Commercial Agents

Apart from establishing locally in the UAE, foreign companies also have the option to have a commercial agent represent their interests in the UAE. The appointment of commercial agents, sales representatives, and distributors is regulated by the UAE Commercial Agencies Law.

According to this law a Commercial Agent must be a UAE national or a company owned 100% by UAE nationals and registered with the Ministry of Economy. The agency agreement between the Commercial Agent and Foreign company (in this case referred to as Principal) must also be registered at the Ministry of Economy in order for it to be recognised under UAE law and protect the Agent. The Agent is considered to be in a relatively weak position compared to the Principal and as such the Law tends to be in favour of and protect the Agent.

The agent is entitled to commission on sales of products within their territory to which they are entitled to exclusivity (normally one or more of the emirates). This is the case whether the sales have been made through the agent or not, unless otherwise agreed beforehand.

The Agreement

The process of choosing an Agent and entering into an agreement should never be rushed as the agreement is a binding contract. It is advisable to seek expert advice and for both parties to perform a background or reputation check. 

Termination of the agreement can result to be a difficult process especially if the Principal and Agent disagree. Moreover the agent is entitled to significant compensation by the Principal if the agreement is terminated or not renewed without justification. In this case, an agent can also prevent the Principal from appointing a replacement. It is not set out clearly in the Law how payment for compensation is calculated, however the duration of the agreement, net profit generated by the agent and his demonstrable efforts in promoting the Principal’s services or products, are often taken into consideration.

An agreement can normally be terminated with the express agreement of both parties. If the parties do not agree, a valid reason for termination must be presented to the Commercial Agencies Committee to decide, however there are no clear specifications as to what qualifies as a valid reason. In practice, so far it has been shown that it involves action or non-action on part of the agent which results in damage of the reputation of the Principal, breach of the Agency Law, failure to honor any terms of the agreement and if the agent takes part in activities that compete with those of the Principal. The decision of the Committee can be appealed before UAE courts.