UAE: 2 exemptions announced as commercial agencies' law come into effect

The recently introduced UAE Commercial Agencies Law applies to existing agencies except in two instances, a senior official said on Monday. Hasan Al Kilany, senior legal counsel, Ministry of Economy, said the new law doesn't apply only in cases of "non-renewal or early termination of convenience."

He added that other than these instances, the whole law with the associated subsequent articles and paragraphs applies to the standing agencies. This means the law will not be applicable in case of non-renewal of commercial agency agreements. It allows either the agent or the principal to terminate the commercial agency agreement prior to its term based on the terms of the agreement.

The new commercial agencies law came into effect on June 16, 2023, which will apply to all sectors. The business of commercial agencies will be exclusive to UAE nationals as well as public joint-stock companies with at least 51 per cent of nationals.

The law affirmed that it is not permissible to engage in commercial agency business in the UAE except for those who are registered in the Commercial Agencies Register at the Ministry of Economy. Any commercial agency that is not registered in this register is not considered.

The new law also dealt with the phenomenon of interruption of services and goods when there is a dispute between the principal and the agent to ensure the consistency of the flow of goods and services during this period. The Ministry of Economy is responsible for determining exclusive alternative sources for a temporary period, provided that the principal is responsible for any compensation decided in favour of the agent by a final judicial decision.

"In a dispute between two parties, the consumer will be in jeopardy. He will not get a continuous supply of the items or goods subject to the agency. The new law has an explicit article where the principal can approach the ministry and ask to appoint an exclusive resource so that goods will still go into the local market from an exclusive source. However, if in case the court rules in favour of the agent, then the principal has to compensate the agent," he said during the briefing, which was organised by the Ministry of Economy and law firm Al Tamimi & Co.

The law introduced a new mechanism for settling disputes between the parties by resorting to arbitration whenever the agency parties agree to that and after the committee's decision is issued within the prescribed appeal period.

While giving opening remarks, Abdulla bin Touq Al Marri, Minister of Economy, said the new UAE Commercial Agencies Law will attract more foreign direct investment and increase the country's competitiveness.

He said the UAE changed 40 laws in 3 years 10 of them related to the economy, and the most important was the commercial agencies' law.

He pointed out this law was misunderstood on social media, but the ministry kept going, and the government wants to engage the industry to keep it aware of this law.

"Our responsibility as policymakers is that legal framework frame conducive encourages FDI," said the minister.

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