Amendments to the UAE Commercial Agencies Law: broadening the scope

• The UAE: The United Arab Emirates;
• The Ministry: The Ministry of Economy;
• The Minister: The Minister of Economy;
• Competent Authority: The local authority in the relevant Emirate;
• The Committee: The Committee of Commercial Agencies, which is formed under Article (27) of this Law;
• Commercial Agency: The representation of a principal by an agent for the distribution, sale, offer or provision of a commodity or service inside the UAE against a commission or profit;
• Principal: The producer or manufacturer inside or outside the UAE or the producer’s approved exclusive distributor or exporter; provided that the producer does not practice marketing on its own;
• Agent: A natural person having UAE nationality or a corporate person that is wholly owned by UAE nationals who are authorised under the commercial agency contract to represent the Principal to distribute, sell, offer or provide a commodity or service inside the UAE for a commission or profit.

• State: The United Arab Emirates.
• Ministry: The Ministry of Economy.
• Minister: The Minister of Economy.
• Competent Authority: The local authority in the relevant Emirate.
• Committee: The Committee of Commercial Agencies.
  Commercial Agency: The representation of a principal by an agent under an agreement of agency, distribution, sale, display, franchise or providing a commodity or service in the State in return for a commission or profit.
• Principal: A producer or manufacturer in the State or abroad, or an exclusive exporter or distributor authorised by the producer; provided that the producer does not carry out the marketing functions by itself.
• Agent: A natural or legal person representing a Principal under a commercial agency agreement.

That said, the definition of Agent has been updated due to the amendments made to Article 2 concerning the legal form and ownership requirements for an entity to qualify for registration as a commercial agent in the Ministry.

Additionally, the definition of “Commercial Agency” has also been expanded to add the wording “under an agreement” whereas the former provision provided for representation without an express requirement for any agreement. In practice, the majority of commercial agencies were via a written contract but, on occasion, if an agent did not have a written contract then it may have been possible for the agent to apply to the UAE court to consider correspondence and any other communications between an agent and relevant principal, in order to ascertain if there was sufficient evidence of an agreement (even though not reduced in a written contract). The judgment issued was then subsequently used to replace the written contract. This change in the definition could now impact an agent’s ability to register itself at the Ministry without a written contract in place.

Furthermore, there is now express reference to “franchise”, which was not included in the old definition of Commercial Agency and this too represents an important development.

1. The practice of commercial agency activities in the State shall be limited to citizens, including individuals or companies that are fully owned by a:
   1. national natural person;
   2. public legal person;
   3. private legal person owned by public legal persons; or
   4. private legal person fully owned by national natural persons.
2. PJSC incorporated in the State to which the contribution of the State’s citizens is not less than (51 per cent) of the company’s capital shall be excluded from the provisions of Clause (1) above.
3. the Minister shall issue a resolution on the procedures and controls necessary for the engagement of the companies mentioned in Clause (2) above in commercial agency activities in the State.

Now, in order for a commercial agency arrangement to be registered at the Ministry, the Agent must be:

1. a UAE national; or
2. a UAE public joint stock company owned, at least, 51 per cent by UAE nationals;
3. a UAE private entity owned by a public joint stock company meeting the requirements of (2) above; or
4. a UAE private entity that is 100 per cent owned by UAE nationals.

Although the relevant individual or entity would still need to satisfy the other prerequisite criteria for effecting registration at the Ministry (as further dealt with above).

1. a commercial agency shall devolve to the heirs in the event of death of the agent.
2. subject to the provisions of Article (27) and (28) of the Law, the Principal may not terminate or refuse to renew the agency agreement without a material reason justifying the termination or non renewal. In addition, the agency may not be re-registered in the commercial agents’ register in the name of another agent, even if the preceding agency is based on a fixed term agreement, unless the agency has been terminated by mutual agreement between the Principal and the Agent or in case of material reasons accepted by the committee justifying the termination or non renewal of the agency or after rendering a final court judgment writing off the agency.
3. the expiry of the agreement term shall not constitute a material reason for terminating the agency agreement between the two parties.

Firstly, it is now expressly mentioned that a commercial agency shall devolve to the heirs in the event of the death of the agent. Previously, in the event of death, Article 14 of the UAE Commercial Agency Law required that an agent’s legal representative or heirs must submit an application along with supporting documents to remove the commercial agency from the register within 60 days of the death or submit objections to avoid the removal of the agency. Article 14 has not been amended under Federal Law No. 11 of 2020, so the Ministry will need to clarify whether, in light of Article 14, the notification requirements are now necessary given the amendment to Article 8.

Secondly, it is now expressly mentioned that the expiry of a registered commercial agency does not amount to a “material reason”, justifying the termination of the registered commercial agency arrangement.

This confirms the interpretation previously given to the original wording of Article 8 i.e. a new commercial agency could not be registered for the same products even if the previous commercial agency was established under a fixed-term contract.

The Committee’s decision may be challenged before the competent court within 30 days from the date on which the Committee’s decision is notified; otherwise the Committee’s decision shall be final and not subject to further challenge.

The Committee’s decision may be contested before the competent court within 30 days from the date on which the Committee’s decision is notified, otherwise, the Committee’s decision shall be deemed final and uncontestable.

Essentially, the Commercial Agency Committee must first hear any disputes arising out of a registered commercial agency. Thereafter, a party has 30 days following notification of the Commercial Agency Committee’s decision to contest the decision before the local UAE courts.

If no appeal is commenced within this timeframe, the Committee’s decision is deemed final and binding.

Such employees shall not disclose the matters to which they may have access ex officio if such matters are of a confidential nature. Whoever violates such prohibition shall be penalised without prejudice to any civil or criminal liability.