Recent Court Judgments: UAE Courts Affirm Breach‑Based Cancellation of Longstanding Commercial Agencies

5 min 9 sec December 3, 2025 (Edited)

Two recent judgments clarify a key point in UAE commercial agency law: the statutory moratorium protecting longstanding agencies from unilateral termination does not prevent cancellation where material breach is proven.

In Abu Dhabi Federal Court of Appeal Action No.46 of 2025 and Federal Supreme Court Cassation No.523 of 2025, the courts upheld the regulator’s cancellation of a decades‑old agency, notwithstanding Article 30 of Federal Law No.3 of 2022 on the Regulation of Commercial Agencies. The decisions emphasise that persistent non‑payment, dishonoured cheques, cessation of purchases, and delegation of operations to an unregistered distributor amount to substantial breach justifying cancellation.

This article will discuss the findings of the judgments and the implications for principals and agents operating in the UAE.

Background

The agent in this case had been the exclusive UAE agent for a principal for over two decades under a commercial agency registered at the Ministry of Economy. The principal complained to the Commercial Agencies Committee (CAC) that the agent and its affiliated distributor (the distributor) failed to pay for supplied luxury goods, issued multiple dishonoured cheques, did not return consigned inventory, ceased purchasing products since 2017/2018, and had effectively transferred operational distribution to an unregistered distributor without the approval of the principal.

On October 8 2024, the CAC issued Decision No.75 of 2024 cancelling the agency. The agent challenged the CAC’s decision. The Court of First Instance set it aside. On appeal, the Abu Dhabi Federal Court of Appeal consolidated proceedings (Appeal Nos.46 of 2025 and 52 of 2025), reversed, rejected the agent’s challenge and upheld the CAC’s cancellation.

The Abu Dhabi Federal Court of Appeal also declined jurisdiction over the principal’s counterclaim for monetary relief and return of goods, directing that these claims be brought before the Abu Dhabi local courts as they relate to invoice recovery rather than agency cancellation. The Federal Supreme Court then refused the Agent’s further challenge, leaving the appellate judgment intact.

The Courts’ Key Findings

The agent argued that, under Federal Law No.3 of 2022, termination of a longstanding agency may only proceed under Article 9, and that, by virtue of Article 30’s transitional protection, the agency could not be terminated for at least 10 years from the law’s effective date. It further contended that termination for material breach — applied under the former Federal Law No.18 of 1981 – was no longer available because the new Law No.3 of 2022 lacks an express provision permitting termination for breach.

The Abu Dhabi Federal Court of Appeal rejected those arguments. The court held that the CAC’s action was not a discretionary early termination under Article 9(1)(b), which would be constrained by Article 30’s transitional moratorium for longstanding agencies. Rather, cancellation was justified by material breaches and supported by the agency law’s structure and general contract principles, including judicial termination under Article 9(1)(d) and the ministry’s power to cancel where statutory conditions are not met.

On the facts, the court found, based on undisputed evidence:

• persistent non‑payment of dues and dishonoured cheques issued by or on behalf of the agent;
• non‑payment for hundreds of high‑value items and failure to return agreed quantities;
• cessation of product purchases since 2017/2018, undermining the agency’s commercial purpose; and
• delegation of distribution to an unregistered distributor outside the registered agency framework.

These acts breached good faith performance and core obligations of an exclusive distributorship. The court emphasised that Article 30 insulates longstanding agents from no‑fault termination routes under Article 9(1)(a) and (b), but it does not immunise them from cancellation where breaches are proven.

The Federal Court of Appeal therefore cancelled the Court of First Instance judgment, rejected the Agent’s challenge, and upheld Decision No.75 of 2024.  It also declined federal jurisdiction over the principal’s counter‑claim for monetary relief and return of goods, directing that such private claims be pursued in the local competent court and not the Federal Court; costs orders followed the Civil Procedure Law.

In Cassation No.523 of 2025, the Federal Supreme Court declined to accept the agent’s appeal, holding that the appellate judgment correctly applied the law to facts and found findings of non‑payment, cessation of purchases, unauthorised operational transfer, and failure to pay for inventory. The Supreme Court reiterated that substantial breach justifies termination or cancellation, subject to reciprocity principles.

Legal Context and Continuity in Case Law

These judgments are consistent with longstanding UAE jurisprudence developed under the former Federal Commercial Agencies Law (Federal Law No.18 of 1981) and continued under Law No.3 of 2022. Courts require “substantial justification” for termination or non‑renewal of agencies. Material breach by an agent — particularly non‑payment, abandonment of purchasing activity, and diversion of distribution — meets that threshold.

What is distinctive in these cases is the clear delineation between Article 30’s moratorium against unilateral, no‑fault termination and the continued availability of breach‑based cancellation through judicial or regulatory routes when statutory conditions are no longer met.

Impact on Commercial Agencies in the UAE

For agents, these decisions are a clear warning that Article 30’s protective moratorium will not protect agents in the face of performance failures. Persistent arrears, dishonoured cheques, failure to purchase or promote products, or de facto delegation to non‑registered entities can justify cancellation, notwithstanding long tenure. Agents should prioritise documented compliance, robust inventory and payment controls, and strict adherence to exclusivity and operational clauses, particularly where distribution is conducted through affiliated retailers.

With respect to principals, the path is clarified: where there is a material breach, they may seek cancellation via the CAC and the courts without waiting out Article 30’s moratorium on unilateral termination, provided they evidence default and respect reciprocal performance obligations. However, standalone monetary or delivery claims should be pursued before the courts. Filing administrative agency challenges risks jurisdictional dismissal.

Conclusion

In these important judgments, the Abu Dhabi Court of Appeal and the Federal Supreme Court have established that the 10‑year moratorium in Article 30 of Law No.3 of 2022 restrains no‑fault, unilateral termination under Article 9(1)(a) and (b), but it does not shield an agent from cancellation where substantial breach is proven. By upholding cancellation on the strength of non‑payment, cessation of purchases, and unauthorised delegation, the courts reinforced the core bargain of UAE commercial agencies: exclusivity is paired with performance and payment.