To conduct business activities in the UAE, reasonable commercial agency arrangements are crucial. It is regulated by the relevant laws of the federation and each emirate. Local citizens, various legal entities and certain international companies can act as agents. The agency contract must clearly define key contents such as rights and obligations, and must be signed in writing, notarized and registered. There are many situations in which termination may occur, and matters such as inventory, customer handover, fee settlement and compensation must be properly handled in the future to protect the rights and interests of all parties.

Table of Contents

I. Applicable Legal Framework 2. Qualifications of the Agent 3. Key points of agency contract 4. Registration Process 5. Termination of agency relationship and subsequent handling

I. Applicable Legal Framework

　The core law regulating commercial agency activities in the UAE is Federal Law No. 18 of 1981, the Commercial Agency Law, which has been amended many times, including Federal Law No. 14 of 1988, Federal Law No. 13 of 2006, and Federal Law No. 2 of 2010, to adapt to the changing economic situation. In addition, each emirate will also introduce supplementary local regulations to regulate commercial agency activities in accordance with local conditions. For example, Dubai, on the basis of following federal laws, has formulated more targeted provisions for commercial agents in specific industries or regions. In free zones, there are also independent regulatory regulations, which present different regulations from local regulations in terms of company establishment, operation and commercial agency. Before enterprises carry out commercial agency arrangements, they must thoroughly study these legal provisions to ensure that their actions are legal and compliant.

2. Qualifications of the Agent

(I) Local entities

Natural citizens: UAE citizens have a natural advantage in the field of commercial agency. They can quickly open up promotion channels for products or services by relying on their familiarity with the local market. Their accumulated personal connections and accurate grasp of local consumption habits help the agency business to be carried out efficiently.

Legal entities:

Public legal persons: Such legal persons are usually closely related to the government. In some commercial agencies involving public resources, infrastructure and other fields, they can rely on their special status to strive for favorable conditions for partners and promote the smooth implementation of projects.

Private legal persons (held by public legal persons): Combining the resource advantages of public legal persons with the flexible operating mechanism of private legal persons, in commercial agencies in specific industries, they can integrate resources from multiple parties and achieve rapid development.

Private legal persons (wholly owned by natural citizens): Such legal persons have relatively flexible decision-making mechanisms and can respond quickly in market competition. Relying on the local background of shareholders, they have a deep understanding of local market needs and provide strong support for agency business.

Public joint-stock companies (with domestic citizens holding not less than 51%): have strong fund-raising and operational capabilities. In large-scale commercial agency projects, they can raise funds by issuing stocks and other means to provide sufficient financial guarantees for the expansion of agency business.

(II) International companies (under specific conditions)

The Cabinet, on the advice of the Minister of Economy, allows certain international companies to engage in commercial agency for their own products. However, they must meet a series of strict conditions: no commercial agency has been established in the UAE before; it is the first time to register as a commercial agency in the country; and the business is carried out within the scope and conditions stipulated by the Council of Ministers. This regulation has opened up limited but valuable space for international companies to carry out commercial agency business in the UAE.

3. Key points of agency contract

(I) Content of the contract

Rights and obligations: It is crucial to clearly define the rights and obligations of the agent and the principal. The agent has the right to promote, sell products or provide services in the designated area, and must also assume obligations such as actively expanding the market and maintaining the brand image; the principal should ensure the stable supply of products, provide necessary technical support and market promotion assistance, etc. For example, in an electronic product agency contract, the agent is responsible for carrying out product promotion activities in Dubai, and the principal is responsible for supplying products on time and in quantity, and providing product maintenance technical training.

Agency area: The scope of the agency area must be clearly defined, which can be a certain emirate, part of the emirate or the entire UAE. The clear division of regions helps to avoid market conflicts between agents and protect the interests of all parties. For example, in the agency contract of a clothing brand in the UAE, the Emirate of Abu Dhabi is designated as the exclusive agency area, and the agent has exclusive sales rights in the area.

Scope of products or services: List the types of products or services of the agency in detail to prevent disputes due to unclear definition of the scope of products or services in the future. Taking the catering service agency as an example, it is necessary to clarify whether the agency is fast food business, formal dining business, or covering a variety of catering models.

Commission and profit distribution: Accurately determining the commission calculation method, payment time and profit distribution ratio is the key to ensuring the agent's income. Common commission calculation methods include extracting a certain percentage of sales and calculating a fixed amount based on sales volume. For example, in a cosmetics agency contract, it is agreed that the agent will extract a commission of 15% of sales and settle it once a month.

Contract term: If there is no special agreement, the general contract term can be determined by negotiation between the two parties. However, when the agent needs to invest resources to build exhibition structures, retail stores or maintenance facilities, the contract term is usually 5 years. This provision is intended to ensure that the agent's initial investment can obtain a reasonable return and promote the long-term and stable development of the market.

