Federal Law No. 3/2022 – Regulating Commercial Agencies

A forty year old law regulating commercial agencies has been repealed in favour of a Federal Law No. 3/2022- Regulating Commercial Agencies - Commercial Agency Code (New Agency Law) that is aimed at empowering commercial agencies to diversify activities, increase economic efficiency and contribute positively to the UAE Economy.  This law will come into force in June 16, 2023

Under the New Agency Law, Commercial agency business can be carried out by the following:

1. A natural person who is a citizen;
2. A public legal person;
3. A private legal person owned by public legal persons; and
4. A private legal person wholly owned by natural persons who are citizens

In order for a Commercial Agency to be valid, the Agent must be engaged by the original Principal under a written and documented contract, and the Commercial Agency must be listed in the Commercial Agencies Register.

Some of the Major highlights of the new legislation are as follows:

1. International Companies

The New Agency Law permits international companies, even if it is not owned by a U.A.E. national to practice the business of commercial agency for the products it owns based on a recommendation by of the Minister and if the business is within the limits prescribed by the Minister. Such companies would have to meet two pre-requisites which are:

1. Such a Company does not have a commercial Agent inside U.A.E.
2. Such a Company is new and not previously registered in U.A.E.

2. Formation of a Commercial Agencies Committee

A committee namely the Commercial Agencies Committee shall be formed and responsible for hearing disputes that arise between the parties to a Commercial Agency registered with the Ministry. The Committee may seek the assistance of whomever it deems appropriate for the purpose of performing its duties.

In all cases, the Committee shall decide on the dispute within a period of one hundred and twenty (120) days from the date of submission of the application, otherwise either party may resort to courts within sixty (60) days from the date on which this deadline lapses. No challenge against the Committee’s decision or referral of the dispute to courts may be admissible after the lapse of sixty (60) days from the date of notification of the Committee’s decision, and the Committee’s decision in this case shall have the force of a writ of execution

3. Continuation of Business during a dispute

The New Agency law also introduces a clause which facilitates trade between the Principal and an Agent during a dispute. Upon approval of the Ministry, goods or services may be brought into U.A.E. from exclusive sources, provided that the Principal shall be liable to his old agent for compensation that may be awarded by the Courts. This is a welcome step and prevents economic losses for both the Principal and Agent during a dispute between the parties.

4. Resolution of Disputes through Arbitration

The New Agency Law also provides that the parties can settle their disputes by resorting to arbitration within U.A.E. If the parties resort to arbitration and challenge the decision passed by the Commercial Agencies committee within the specified time frame of 60 days. The consequence of any decision passed by the Commercial Agencies Committee shall not have any effect or consequence, if the dispute is resorted to arbitration as stated above.

5. Termination and Non- Renewal of Commercial Agency Contract

A commercial agency contract may be terminated by either party by sending a notice which is not less than one year prior to the lapse of the commercial agency agreement or prior to the lapse of one half of the contract term, whichever is less, unless the two parties agree otherwise.

The party not accepting the termination of the Commercial Agency contract based on the terms and conditions of the contract may resort to the Committee to challenge the request for termination of the Commercial Agency contract

The party not wishing to renew the Commercial Agency contract shall notify the other party of non-renewal one year before expiry of the term of the Commercial Agency contract, or before the lapse of one half of the term, which is less, unless the two parties agree otherwise.