A noteworthy amendment in the Commercial Agency Law (Federal Law 18 of 1981) in UAE is currently the talk of the town. The recent amendment was issued by virtue of Federal law 11 of 2020, which is approximately after 10 years of the last amendment in the Agency Law. The Commercial Lawyers of Dubai will discuss the important clauses introduced in the Amendment law for a better understanding of the law.
The recent amendment is significant is because of the right granted to corporate entities with 51% national contribution to act as a commercial agent. While the Amendment carried a few changes to the Law, the unwinding for unfamiliar foreign investors was anyway constrained. Then again, the Amendment reconfirmed the legal assurances offered to commercial agents registered in the country.
Under the new Amendment the definition of an agent has been amended or broadened up for that matter. A natural or a legal person can act as an agent if the commercial activity is under taken by any local national individual, public legal entity, private legal entity owned by a public company, private entity owned by local shareholder and a public joint stock company whose 51% of shares are owned by local shareholders.
In addition, the amendment now allows the shareholders to transfer their shares to their heirs, in the event of their demise. A more stringent provision can be witnessed under the new Amendment with regards to the termination of the Agency contract. The amendment forbids the principal to terminate the Agency contract or even restricts them to not renew the contract without a justified reason for termination or non-renewal. Additionally, the law does not allow the agent to register a new commercial agency, until the previous agency contract was terminated mutually by both parties or the Commercial Agency Committee is convinced of the justified reasons for terminating the agency contract.
Another significant change in the amendment in the law is the jurisdiction awarded to the Commercial Agency Committee. The new Amendment offers an exclusive jurisdiction to the Committee, yet restricts their scope to entertaining disputes arising out of a commercial agency agreement. As compared to the earlier, the new amendment has reduced the scope of Agency Committee.
The Amendment in addition clearly promised the wide range of roles and powers offered to agents in the country, which are as followsU+0003A.
- Exclusive right of the agent to sell principal's goods ion the country and represent the principal;
- Agents right to claim commission from the principal on all transactions even on transactions concluded by principal or any third party;
- The right df the agent to block any parallel similar product imported by the any other company;
- The right to claim compensation ion the event the agency contract is terminated by principal without any justified reasons;
- Exclusive authority of the committee to resolve agency disputes;
- The termination of the agency agreement will not be allowed unless the principal states the justified reasons for such termination.
The aforementioned changes in the law will certainly have a deep impact on the existing agency agreements in the country and would require Top Lawyers of Dubai to review such agreement for ensuring safety of both parties rights.
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