Termination and renewal clauses: Clarify the circumstances of contract termination, such as contract expiration, breach of contract by one party, force majeure, etc., and the corresponding handling methods. At the same time, stipulate the conditions and procedures for renewal, such as advance notice period, performance evaluation standards, etc. For example, a certain agency contract stipulates that if the sales of the agent fails to reach 80% of the agreed target for two consecutive quarters, the principal has the right to terminate the contract in advance; if both parties intend to renew the contract, they must notify the other party in writing 3 months before the expiration of the contract and renegotiate key terms such as commission.

(II) Contract form

According to legal provisions, commercial agency contracts must be presented in written form and notarized to ensure the legal effect and seriousness of the contract. After the contract is signed, it must also be registered in the commercial agency register of the Ministry of Economy. Unregistered commercial agency contracts have no legal effect. This series of requirements is intended to protect the legitimate rights and interests of both parties to the contract and maintain market trading order.

4. Registration Process

(I) Preparation of application materials

Agency contract: A notarized complete agency contract text must be submitted. The content of the contract should comply with legal provisions and cover the above key points.

Certification of principal qualifications: The agent must provide documents that can prove that it meets the principal qualifications, such as the identity certificate of UAE citizens, the business license of the legal entity, the company charter, etc., to prove that it has the legal qualifications to engage in commercial agency business.

Other relevant documents: In some cases, it may also be necessary to provide the client's business registration certificate, relevant certification documents for products or services, etc. The specific requirements vary depending on the type of business and the emirate where it is located.

(II) Submission of registration application

Submit the prepared application materials to the registration agency designated by the Ministry of Economy or the relevant free zone authority. The submission methods usually include online submission and offline window submission. Enterprises can choose a convenient method according to their actual situation. When submitting an application, it is necessary to ensure that the materials are complete and accurate to avoid application delays due to material problems.

(III) Review and approval

After receiving the application, the registration agency will strictly review the materials, focusing on the legality of the agency contract, the compliance of the principal qualifications, and the authenticity of the materials. If any problems are found during the review process, the applicant will be notified in a timely manner to supplement or modify the materials. After the review is passed, the registration agency will issue a commercial agency registration certificate, which means that the agency business has been officially recognized.

5. Termination of agency relationship and subsequent handling

(I) Termination Circumstances

Contract expires without renewal: When the term agreed in the contract expires and the two parties fail to reach a renewal agreement, the agency relationship automatically terminates. For example, the term of an agency contract is 3 years. After the expiration, the two parties evaluate and believe that the changes in the market environment are not conducive to continued cooperation. The contract is not renewed and the agency relationship terminates.

One party breaches the contract: If the agent fails to perform the obligations of promotion and sales as agreed in the contract, or the principal fails to guarantee product supply and provide technical support, it constitutes a breach of contract. The party that abides by the contract has the right to terminate the agency relationship in advance according to the contract and require the breaching party to bear the corresponding compensation liability. If the agent fails to complete the prescribed sales task for several consecutive months, the principal has the right to terminate the contract in accordance with the contract and require the agent to compensate for the losses caused by poor market promotion.

Force majeure: If the contract cannot be continued due to force majeure events such as natural disasters, wars, and major adjustments to government policies, the agency relationship can be terminated according to law. For example, due to a sudden war, logistics and transportation are blocked and products cannot be supplied normally, the two parties can negotiate to terminate the agency contract.

Agreed by both parties: During the performance of the contract, if the two parties reach a consensus through friendly negotiation due to strategic adjustments, operational difficulties, etc., the agency relationship can be terminated in advance. For example, the principal plans to adjust its global market strategy and decides to withdraw from the UAE market. After reaching a consensus with the agent, the agency contract is terminated.

(II) Subsequent processing

Inventory processing: After the agency relationship is terminated, the inventory products in the hands of the agent must be properly handled. The principal can repurchase them, the agent can handle them on its own (under the premise of complying with the contract agreement and legal provisions), or the two parties can negotiate other solutions. For example, the principal repurchases the remaining inventory products of the agent at cost price to avoid waste of resources.

Customer handover: The agent should transfer customer information, sales channels and other relevant information to the principal or its designated new agent in an orderly manner in accordance with the contract agreement to ensure the continuity and stability of customer service. For example, the agent organizes customer lists, transaction records and other information to assist the new agent to smoothly take over customer resources.

Expense settlement: Both parties need to make a comprehensive settlement of commissions, payments, expense reimbursements, etc. during the agency period. The principal shall pay the commission and fees due to the agent in a timely manner, and the agent shall also settle debts such as payment for goods with the principal. For example, both parties shall complete all fee settlement within 1 month after the termination of the agency relationship to avoid financial disputes.

Compensation and Indemnity: If the agency relationship is terminated due to breach of contract by one party, the breaching party shall compensate the abiding party in accordance with the contract agreement and legal provisions. When the contract expires normally or terminates due to force majeure or other reasons that are not attributable to both parties, if the agent suffers losses due to the initial investment, appropriate compensation may be negotiated based on the principle of fairness. If the contract is terminated early due to breach of contract by the principal, the principal shall compensate the agent for the marketing expenses, expected profit loss, etc.; if the contract is terminated due to force majeure, the two parties shall negotiate to share part of the losses of the agent in the initial construction of the retail store.