- within Corporate/Commercial Law, Technology and Insolvency/Bankruptcy/Re-Structuring topic(s)
The UAE Commercial Agencies Law, issued under Federal Law No. 3
of 2022, came into effect on June 16, 2023, replacing the
long-standing Federal Law No. 18 of 1981.
The new legislation introduces greater competitiveness,
flexibility, and clarity to the commercial agency sector. Below is
a summary of its key features.
1. Who Can Act as a Commercial Agent
Article 2 of the new law defines who is eligible to practice commercial agency activities in the UAE:
- The activity is restricted to individuals and entities wholly
owned by any of the following:
- UAE nationals (natural persons)
- Public legal persons (e.g., government entities)
- Private legal persons owned by public legal persons
- Private legal persons wholly owned by UAE nationals
- The Cabinet may, upon recommendation from the Minister of
Economy, authorize an international company—even if not
UAE-owned—to act as its own agent under the following
conditions:
- There is no existing registered commercial agent for the same products in the UAE; and
- The commercial agency is new and has not been previously registered in the country.
- Public joint-stock companies incorporated in the UAE with at least 51% UAE national ownership may also act as commercial agents.
- The Cabinet will issue separate resolutions governing the procedures and conditions under which such companies may engage in commercial agency activities.
In summary, the law retains exclusivity for UAE nationals as commercial agents but permits limited participation by international companies under strict Cabinet-approved conditions when no agent exists.
2. Registration Requirement
All commercial agency agreements must be registered in the
Commercial Agencies Register maintained by the Ministry of
Economy.
Registration is mandatory to obtain the protections and rights
provided under the law.
Unregistered agency agreements are considered invalid and not entitled to the legal protections granted to registered commercial agents.
In addition:
- Agency agreements must be in writing, notarized, and registered to be legally valid.
- Article 3 confirms that only registered agents may legally conduct commercial agency activities.
- Article 4 stipulates that registration requires a written and notarized contract between the principal and the agent.
3. Termination
The new law introduces enhanced clarity and flexibility for the termination of agency relationships. Termination may occur:
- Upon contract expiry;
- By mutual agreement;
- For convenience (if contractually allowed); or
- Based on other agreed contractual termination rights.
Notice periods are now defined: termination must be notified at least one year before the contract's expiry or at the midpoint of the contract term, whichever is shorter—unless otherwise agreed by the parties.
4. Transitional Provisions
Existing agency agreements are protected by transitional measures that delay the full application of new termination and non-renewal rights:
- For existing contracts, these rights are suspended for two years from the law's effective date.
- For long-standing agencies (registered for over ten years) or those involving agent investments exceeding AED 100 million, the transitional period extends to ten years.
5. Protection of Agents and Compensation Rights
Upon termination, agents may be entitled to fair compensation for investments in infrastructure, inventory, or other assets necessary for operating the agency.
Agents may also seek damages for lost profits if they can demonstrate that their efforts expanded the principal's market share or sales within the UAE.
6. Dispute Resolution
The law allows arbitration clauses in agency contracts, with proceedings seated either within the UAE or abroad.
A dedicated Commercial Agencies Committee, appointed by the UAE Cabinet, is empowered to handle disputes between registered parties before they are escalated to court.
7. Continuity of Supply
To prevent market disruption during disputes or termination periods, the Ministry of Economy may intervene to maintain supply chains, including:
- Authorizing temporary imports; or
- Approving alternative suppliers, subject to compensation as determined by the courts.
8. Contractual Flexibility
The law reinforces contractual freedom, allowing parties to
define terms on exclusivity, termination, and compensation.
Parties may agree to waive or modify certain rights, such as
compensation, provided such agreements are fair, transparent, and
mutually agreed upon.
9. Strategic Considerations
The reforms create a more competitive and transparent commercial environment by:
- Offering flexibility in market entry and exit;
- Clarifying termination and arbitration provisions;
- Ensuring supply chain continuity; and
- Encouraging greater foreign participation under defined conditions.
Businesses should review and update their commercial agency agreements to align with the new requirements—particularly regarding registration, notice periods, compensation clauses, and dispute resolution.
Conclusion
The new UAE Commercial Agencies Law marks a major step forward
in modernizing agency regulation.
By balancing protection for agents with flexibility for principals,
and by clarifying key aspects such as termination, arbitration, and
continuity of supply, the law supports the UAE's broader vision
of economic diversification and commercial competitiveness.
With proper legal review and strategic planning, these reforms will promote a clearer, fairer, and more dynamic environment for commercial agency operations across the UAE.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
