Officials & legal experts confirm role of Commercial Agencies Law in enhancing the sector during a panel session organized by Ministry of Economy

New law also safeguards existing agencies’ investments and sets mechanisms to implement the provisions of agency contract termination by allowing a grace period of 2-10 years according to specific criteria

 The Ministry of Economy (MoE) organized a dialogue session at its Dubai headquarters to shed light on the technical aspects of Federal Law No. (3) of 2022 on the regulation of commercial agencies. The session was attended by H.E. Abdullah Al Saleh, Undersecretary of the Ministry of Economy; Dr. Muhammad Al Kamali, Director General of the Judicial Training Institute in the Ministry of Justice; Hassan Al Kilani, Principal Legal Adviser at the Ministry of Economy; and Essam Al Tamimi, Legal Adviser and Senior Partner and Founder of Al Tamimi & Co.

The session discussed the most prominent provisions and axes of the law, including the will dominance principle; pacta sunt servanda principle; the jurisdiction of the state courts in commercial agency disputes; mechanisms for settling disputes; and the provisions for the termination of current agencies. The participants deliberated on the impact of the new law and the balancing of the interests of both the principal and the agent, and the articles introduced by the law. These most notably include the enabling of the entry of goods and services during periods of disputes between the principal and the agent; settling of disputes and the development of a new mechanism by resorting to international arbitration; and the regulation of international companies practicing the business of commercial agencies in the country. The law also regulates the devolution of assets to the new agent at fair value according to clear and specific conditions.

Experts confirmed that the new Commercial Agencies Law has been drafted with a forward-looking vision that took into account the interests of the contractors in accordance with best practices followed globally in this regard. They pointed out that the law is the most important one concerned with the facilitation of trade and investment movement in the UAE, and it confirms the UAE's leadership in developing proactive legislation that puts citizens first and supports the country’s new economic model, enhancing its flexibility and global competitiveness.

Benefits for the business environment

During the session, H.E. Al Saleh confirmed that the new Commercial Agencies Law is in line with the UAE’s new economic model, and that it enhances the competitiveness of the business sector; establishes a favorable environment for the entry of UAE citizens into commercial agencies activity; and helps attract FDI into the country. He said that the law also takes into account the latest global practices in the governance of agencies to benefit the country’s business environment, which will help the sector increase its contribution to the sustainable growth of the national economy. H.E. further noted that the law will come into force six months after its issuance, that is, on June 16, 2023.

Ensuring uninterrupted flow of goods during disputes

Dr. Al Kamali said: “The new law resolved a very important issue, which is the flow of goods to the country’s markets during disputes between the principal and the agent or in the event of the termination of the agency. Earlier, the entry of goods into the country’s markets was not allowed during this period, which was enforced by the customs authorities. Also, the previous law did not give the UAE Cabinet the authority to issue an order to allow the goods temporarily until a dispute is resolved, which was affecting the national economy.”

Al Kamali pointed out that the new law resolved this issue by authorizing the Ministry of Economy to allow the entry of goods temporarily from exclusive sources until a dispute is resolved, while also preserving the agent’s right to be compensated for his commission according to the organizing regulations. These regulations will be issued by the Ministry of Economy, which will ensure the availability of basic commodities in the country’s markets, including medicines and spare parts, at all times.

Protection of existing agencies' investments

Meanwhile, Hassan Al Kilani explained that the new Commercial Agencies Law ensures that only UAE citizens can become commercial agents, and that it gives global companies the advantage of exclusivity for their products imported into the country by preventing others from trying to bring the products of the same company to the country through other dealers/distributors. This provision serves as a new opportunity to increase national investments in the commercial agency sector, attract international companies to practice commercial agency business; and increase their number in the country, especially since there exist only 6,000 commercial agencies over the 41 years since the issuance of the old law.

Furthermore, Al Kilani emphasized that the law has been developed in a way that does not harm the investments of existing agencies. To ensure this, it has established a mechanism to apply provisions of terminating the agency contract to be after two years (for valid commercial agency contracts). This period is ten years for commercial agencies that have been registered by  the same agent for more than ten years or commercial agencies where the agent’s investment exceeds AED 100 million. He further pointed out that the law stipulates the volume of investments but does not specify them, and that the agent whose investment volume exceeds AED 100 million must prove it so that the specified deadline applies to him.

Hassle-free international arbitration

Essam Al Tamimi, Legal Adviser and Senior Partner and Founder of Al Tamimi & Co., confirmed that the timing of the issuance of the new commercial agencies law is very important as it coincides with the significant economic boom witnessed by the UAE to become a major player on the global economic landscape. He explained that Article 26 related to the parties resorting to international arbitration (if both sides agree) is a very pivotal and important one, especially as it gives enough space for the parties of the agency contract to choose the method of dispute resolution between them away from the intervention of the concerned authorities. He pointed out that this reflects the forward-looking nature of this law to ensure fair rights to all parties.

Moreover, Al Tamim indicated that there will be no complications regarding the issue of international arbitration, especially since the UAE, by virtue of its accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2006, and after the issuance of the Federal Arbitration Law in 2018, the foreign ruling now comes directly from the arbitrator to the Court of Execution. This is contrary to what it used to be, when submitting a request to ratify the foreign arbitral award, appealing it and be appealed against. However, the current law does not stop the execution of the ruling if an appeal is filed against it or if one of the parties raises a complaint.