The UAE’s updated Commercial Agencies Law went into full effect on June 16, 41 years after the previous law had been implemented.
The updated version of this law comes as part of the UAE’s efforts to enhance the attractiveness and competitiveness of the business environment to keep pace with future economic trends, and to provide a stimulating legislative framework for business models that support the country’s new economic model.
The number of agencies in place under the old agency law reached 6,000 over 41 years, and this update will contribute to increasing flows of goods and enable the UAE to attract more companies and foreign direct investment.
The commercial agencies sector has played an important role in supporting the UAE’s development processes over the past years with pioneering projects and vital commercial activities, which provided many services and products to the country’s markets, and led to enhancing the positive reputation of the national economy, according to the UAE Ministry of Economy.
Read: Significant changes under the new UAE Commercial Transactions Law
Under the new version of the law, new companies and their owners can now take full advantage of the 100 percent ownership option that it currently allows across the categories set by the Cabinet.
The benefits will be spread across several sectors – retail, services, and consulting, among others – and will also serve as a beacon for international companies to expand their presence in the UAE. The new law specifically allows international companies that do not currently have an Emirati agent to play this role. The Cabinet allowed any of the international companies that are not owned by UAE nationals to act as agents for products they own, provided that such agency is new, has never been registered, and does not have a commercial agent registered for it in the UAE.
This is one of the most important reforms introduced to the law.
This law would also increase the flexibility of establishing companies that already exist in the country.
The timeframe for the application of such provisions is extended to 10 years in the case of commercial agencies that have been registered under the same agent for more than 10 years or for commercial agencies in which the volume of the agent’s investment exceeds one hundred million dirhams, and a period of two years for agencies in force for less than that period or those in which the volume of the agent’s investment is less than 100 million dirhams.
The new law broadened the legal basis for dissolving a registered commercial agency, whereas the previous version linked the termination of a registered commercial agency to a court order. It specified explicit and specific cases for the expiration of the commercial agency contract in the interest of the national economy and to provide the best services and prices to consumers through fair competition between agents, whether current or likely to enter the market from national companies.
It also allowed public shareholding companies established in the State whose share of UAE nationals is not less than 51 percent of their capital, to practice the business of commercial agencies while limiting the practice of commercial agency business to citizens only in other legal forms.
The new law allows parties to resolve agency disputes through an arbitration agreement, which was previously not allowed. It stipulates the establishment of a committee called the “Commercial Agencies Committee”, whose composition, work system, remuneration of its members, and fees for hearing disputes before it shall be issued by a decision of the Cabinet.
A committee shall be established under the name of the “Commercial Agencies Committee”, and
a resolution shall be issued by the Cabinet to determine its formation, work system, member
remuneration and fees for hearing disputes before it.
The Committee shall be responsible for hearing disputes that arise between the parties to a
Commercial Agency registered with the Ministry, and no case may be admitted before
courts in this regard before referral to the Committee.
The law allows the committee to seek the assistance of whomever it deems appropriate to perform its duties, and it must decide on the dispute within 120 days from the date of submitting the request, otherwise, any party may resort to the judiciary within 60 days from the date of expiry of this date.
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