
What is the new commercial agency law UAE?
Federal Law No. 3 of 2022 Regulating Commercial Agencies (the New Commercial Agency Law), was published in the UAE Federal Gazette on 15 December 2022, repealing and replacing UAE
Federal Law No. 18 of 1981 Regulating Commercial Agencies (the Old Commercial Agency Law). The New Commercial Agency Law comes into force on 15 June 2023. The practice of Commercial Agency business in the State shall be limited to individual citizens and companies and institutions that are wholly owned by any of the following:
- a. A natural person who is a citizen;
- b. A public legal person;
- c. A private legal person owned by public legal persons; and
- d. A private legal person wholly owned by natural persons who are citizens.
The Cabinet may, based on a recommendation of the Minister, allow any international company, even if it is not owned by citizens, to practice the Commercial Agency business for the products it owns, under the conditions and within the limits, it deems appropriate in this regard, and if they meet the following requirements:
- a. This Commercial Agency does not have a commercial Agent inside the State; and
- b. The Commercial Agency is new and not previously registered in the State.
In order for a Commercial Agency to be valid, the Agent must be engaged by the original Principal under a written and documented contract, and the Commercial Agency must be listed in the Commercial Agencies Register.
A Commercial Agency contract shall be in the common interest of the contracting parties, and the provisions of this Law shall apply thereto, and any agreement to the contrary shall not be valid. The Agent may use the services of a distributor in one or more emirate(s) covered by their Commercial Agency.
The Agent shall be entitled to a commission for the transactions concluded by the Principal themselves, or through others in the territory designated for the business of the Agent, even if these transactions are not concluded as a result of the latter’s efforts. Resorting to the Committee:
- a. The party not accepting the termination of the Commercial Agency contract based on the terms and conditions of the contract may resort to the Committee to challenge the request for termination of the Commercial Agency contract;
- b. Either party may provide the Committee with the report prepared by the professional body;
- c. The Committee shall decide on the challenge request within a period of one hundred and twenty (120) days from the date of recording it, provided that the lapse of the aforementioned period without a decision having been issued is deemed a rejection of the challenge; and
- d. the Commercial Agency contract shall continue in force until the end of the notice period of the resolution of the dispute by the Committee, whichever is later
The party not wishing to renew the Commercial Agency contract shall notify the other party of non-renewal one year before expiry of the term of the Commercial Agency contract, or before the lapse of one half of the term, which is less, unless the two parties agree otherwise.
Competencies of the Committee
1. The Committee shall be responsible for hearing disputes that arise between the parties to a Commercial Agency registered with the Ministry, and no case may be admitted before courts in this regard before referral to the Committee. The Committee shall proceed with hearing the
dispute within twenty-two (22) working days from the date of submission of the application for hearing the dispute to it, in the event that the application is complete or from the date of completion of the required documents. The Committee may seek the assistance of whomever it deems appropriate for the purpose of performing its duties. In all cases, the Committee shall decide on the dispute within a period of one hundred and twenty (120) days from the date of submission of the application, otherwise, either party may resort to courts within sixty (60) days from the date on which this deadline lapses.
2. No challenge against the Committee’s decision or referral of the dispute to courts may be admissible after the lapse of sixty (60) days from the date of notification of the Committee’sdecision and the Committee’s decision, in this case, shall have the force of a writ of execution.
Resorting to Arbitration
1. The provisions of this Law do not prejudice any agreement between the Agent and the Principal to refer any dispute that may arise between them to arbitration.
2. The aforementioned arbitration shall take place within the State unless the parties agree otherwise.
The New Commercial Agency Law has several measures that will give welcome assistance to foreign principals, however, many principals will not be able to take benefit of those provisions for some time (particularly in the context of termination). The new legislation provides a more level playing field for contracting between principal and agent than the Old Commercial Agency Law, however significant provisions in favor of the agency remain in place.
Khairallah law firm has expertise in the region advising on commercial agency agreements. Please contact one of the best lawyers in Dubai, if you have any questions about commercial agency agreements in the UAE.