UAE has keenly been on the way to becoming a global player. UAE’s ambitious administration and rapid modification in laws, clearly show their passions and plans. Simultaneously, it has brought a number of changes to its current laws to accommodate foreign entities and businesses into the local markets.
In the year 2022, the federal law also called the New Commercial Agency law was introduced to the legal framework of United Arab Emirates. This has been a crucial and much awaited, milestone in the business hierarchy in the UAE.
The Federal law was published at the end of the year 2022 and was effective from the middle of the year 2023. Let’s discuss further on this law known as New Commercial Agency Law. For legal knowledge and explanations, you can get deep by visiting Ask The Law.
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This law has been replaced by a long-standing law of 1981. This change signals the shift towards more cohesive and compliant rules and regulations for commercial agencies inside the UAE. A 40-year-old Federal law was replaced with a new one. According to the critiques, the previous law was stated to be biased towards the local agents. It supported and favored the local agents which hindered the way for the free engagement of foreign entities.
Furthermore, the critics also suggested a more equitable procedure to be placed to encourage the foreign entities in UAE markets. This way, a better and flexible and adaptable work plan was introduced. It was introduced in 2022 to put an end to perception.
Relationship between Agent and Principal
The New Commercial Agency law fosters more business-friendly policies and rules. It means the new commercial agency law, puts an emphasis on the transparency. The plan is to build a better and transparent relationship between the principal and agent. This has paved a path towards building an open and clearer relationship between the two.
Additionally, the New Commercial Agency law has expanded its provisions to ensure greater autonomy. Based on new law, both parties enjoy more freedom over the timeframe and termination of the registered agency contracts. The new legislation has further broadened the scope for foreign entities and international businesses to come to the UAE market.
They can more easily get in to commercial activities. However, according to the New Commercial Agency law, there are specific set conditions that must be met and adequate permissions are required. The UAE cabinet needs to give the necessary approvals and also meet the conditions. According to the New Commercial Agency law, a lot of changes have been brought to the landscape of authorized agents; this is done to ensure preserving and also ascertain the foundational principles. Similar to the prior law, there is still a requirement for commercial agents. It requires UAE nationals or entities that are wholly owned by them.
Eligibility Criteria
A significant shift is made to extend the eligibility criteria. The expansion of criteria is aligned with the amendments introduced in the law. This is done to diversify the pool of eligible entities that can act as commercial agents inside the UAE. With the implementation of the New Commercial Agency law, a business-friendly environment will be created. It will not immediately impact the existing registered commercial agents. A reasonable grace period of 2 years from the date of enactment is given before the new termination rights came into effect.
According to the revised legal provisions, the previous existing commercial agent agreement won’t change. The agreements that are registered with the commercial agent over a decade with more than AED 100,000 will remain. There are still some exceptions that remain to ensure the duration for 10 years’ time. According to the changes, this law stipulates the need for an exclusive arrangement for a commercial agency within any state of the Emirates of UAE. Moreover, any agency agreement that lacks exclusivity to meet the eligibility criteria will not qualify. Moreover, certain situations require mandatory registration.
Previously, there were limited termination rights for foreign principals. There was a massive reluctance among principals to register their qualifying agreements. Registering the agreements with MOE = Ministry of Economy. The new amendments, efforts are made to include the contractual provisions.
Now the foreign principals will have a sense of comfort to register for the new commercial agency contract. Now the registered ones will instill more advantages that will halt the grey market goods. It will also stop the parallel imports.
The introduction of New Commercial Agency law signifies a transitional shift toward a more balanced landscape of the principal and agents. The new law marks a step towards guiding foreign principals and agents to swiftly enter the UAE market. The new commercial agency law brings in transformational legal provisions that will allow more scope for foreign entities and international companies to easily operate within the UAE.
