commercial agents  

Commercial agents
 The primary source of legislation in the UAE regarding commercial agencies is the Organisation of Commercial Agencies (Agencies Law). A commercial agency is defined as “the representation of a principal by an agent for the purpose of distributing, selling, offering or providing merchandise or services inside the UAE for a commission or profit”. A principal may be either “the producer or manufacturer” of the relevant product or the “exclusive accredited exporter or representative of the producer”.  

The Agencies Law makes no distinction between commercial agency agreements, agreements regarding distributorships, franchises, commission arrangements and other forms of sales representative or sales agency relationships. All of these forms of business arrangements may qualify as commercial agencies under the Agencies Law.  

Although this legislation applies to all seven Emirates, it should be noted that its provisions have been subject to various and differing interpretations by the particular Emirate court applying it. The UAE Commercial Code and the UAE Civil Code also contain provisions which regulate agency relationships in the UAE. The provisions of the Commercial Code would likely be applicable in cases where they address an issue which is not specifically addressed in the Agencies Law, and the Civil Code would apply in instances where the Commercial Code is also silent on the issue.  

A registered commercial agent must be either a natural person holding UAE nationality or a legal person (e.g. corporate entity) incorporated in the UAE and wholly owned by UAE nationals. Under the Agencies Law, registered commercial agents are afforded certain protections which relate, amongst other things, to termination and exclusivity. For example, a principal may not terminate a distributor agreement prior to the end of the term except for good cause. The Agencies Law further provides that if the termination of the agreement causes damage to either party, such aggrieved party may claim compensation for the damage suffered (thus providing both the principal and agent a statutory right to claim compensation).  

Only commercial agents who are registered with the Ministry of Economy (Ministry) are authorised to engage in commercial agency activities.  While it may therefore appear that only UAE nationals or companies wholly owned by UAE nationals registered with the Ministry may engage in commercial agency activities in the UAE, in practice, many non-UAE entities do actually conduct commercial agency activities. Nevertheless, such individuals or companies are not entitled to claim the same protections as registered commercial agents under the Agencies Law (see paragraph above).  

Unregistered agency agreements are still enforceable in the UAE as valid commercial contracts and the parties are bound by the respective terms and conditions thereof.  The affairs of unregistered agents are regulated by the Commercial Code and the Civil Code.