New UAE Commercial Agencies Law comes into force

Last year, we published an e-bulletin on the key changes that had been announced to the draft UAE Commercial Agencies Law. Following the passage of Federal Law No. 3/2022 in December 2022 (the "Commercial Agencies Law"), these changes are now in-force. Below we have provided a re-cap of the key features of the new Commercial Agencies Law, including important details provided under the new legislation.  

PJSCs may register as commercial agents

Per Article 2(2) of the Commercial Agencies Law, public joint-stock companies with at least 51% of their shares owned by UAE nationals are now permitted to register as commercial agents.

Mutual benefit 

Article 5(1) of the Commercial Agencies Law expressly provides that the commercial agency contract will operate for the 'common interest' of both the foreign principal and the UAE national commercial agent. A commercial agency agreement which is not for the mutual benefit of the parties shall not be upheld by the UAE Courts.

Termination and dispute provisions

Article 9(1) of the Commercial Agencies Law removes restrictions that had previously existed on the agent's termination rights. A commercial agency may now be terminated in the following circumstances: (i) by mutual agreement of the parties, (ii) by either party, in accordance with the terms of the commercial agency contract and Article 10 of the Commercial Agencies Law, (iii) on the expiry of the contract's term or (iv) via a court order.

Where the agency contract has been cancelled, the old agent must transfer the assets under the contract to the principal or its new agent at a fair value, unless the parties agree otherwise.

If a dispute ensues between the old agent and principle following termination, Article 9(3) provides for the option (subject to the approval of the Ministry of Economy) to re-register the agency in the name of a new agent whilst the agent-principal dispute is ongoing. However, the principal will be liable throughout this period to pay the old agent any compensation which the courts may award.

Safeguarding of the right to commission

Article 8 of the Commercial Agencies Law gives commercial agents the right to claim commission on all transactions that take place in connection with the distribution of agency products within the territory, even on transactions not concluded by the agent, such that for every transaction which the principal completes in the agency’s territory, the agent would be entitled to commission.

Option of dispute resolution by arbitration 

The Commercial Agencies Committee continues to have jurisdiction for disputes arising between principals and agents and, in turn, UAE courts will not hear such disputes unless they are first presented before the Committee. However, the new law specifically provides that nothing in it will prejudice any agreement between the parties to refer their dispute to arbitration.

Should you have any questions regarding the New Law and what it could mean for you or your company, please do not hesitate to get in touch.