Trading Regulations in Abu Dhabi for Commercial Agencies
International manufacturers and exporters may conduct business by concluding transactions directly with importers and traders already established in Abu Dhabi. This type of arrangement may be suitable for low-volume trade. However, for an ongoing business relationship, overseas companies may well want to consider a more permanent form of representation. Trade practices in the UAE are in line with normal international standards. As a sophisticated market, full technical specifications should be provided with CIF UAE prices and Middle East references. UAE is a member of WTO. Only importers who have the appropriate trade license may import goods into the UAE.
A foreign company wishing to supply goods and services from abroad, but without establishing a physical presence in Abu Dhabi, can appoint a Commercial Agent. The UAE commercial Agencies Law(Click to download) , Federal Law No. 18 of 1981, as amended by Federal Law No. 14 of 1988, and Federal Law No. 13 of 2006 (the ‘2006 Amendments’), and Federal Law No. 2 of 2010 (the ‘2010 Amendment’) regulates and governs the appointment of registered Commercial Agency Law is supplemented by, inter alia, the UAE Commercial Transactions Law, Federal Law No. 18 of 1993 (the’ Commercial Code’), implementing regulations, custom and practice.
Together, the Commercial Agency Law and the Commercial Code provide the primary regulatory frame work for agency relationships through which foreign businesses provide products and services in the UAE.
- Commercial Agents are entitled to receive commissions on sales in their designated territory irrespective of whether such sales are made by or through the Commercial Agent, unless otherwise agreed.
- Commercial Agents are entitled to prevent products subject to their agency from being imported into the UAE if the Commercial Agent is not the consignee, unless the UAE Council of Ministers has exempted the subject products from application of the Commercial Agency Law.
- A principal may not terminate or fail to renew the agency agreement unless there is a material reason justifying such termination or non-renewal. Either party is entitled to claim compensation for damages suffered and losses incurred due to termination or non-renewal of registered Commercial Agency.
- A registered Commercial Agent can preclude the foreign principal from appointing a replacement registered agent even if the registered agency was for a fixed term and expired, unless the former agent consents or the principal obtains a favorable decision from the specialized agency disputes committee or a court in the UAE.
- Commercial Agency Law provides that Commercial Agency Agreements shall be governed exclusively by UAE law notwithstanding any provision to t he contrary in the agency agreement.
However, due to the restrictive provisions in the Commercial Agency Law, foreign investors do not always prefer this route to set up business in UAE unless it is mandatory to appoint a Commercial Agent to distribute their products as per the local laws.
Source: Morison Menon