A Concise Overview Of The UAE Agency Law

What is commercial agency?
Commercial agency is an arrangement where one party (the principal) appoints another as an agent for
the sale of its products or services.
A foreign company who does not want to acquire license in the United Arab Emirates but want to carry
out business in the region through minimal investment may opt to appoint a commercial agent to be
able to sell its products and services in the UAE.
In UAE, commercial agency is governed by The Federal Law No. 18 of 1981 on Commercial Agencies as
amended by Federal Law No. 14 of 1988, Federal Law No. 13 of 2006 and Federal Law No. 2 of 2010 (the
“Commercial Agency Law”)
As per the Commercial Agency Law, commercial agency is defined as, “representation of a principal by
an agent for distribution, sale, display or provision of a commodity or service in the state in return of
commission or profit”. The agent has to be a UAE national or a company wholly-owned by UAE national.
The Commercial Agency Law makes no distinction between commercial agency agreements,
distributorship agreements, franchise agreements, commission arrangements and other forms of sales
agency relationships. Such forms of arrangements may thus fall under the definition of commercial
agency under the Commercial Agency Law.

Registration and requirements
As per the Commercial Agency Law, the commercial agent must be registered with the Ministry of
Economy and Commerce. Further it is mandatory to register the agency agreement in the Ministry of
Economy and Commerce, otherwise agreements which are not registered will not be protected under
the Commercial Agency Law.

Requirements for registration of commercial agency contract
Agency contract, distribution or exclusive representation contract with agent should be attested by
official bodies along with legal translation into Arabic Language if the contract is in foreign Language.
The agency contract should contain name and address of parties, exclusiveness, and place of activity,
products and services, trade name of products, approval to register the contract, period of contract,
attestation and certification.
The contract has to be submitted to the Ministry of Economy along with the identity card of local agent,
authorization signature of owner or authorized manager and filled out agency application form available
at the Ministry.

Protection through registration
By registering the agency agreement in the Ministry of Economy, the agent enjoys exclusivity to import
and distribute the products of the principal in the defined territory. The exclusivity applies to a territory
within the UAE, i.e. an Emirate in UAE. Exclusivity may also apply to multiple Emirates or the UAE as a
whole.

The agent can also block third parties from importing the products in to the UAE for the products it is
the registered agent (Article 23 of the Commercial Agency Law). The agency agreement can provide a
list of product or services to be distributed in the territory.
The agent is entitled to receive commission for the sale of the products in the designated territory no
matter whether such sales are made by or through the agent (Article 7 of the Commercial Agency Law)
As per Article 8 of the Commercial Agency Law, the agency agreement is deemed renewable regardless
of any specified expiry date. Therefore, these provisions help prevent the principal from appointing a
new agent. In accordance with Article
9 of the Commercial Agency Law upon termination of the agency agreement the principal is entitled to
compensate the agent for non-renewal of an agency agreement [see section termination of agency
agreement below].

The Commercial Agency Committee
Federal Law no. 2 of 2010 re-instated the Commercial Agency Committee (the “Committee”). On 10
April 2011, H.H Mohammad Bin Rashid Al Maktoum, the Vice President of the UAE and Ruler of Dubai
issued Decree No. 3 of 2011 (the “Decree”) Establishing the Committee of Commercial Agency whose
role is to review any dispute pertaining to any commercial agency registered with the Ministry of
Economy.
As per Commercial Agency Law, it is compulsory for agent and principal in dispute with one another to
refer the matter to that Committee before going to the courts.
A party may challenge the determination of the Committee by bringing a matter to the UAE courts
within thirty (30) days of the date of receiving notice of the Committee’s resolution.
As per Article 3 of the Commercial Agency Law, only the commercial agency which are registered with
the Ministry of Economy may be heard by the Committee in case of dispute. Any unregistered agency
agreement would therefore be heard in the Courts and would be governed by the Federal Law No. 18 of
1993 on Commercial Transactions and the Federal Law No. 5 of 1985 on Civil Transactions.

Termination of commercial agency
The provisions governing termination of agency underwent several amendments. Under the old
provisions the principal could only terminate the agency agreement for ‘valid reason’ as accepted by the
commercial agency committee in the Ministry of Economy. Also, the principal would often find itself in
the position of compensating the local agent as a result of termination of the agency agreement.
In 2006, the Commercial Agency Law was amended to state that the commercial agency agreement shall
terminate on the date if such is fixed in the agreement. It also allowed either party to the agency
agreement to seek compensation in the event of any breach of the agreement or law. It further
abolished the commercial agency committee to hear the matters arising from the agency agreement
placing the authority exclusively in the hands of the courts.

Under Federal Law No. 2 of 2010, the provisions on termination and renewal of the agency agreement
switched back to the spirit of the original law whereby the principal has to show a ‘material reason’ to
justify the termination or non-renewal of the agency agreement. The legislation does not define what
constitutes as ‘material reason’ but places the onus on the principal to provide with a very convincing
reason in order to seek termination of the agency contract. This thus becomes a question of facts and
circumstances surrounding the case.
Some of the reasons that a judge may take into account while considering cancellation of the agency
agreement by the principal may include: failure of the parties to meet specified sakes target, action of
agent that impinges the reputation of principal’s the products or the services, where the agent is
involved in activities in conflict with the principal’s product and services, the agent breaches any agency
law. These reasons are not exhaustive and provided the broad wordings of the legislation, the judges or
Committee enjoy certain discretion to use its creative reasoning in deciding on what counts as a valid
reason.

By Shadha Zawawi
Senior Associate
© Maha Bin Hendi Law Firm

This Article does not constitute legal advice and refers to legislation as of the date of publication of this
Article. Specific legal advice should be taken before acting on any of the topics covered.