06 Jul Commercial agent in the United Arab Emirates
International contracts
In the United Arab Emirates, a contract can be formed on anything that is not prohibited, contrary to public order or morality. Once entered into, this contract becomes binding between the parties and termination, modification or cancellation cannot be done unilaterally.
For commercial agents there is a specific “Agency Law”. This law regulates and governs the appointment of commercial agents and representatives, and distributors. For it to apply, the commercial agent must have been registered with the UAE Ministry of Economy.
In its first article, a commercial agency is defined as “the representation of a principal by an agent to distribute, sell, display or offer a good or service within the State in exchange for a commission or profit“.
Conditions for registering an agency contract
The chosen commercial agent must be a national or a company owned by UAE nationals. Then, the contract must provide for an exclusive relationship between the principal and the agent, define the products in question and delimit a territory (all the Emirates or only one or more of them).
A commission is paid to that agent when a sale is made in the territory to which the contract relates.
Termination of an agency contract
Registration protects the parties against unilateral termination. It can therefore only be carried out by mutual consent of the contracting parties. The principal may only terminate the contract or refuse to renew it if they provide a legitimate material reason. It then seems essential to anticipate a relationship without escape for the principal, for example by providing for special cases of fair grounds for termination in the contract.
Dispute resolution and compensation
It is possible for either party to seek compensation as a result of the termination of a registered agency contract for loss or damage suffered. However, the calculation of such compensation is not provided for by law.
In the event of a dispute, the Committee of Commercial Agencies has sole authority to hear the case. Then an appeal of the decision is possible before the courts of the Emirates.
It is important to note that a jurisdiction or applicable law clause is ineffective in such a contract; the courts having jurisdiction and the applicable law will always be those of the Emirates.
Trading without a registered agreement?
When the agreement is not registered with the Ministry of Economy, the contract entered into is subject to the rules of the Law of Transactions and those of a conventional contract. This does not preclude careful negotiation of the contract, including the grounds for termination.
If the contract entered into between the parties fulfils the conditions for the registration of an agency, it is necessary to expressly demonstrate the will not to register the agreement.