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Business

SETTING UP BUSINESS
General introduction
Incorporating a Limited Liability Company
Establishing a Branch or Representative Office
Commercial Agency
Public Sector Procurement
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Commercial Agency

The UAE Commercial Agencies Law (Federal Law No.18 of 1981, as amended by Federal Law No. 14 of 1988) regulates the appointment of commercial agents, sales representatives, and distributors in the UAE. This law defines a commercial agency as any arrangement whereby a foreign company is represented by an agent to ‘distribute, sell, offer, or provide goods or services within the UAE for a commission or profit’. (Article 1 of the Agencies Law). The Commercial Code (Federal Law No. 18 of 1993) augments the Commercial Agencies Law and establishes the regulatory framework for the various types of commercial agencies permitted under the law. The most common type of agency is the contracts agency, whereby the agent undertakes ‘on a permanent basis and in a specific area of activity, the instigation and negotiation of the conclusion of deals, to the advantage of the principal and in return for payment.’ (Article 217 of the Commercial Code). Distributor contracts are treated like contracts agencies when they involve one agent as the sole distributor. (Article 227 of the Commercial Code).

The following conditions apply to commercial agencies:

o Commercial agents must be UAE nationals or companies incorporated in the UAE and owned entirely by UAE nationals.

o Commercial agents must be registered with the UAE Ministry of Economy and Commerce to engage in commercial agency activities.

o The agency agreement must be registered in order for the agent to avail himself of the protections afforded under the law and to have the agency relationship recognized under UAE law.

o Commercial agents are entitled to an exclusive territory encompassing at least one emirate for the specified products. (Article 5(1) of the Commercial Agencies Law)

o Unless otherwise agreed, commercial agents are entitled to receive commissions on sales of the products in their designated territory irrespective of whether such sales are made by or through the agent. (Article 7 of the Commercial Agencies Law)

o Commercial agents are entitled to prevent products subject to their agency from being imported into the UAE if the agent is not the consignee.

o Commercial agents are entitled to receive compensation from the principal if the agency is terminated without substantial justification or if the agency is not renewed by the foreign principal, and the agent may be able to preclude the foreign party from appointing a replacement agent in such circumstance.

o The Commercial Agency Law provides for compensation of the agents terminated without due cause only if the agency agreement has been registered with the federal Ministry of Economy and Commerce (MOEC). Many UAE commercial agents will insist on a registered arrangement in order to avail themselves of the protection of the Commercial Agencies Law.
Unregistered commercial agencies not governed by the Agency Law are subject to the Commercial (Federal Law No. 18 of 1993) and Civil Code (Federal Law No. 5 of 1985). These codes do not require agents to be UAE national or commercial entities wholly owned by UAE nationals, however such agencies are not common.

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