There are various methods to develop new markets. Business can
successfully be done by exporting products into the foreign
country, by setting up a company or by taking advantage of
appointing a commercial agent or distributor (both referred to as
Agent"). Should a manufacturer of products or a service
provider (Principal") opt for engaging an Agent, it is
particularly important for the market of the United Arab Emirates
(UAE") to be aware of the local laws and regulations governing
such a business relation. Compared to the legal framework in Europe
or even other Gulf countries, the provisions applicable to
commercial agencies and distributorships in the UAE are extremely
advantageous for the Agent. Protecting the Emirati business
community can be considered as a reason for the restrictive
Federal Law No. 18 of 1981 including its amendments (UAE
Commercial Agency Law") forms the primary legal basis. It
applies to commercial agencies and distributorships alike. However,
a pre-condition for the UAE Commercial Agency Law to take effect is
the registration of the contractual relation between the Principal
and the Agent with the competent authority, i.e. the Ministry of
Economy. Should registration be possible and actually implemented,
the UAE Commercial Agency Law will automatically apply. The
provisions of this law are mandatory and cannot be contracted out
1. Protective Regulations for Registered Commercial
A registered Agent enjoys, for example, exclusivity within his
territory. In addition, the Agent is entitled to commission for all
products he is registered for and which are sold within his
territory. He even is eligible to commission for business
transactions he was not actively involved in. Furthermore, the
Agent is able to block the import of products at customs should
there be a disagreement with the Principal.
2. Termination of Registered Commercial Agencies
The Agent is protected by the UAE Commercial Agency Law until
the registration of his agency is formally deleted from the
ministry's register. According to the latest provisions of the
law, even if a time-limited contract expires, the deletion of the
agency from the ministry's register will not automatically be
enforced. In fact, a serious reason needs to be presented for not
renewing a time-limited contract or for terminating a
time-unlimited contract. In most cases the Principal will only be
able to withdraw from a registered commercial agency contract by
paying a high compensation to the Agent.
3. Drafting Commercial Agency Contracts
Due to the extensive protective rights of a registered Agent it
is essential to choose wisely when selecting a representative.
Before his appointment, the Principal should weigh the options of
registering or not registering the agency contract. In either case,
the local laws and regulations need to be considered when drafting
the agreement to best justify terminating or not extending a
contract in case of an Agent's wrong doing.
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