The biggest update to UAE's long-established Commercial Agency Law throws in greater transparency into agreements between international brands and their local partners. Image Credit: Shutterstock

Dubai: Allowing 100 per cent foreign ownership across sectors had to be the single biggest reform the UAE has brought into the business and corporate space in the recent past. Because so much of change was brought into play to decades on doing business in a certain way.

The changes don’t end there - a close second would have to be the tweaks the UAE made to the Commercial Agency Law. Tweaks, because rather than wholesale changes to the prevailing eco-system that governs international brands’ relationships with their local partner, the emphasis is on the incremental. And offers greater clarity on other points.

In an interview, Essam Al Tamimi, Chairman at the law firm Al Tamimi & Co., gives a walk through to how the UAE’s updates to the Commercial Agency Law will pan out.

Under the new Law, are there any activities that have been excluded from the need to have a commercial agent?

No specific activities have been excluded from the need to have a commercial agent under the new law. But it does lay down that the UAE Cabinet of Ministers may provide a list of specific products and services that will not qualify for registration under the Commercial Agency Law.

This will entail the de-registration of any agency covering products and services that have been excluded. We are awaiting developments from the Cabinet in this respect.

An international brand becoming its own principal agent – will that be only in rarest of rare cases?

Foreign MNCs may be permitted to carry out commercial agency activities in the UAE even if such companies are not owned, wholly or in part, by UAE Nationals. Provided that (a) such companies are, specifically, licensed by a resolution from the UAE Cabinet to conduct commercial agency activities, and (b) the relevant goods or services in question have no existing local agent(s) in the UAE, and the agency should be new (not registered before).

In other words, and, subject to the aforementioned UAE Cabinet’s approval, foreign MNCs may be permitted to carry out the business of commercial agencies within the UAE. So long as there are no existing commercial agencies that already exist and operate in the UAE in respect of the underlying goods and services.

If an international brand is entering the UAE market, what will be the biggest differences between its agreement with a commercial agent from ones in the past?

There are no standard requirements for commercial agency agreements. Therefore, each agreement may be different than the other and it is up to the parties to set out the agreement terms.

"The new law affords more flexibility to the parties to agree contractual terms between themselves, including the right to agree on arbitration and the unilateral termination terms of commercial agency agreements." - Essam Al Tamimi of Al Tamimi & Co. Image Credit: Source: Al Tamimi & Co. Website

Yet, it is worth highlighting that such termination rights are not devoid of limitations set out in the new law, unless the parties agree otherwise. Based on such changes, we expect the main differences in new commercial agency agreements to be related to the termination and dispute resolution clauses.

The revised agency law puts emphasis on arbitration. Is it the Ministry of Economy that plays the role of arbiter?

The new gives the parties contractual freedom to agree in their commercial agency agreements on settling disputes though arbitration in or outside the UAE. As an alternative to litigation before the UAE courts.

The parties can agree on all of the arbitration terms, including appointment of arbitrators and the arbitration institute that should oversee it. If a dispute arises and the parties resort to arbitration, the arbitrator(s) are appointed in accordance with the terms set out in the parties’ agreement. The Ministry of Economy plays no role in that ensuing arbitration process.

The Commercial Agencies Committee in the Ministry of Economy will continue to examine disputes between agents and principals, as a pre-requirement for submitting disputes before the courts and/or arbitral tribunals.

Will these arbitration proceedings be handled on a fast-track basis?

If the parties have not agreed on the set of rules applicable to the arbitration, then it is up to the arbitrators appointed by the parties to agree on these. Including whether or not the arbitration proceedings be handled on fast-track basis.