The UAE is determined to foster the attractiveness and competitiveness of the business environment in order to keep pace with future economic trends, a senior official said.
The UAE further aims to offer a legislative framework that will enable companies to promote the new economic model, particularly the commercial agencies sector, said Abdulla Al Saleh, Under-Secretary of the Foreign Trade and Industry at the UAE Ministry of Economy.
With innovative projects and crucial commercial activities, this sector significantly contributed to the country's development during the past several years; he pointed out. This allowed for the availability of a variety of services and goods for local markets, which improved the reputation of the national economy, the official added.
Al Saleh said this at a press conference to introduce the Federal Law No. (3) of 2022 on regulating commercial agencies.
“The new Law, which replaces the previous 40-year-long legislation, aims to accelerate the growth of commercial agencies in the nation by diversifying their activities, improving their economic performance, and increasing their contribution to the growth of the national GDP in accordance with the Principles of the 50 and the UAE Centennial 2071,”
he said.
“The Ministry of Economy has collaborated with all of its federal and local partners, the corporate sector, and other pertinent organisations. Following the constitutional processes established after the enactment of the nation's federal legislation, the revised law was further discussed in the UAE Federal National Council. These initiatives attempt to ensure optimum legislation that would best benefit the nation's economy, satisfy the goals of the current commercial agencies, encourage the national economy's flexibility, and support its openness to foreign markets,"
he added.
Al Saleh emphasised that the significance of the Federal Decree Law on regulating commercial agencies stems from its provisions, which are based on the principle of autonomy/will and that the contract is indeed a pacta sunt servanda [Latin for “agreements must be kept”].
“This creates an environment that is favourable for investment and safeguards the rights of parties per their agreement,”
he said, adding that the law would contribute to increasing national investments and FDI to the country.
"The law will further allow the businesses of commercial agencies to grow and prosper, by diversifying their activities, thereby ensuring the best products and services for consumers, and fulfilling their ambitions for competitive prices and high-level services. The law will further offer guarantees and after-sale services as well as create new job opportunities in the country,”
Al Saleh added.
Moreover, the new law allows the broad participation of UAE nationals as commercial agents, offering them an encouraging environment to establish new and innovative commercial and investment projects, he noted. The law will accordingly promote the flexibility of the national economy and enhance its international competitiveness, as well as consolidating the UAE’s position as a favoured destination for top regional and international companies and trademarks, the official added.
Al Saleh further highlighted the key provisions of the new law that will ensure the proactive approach of the country as follows:
The new law allows public joint-stock companies with at least 51 percent of national capital contribution to act as commercial agents, with the business of commercial agencies being exclusive to only UAE nationals in all kinds of agencies. This will contribute to creating new opportunities and fields for family companies owning commercial agencies, supporting their transformation to public joint-stock companies.
The new law stipulates a clause to specify the length of the agency contract in the event that the agent is asked to develop exhibition structures, retail establishments for goods, or maintenance or repair facilities. The duration of the contract will be for five years, unless the parties agree otherwise.
The law authorises the UAE Cabinet to allow any international companies to act as agents for their own products, as long as the products do not have/had an agent within the country.
The law prohibits practising agency in the country, unless registered in the commercial agencies' records in the Ministry of Economy. Any non-registered agency is not counted.
The new law determines specific termination clauses.This benefits the national economy and ensures that consumers receive the best products and services at fair prices from current and prospective agents, such as national companies, who are anticipated to enter the market. The law also pushes representatives to improve their work in order to maintain the relationship.
The law develops a set of controls and provisions for the expiry of commercial agency and the duration of notification (a year or half of the remaining contract period, whichever is less, unless otherwise is agreed upon). The law further organises the devolution of the commercial agency's assets, with recognition of the right to claim just compensation per specific and clear terms.
The new law addresses the disruption of goods and services in the case of a dispute between the agent and the client to ensure uninterrupted access of products and services to the country during the dispute. It also grants the Ministry of Economy the authority to assign specific resources for the entry of products and services for interim period, with indemnities extended to the commercial agent for any compensation given by irrevocable court verdicts to his favour.
The formation of commercial agency committee will be made by the decision of the UAE Cabinet. The committee will be specialised in resolving the dispute between the registered agency parties. Before presenting the matter to the Committee, the dispute cannot be admitted in court.
The law introduces a new mechanism to resolve disputes between parties by agreeing to go to arbitration, whenever agreed by the two parties.
Per the recommendation of the Minister of Economy and in coordination with the specialised entities, the law allows the Cabinet to release any activities or materials from the agencies in accordance with the specific regulations, under the condition that the Cabinet will set a date to edit these activities or materials.
Moreover, the official emphasised that the Federal Law on the regulation of commercial agencies targets various categories that will benefit from its provisions and outcomes, including national business owners, companies, and entrepreneurs, as well as local and international commercial agencies wishing to relocate their activities to the UAE, and local and foreign investors.
He also noted that the law comes into force six months after its proclamation in the official gazette on 16th June 2023. However, reiterating the termination provisions regarding the current agency contract in the instances, respectively of non-renewal, or termination for convenience will not imminently apply. However, it applies as the following:
After two years of valid commercial agency contracts.
If contracts have already been existing with the same agent for the past 10 years since they were registered or where the size of the agent's investment exceeded AED100 million, thereby protecting stability and national investments in this vital sector.
Al Saleh concluded his statement by emphasising that the law is a new landmark in the future legislative structure initiated by the country to increase national and foreign investments. The law further guarantees the best services for consumers, hence ensuring the sustainable development of the national economy and enhancing the country’s position as an attractive hub for future economic models.
News Source: Emirates News Agency
