As already mentioned, an Italian company intending to market its products in the UAE, may initially consider using agents. It is important to bear in mind that in the UAE market the activity of commercial agency can only be exercised by local citizens, as provided in Article 2 of the Commercial Agency Law, which states: “The commercial agency business shall be conducted only by UAE nationals, whether natural persons or companies wholly-owned by UAE natural persons”.
The foreign company may, however, maintain control over the management of the commercial activity on site in various ways, such as through a representative office or branch or business corporation standing as a trading company.
For the purposes of the commencement of a commercial agency, it is necessary that a properly selected agent applies for the registration of the agency contract with the Ministry of Economy and Trade, the only authority responsible for issuing the license in accordance with local law.
For the purposes of registration of the contract some basic requirements must be fulfilled. First of all, the document must be in writing, translated into Arabic, legalized and authenticated (Article 3 “The UAE Commercial Agency Law requires all local commercial agents to register with the Ministry of Economy. A number of supporting documents must accompany the application for registration, including a copy of the commercial agency agreement, legalized by the UAE embassy or consulate in the foreign principal’s country and translated into Arabic”).
Moreover, the Commercial Agency Law states the minimum contents of the contract upon which the authority’s appropriate controls will be carried out at the time of registration. In this regard, Article 22 of the Law sets out that “a person performing commercial agency in violation of the law’s requirements shall be subject to a fine of not less than UAE Dirhams 5,000 –approximately US$ 1,350”.
Once the Ministry accepts the registration request, it issues a certificate of registration requiring the publication of the data of the agent in the Official Gazette. In general terms, the obligations of the foreign producer- company are specifically set out in the Commercial Agency Law. The obligations of the agent must instead be carefully regulated in the contract, as the only official obligation laid down by Article 21 of the Law relates to the need to supply replacements / spare parts if necessary. Further regulation of agency contracts can also be found in the Commercial Transaction Law, the provisions of which, however, apply only in a residual way.
(Bologna Office –Linda Tontodonati – 0039 (0)51 2750020).
