As already mentioned in our previous newsletters, Italian companies intending to market their products in the United Arab Emirates, may initially consider using intermediaries – a very frequent option in international practice – such as agents, distributors and franchisees.
In general terms, the rules governing agency relationships are included in Federal Law 18/1981 (Commercial Agency Law), as amended by Federal Laws 14/1998, 18/1981 and 2/2010. The legislation refers to a broad concept of Commercial Agency which applies both to agency relationships and to distribution and franchising relationships. Article 1 of the Commercial Agency Law reads: “The Trade Agency: means representation of the principal by an agent for the purpose of distribution, selling, display or rendering of a commodity or service in the State, against a commission or profit”.
The national legislation provides rules which essentially favour the agent by giving the latter multiple safeguards. In fact, only individuals with UAE citizenship, or companies whose capital is fully owned by individuals with a local citizenship, are entitled to pursue activities of Commercial Agency in a broad sense.
The agency agreement must first be registered at the DED (Department of Economic Development). The registration of the contract is essential for its validity.
Article 3 of the Commercial Agency Law reads “Any trade agency not registered in the above register shall not be considered, nor legal cases therefor shall be heard”, therefore explicitly providing that a contract of Commercial Agency which is not registered at the Ministry is invalid, so that no claim may be made by any of the parties.
The agent will then request the entry of the agreement into a specific register at the Ministry of Economy and Trade. Once the Ministry receives the request, it will issue a certificate of registration of the agent, requiring the publication of the data in the Official Gazette. The Commercial Agent, or his representative, must inform the DED of any changes in the contract within 60 days. Such changes will be published in the Official Gazette and the Ministry will inform the competent authorities within the following 30 days.
The Commercial Agency Law also provides the possibility to sign Commercial Agency contracts both for a fixed or an indefinite period of time. In the event of termination or discharge, the contract is cancelled from the Register of Commercial Agents.
Any dispute concerning registered Commercial Agency contracts is mandatorily subject -in the first instance- to the Committee for the Settlement of Disputes of Commercial Agencies, internal Committee to the Ministry of Economy and Trade, and only in case of a second degree proceeding, will it be possible to take the case to Court.
(Bologna Office–Linda Tontodonati – 0039 (0)51 2750020)
