The United Arab Emirates (UAE) law does not distinguish between an agent and distributor, referring to both as commercial agents. The provisions relating to commercial agencies are collectively set out in Federal Law No. 18 of 1981 on the Organization of Commercial Agencies as amended by Federal Law No. 14 of 1988 (the Commercial Agency Law).
Generally, there are two types of agency agreements:
- Registered agency agreements with the Commercial Agencies Register at the UAE Ministry of Economy
- Unregistered agency agreements with private entities in the UAE without registering the agreement with Commercial Agency Registrar
Unless a commercial agency agreement is registered with the UAE Ministry of Economy, it will not be recognized by local courts in case of a dispute. However, unregistered commercial agency arrangements are still valid contracts and are governed by Federal Law No.5 of 1985 Civil Transactions Law (under UAE Civil Code) and Federal Law on Commercial Transactions and tends to protect the interests of both parties.
The Commercial Agents (Council) Regulations 1993 (the Regulations) promulgated under the Commercial Agency Law recognize that commercial agents. Only UAE nationals or companies wholly owned by UAE nationals are entitled to carry out commercial agency activities in the UAE and register with the Ministry of Economy and Commerce as local agents.
In order to register an agreement, an agent must have a presence and be licensed to operate in each emirate in which it conducts business, as there is no blanket license for the whole of the UAE. Any commercial agency covered by the Commercial Agency Law must be registered in the commercial agencies register maintained by the Ministry of Economy in the relevant emirate or, if for the entire UAE, with the Ministry of Economy in the federal capital, Abu Dhabi. An Agency Agreement must be signed before a notary public and must be written in Arabic only or in Arabic and English. The agreement must be exclusive with respect to a defined territory (can be one Emirate, or several, or the whole of the UAE).
Commissions and other forms of compensation are a matter of commercial negotiation as between the parties, typically dependent on the amount of work required of the agent and sales volume. Responsibilities, performance measures, and geographic territory covered should be clearly defined in the agency contract. UAE law awards automatic exclusivity to the agent in the geographic area covered by the agreement.
On March 22, 2010, the UAE issued Federal Law No. 2 of 2010 amending certain provisions of the Commercial Agency Law. The amendments prevent the termination, or non-renewal, of a commercial agency unless the principal has a material reason to justify the termination or non-renewal and re-introduced the specialized Commercial Agencies Committee designed to deal with disputes relating to commercial agencies, a body which had formerly been dissolved by amendments to the law in 2006. Under the current legislation, the Committee has full powers of investigation, including the ability to appoint experts and the ability to apportion the costs of a hearing between the parties. In order to be binding, the Committee must rule on disputes within 60 days of receiving a complaint from either party to an agreement. Parties can also appeal the decisions of the Committee before the UAE courts. In addition, a principal may not re-register the commercial agency in the name of another agent even if the previous agency was for a fixed term unless: (i) it is amicably terminated by the principal and the agent; (ii) termination or non-renewal is for justifiable reasons that are satisfactory to the Commercial Agencies Committee; or (iii) a final judicial judgment is issued ordering the cancellation of the agency.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.