UAE: Two exemptions revealed as commercial agencies law takes effect
Commercial agency business exclusively reserved for citizens and companies with 51% or more national ownership, per UAE law. This regulation aims to promote local participation in this sector and ensure its economic vitality remains within the country's boundaries.
UAE Commercial Agencies Law
A senior official, Hasan Al Kilany, Senior Legal Counsel at the Ministry of Economy, has clarified certain exceptions to the recently introduced UAE Commercial Agencies Law. According to him, the new law does not apply solely in cases of "non-renewal or early termination of convenience."
However, aside from these specific scenarios, the entire law, along with its subsequent articles and paragraphs, applies to existing agencies. This means that the law does not come into play in the event of non-renewal of commercial agency agreements. It permits either the agent or the principal to terminate the commercial agency agreement before its term based on the agreement's stipulated terms.
Effective Date and Scope of Application
The updated Commercial Agencies Law, effective from June 16, 2023, applies universally. It restricts commercial agency operations to UAE citizens and public joint-stock firms, where nationals own a minimum of 51 percent of shares.
The law underscores the necessity of registration in the Commercial Agencies Register at the Ministry of Economy for engaging in commercial agency business in the UAE. Any agency not registered in this official register is not recognized under the law.
Addressing Service and Goods Disruptions in Disputes
The new law also addresses the issue of service and goods interruptions in disputes between principals and agents to ensure the uninterrupted flow of goods and services during such periods. The Ministry of Economy is tasked with identifying exclusive alternative sources for a temporary period, with the principal being responsible for any compensation determined in favor of the agent through a final judicial decision.
"In a dispute, consumers face disruption in product supply. The new law permits principals to request the ministry to appoint an exclusive source to maintain local goods flow if the court favors them. However, if the court sides with the agent, compensation falls on the principal," Hasan Al Kilany detailed during the Ministry of Economy and Al Tamimi & Co.'s briefing.
Introduction of Arbitration Mechanism
One notable feature of the law is the introduction of a new mechanism for resolving disputes between parties through arbitration, provided both agency parties agree to it, and after the committee's decision is issued within the prescribed appeal period.
Promoting Foreign Investment and Competitiveness
Abdulla bin Touq Al Marri, the Minister of Economy, underscored in his opening statement that the new UAE Commercial Agencies Law is set to draw increased foreign direct investment and bolster the nation's competitive edge. He spotlighted substantial economic legislative reforms, including ten in total, with the Commercial Agencies Law standing out as a prominent example.
As The minister also underscored the government's commitment to engaging with the industry to ensure awareness and understanding of the law, emphasizing the importance of a legal framework that encourages foreign direct investment.