- What is the law regulating commercial agencies in UAE?
The Federal Law No. 3 of 2022 concerning the Regulation of Commercial Agencies applies to the relationship between the principal and the commercial agent and regulates, inter alia, the creation and the registration of the agency, its commencement, existence, termination and the rights and obligation that may arise out agency relationship. The law came into effect on 15 June 2023 and it introduces a number of key reforms to the practice of commercial agencies in UAE.
- Why to register the agency ?
The registration of the agency with the competent authority is a mandatory condition for validation and enforcement of the exclusive commercial agency. The commercial agency activities may not be practised in the UAE and will not be legal protected except by registration in the Commercial Agencies Register of the Ministry of Economy, and any commercial agency that is not registered in this Register shall not be deemed valid.
- In which events can the commercial agency terminate under the new law?
The Commercial Agency Contract ends by the following ways:
A- Expiry of the contract term (unless the said term is renewed by agreement of the contracting parties).
B- By the will of either the Principal or the Agent based on the terms and conditions of the Commercial Agency Contract.
C- By agreement of the contracting parties before the end of the contract term.
D- Issuance of a final court judgement terminating the Commercial Agency.
E- Any other even provided for in the law.
- What should a party to the agency do if it is not willing to renew the agency?
The party wishing not to renew the Commercial Agency Contract shall notify the other party of non-renewal one year prior to the expiry of the Commercial Agency Contract Term, or before the expiration of half of the Term, whichever is less, unless the two parties agree otherwise.
- Can a party claim compensation as a result of the termination of the agency?
If the termination of the Commercial Agency Contract leads to damage to either party, the affected party may request compensation for the damages incurred, moreover, the Agent shall be entitled to compensation if he proves that his legitimate activity has contributed to the achievement of a notable and great success for the Principal’s products and has led to the promotion of these products or the increase in the number of customers, and as a result of the termination of the Commercial Agency Contract, the Agent was deprived of the missed profits earned in relation to that success.
- If I have a dispute related to a commercial agency what is the competent forum?
If you have a dispute over a commercial agency the dispute shall be brought before the “Commercial Agencies Committee” of the Ministry of Economy. The Committee shall have the competence to hear the dispute that arises between the parties to the Commercial Agency that are registered with the Ministry as a pre-condition to litigation. A legal claim shall not be heard by the courts unless it is first presented to the Committee.
- Is it permitted under the new law to refer the commercial agency dispute to arbitration?
According to the new law, it is now permissible for the principle and the agent to agree to refer any disputes that arise between them to arbitration (that shall take place within the State, unless the parties agree otherwise).