Sheikha Lubna bint Khalid Al Qasimi, Minister of Economy, outlined the major amendments the Cabinet has introduced to the existing Commercial Agencies Law, pending their ratification by decree from HH Sh. Khalifa bin Zayed Al Nahyan, President of the UAE.
In an exclusive statement made to The Emirates News Agency, Al Qasimi said that the Ministry of Economy's proposed revision of the Commercial Agencies Law stems from a desire to improve the competitive environment for the UAE economy and provide high quality agency services to consumers.
Al Qasimi confirmed that a revision of the Commercial Agencies Law was required to bring it fully into conformity with the laws and regulations of other jurisdictions as far as concerns commercial contracts and exclusive agency rights, to improve transparency in the agent-principal dispute resolution process through the referral of disputes to the courts and to ensure that price stability is maintained through the enforcement of price controls with respect to exclusive agencies.
Al Qasimi said that amendments to Articles 8 and 9 of the Commercial Agencies Law state that a principal may not terminate the agency except for good cause and that an agency may not be reregistered in the name of a different agent on the Register of Commercial Agencies except after the term of the agency has expired without being renewed by agreement of the parties or after the agency has been revoked by mutual consent of the parties or pursuant to a Court order directing the deregistration of the agency.
She said that by virtue of the amendments, the agency contract shall be limited to a certain duration and shall expire at the end of its term unless the parties agree to extend its duration within one year prior to the expiration date, adding that, prior to revision, the law stated that a commercial agency, including one for a fixed term, could not be terminated without good cause acceptable to the Commercial Agencies Committee or a final Court decision or the consent of the agent himself or the agent electing not to renew the agency for a year and paying the fees during that year as from the date of expiration of the agency.
Al Qasimi stressed the importance of the changes in these two articles in that a commercial agency could be renewed only at the mutual consent of the parties which would help balance out the relationship between the principal and the agent and ensure that it endures in stable fashion without any prejudice being cause by either party to the other especially since the present law prohibits the entry of products into the market when there is a dispute between the agent and principal.
Citing the benefits of the amendments to those two articles, Al Qasimi said that the agent will now strive to provide services or distribute goods in accordance with the terms stated in the contract thus promoting an atmosphere of trust among the agent and the consumer, while the agent would still reserve the right to recover damages from the principal in Court in the event of damage caused by the termination of the contract.
Al Qasimi also pointed to an amendment in Article 23 of the Commercial Agencies Law under which no goods or products of the same brand shall be allowed into the country without the agent's approval, with the exception of those specified by the Cabinet as liberalised goods.
Al Qasimi said that this amendment comes on the heels of the Government's recent efforts to liberalise goods based on market surveillance showing that some exclusive agents are selling their goods at unjustifiably high prices.
Included in this framework is the list of main consumer goods previously approved by Cabinet decision, comprising 15 items.
She mentioned that the amendment authorizes the Ministry of Economy to delete commercial agencies dealing in such items from the Register of Commercial Agencies, adding that goods listed on the Register of Commercial Agencies could only be imported by the respective agent registered with the Ministry of Economy although the amendment does not affect the requirements for the registration of commercial agencies and the UAE citizenship restriction on eligibility to register and agency.
Al Qassimi pointed out that amendments were also made to Article 27 regarding the appointment of the Commercial Agencies Committee and Article 28 concerning the functions of the committee to the extent of doing away with that committee which had been set up under the current law to consider and decide agency related disputes.
She clarified that this amendment was in line with the global trend towards greater transparency in the judicial process and the referral of all commercial cases to the courts for an appropriate decision.
Against this backdrop of reform, Sheikha Lubna bint Khalid Al Qassimi concluded her statement by urging UAE businessmen looking to sign a commercial agency contract to first check the period mentioned in theCommercial Agencies Law and whether the agent's proposed investment is commensurate with the term of the agency as well as carefully scrutinise the clauses of contracts and the terms stipulated regarding renewal and the compensation payable upon termination of the agency or in the event that a dispute should arise between the parties.
352 and 219 Agencies Registered and Deregistered Respectively
Statistics from the Ministry of Economy indicate that 352 commercial agencies were registered at the Ministry during the past year, 234 in Abu Dhabi, 100 in Dubai and 18 in Sharjah and the other Northern Emirates. In the first quarter of the current year this figure reached 73 commercial agencies, 52 in Abu Dhabi, 17 in Dubai and 4 in Sharjah and the Northern Emirates. 219 commercial agencies were deleted in the past year, 146 in Abu Dhabi, 70 in Dubai and 3 in Sharjah and the Northern Emirates while 54 agencies were deleted during the first quarter of the current year, 38 in Abu Dhabi and 16 in Dubai. A total of 3,254 commercial agencies were renewed with the Ministry during the past year, 2,333 in Abu Dhabi, 832 in Dubai and 89 in Sharjah and the Northern Emirates while 773 agencies were renewed during the first quarter of the current year, 547 in Abu Dhabi, 210 in Dubai and 19 in Sharjah and the Northern Emirates.
To Avoid Disputes between Agent and Principal
Agencies must be approved for registration before they can be registered.
Sheikha Lubna bint Khalid Al Qassimi, Minster of Economy, has issued a Ministerial Decision concerning registration on the Commercial Agencies Register.
The Decision states that no agency may be registered on the Commercial Agencies Register at the Ministry unless the agency contract includes a clause indicating the parties' agreement to register the agency on the Commercial Agencies Register or the agent provides a letter from the principal expressing his consent to the registration of the agency on the Commercial Agencies Register.
The decision, which took effect on 16th April, was issued after reviewing Federal Law No. 18 of 1981, as amended by Law No. 14 of 1988 regulating commercial agencies, and Ministerial Decision No. 47 of 1989 promulgating the implementing regulations of the Law Regulating Commercial Agencies, as amended.
Naguib Malallah Al Mussali, Deputy Director of the Commercial Agencies Department at the Ministry of Economy stated that the decision was in harmony with amendments to the Commercial Agencies Law and aims to create transparency such that the agent and principal would be clear and in mutual agreement as to their respective rights and obligations under the law thus ensuring the handling of the agency contract in accordance with the Commercial Agencies Law.
Mr. Mussali explained that the purpose of the decision is to avoid the difficulties that used to arise in the past when some principals came to know that commercial agencies had been registered in their name at the Ministry without them having knowledge of the agencies law in force in the UAE.
Mr. Mussali confirmed that the revision meant that principals could no longer plead ignorance of the Commercial Agencies Law with regard to termination and the rights of the agent and principal.
© Al Tamimi & Company 2006
