Distribution & Commercial Agency Disputes Under UAE Law

Introduction

Commercial relationships between foreign suppliers, brand owners, local distributors and commercial agents play an important role in trade within the United Arab Emirates. These relationships may involve the distribution, sale, promotion or supply of goods and services within a specified territory.

The legal framework that applies to such arrangements depends mainly on whether the relationship is registered as a commercial agency with the Ministry of Economy and Tourism. The main law that regulates registered commercial agencies is Federal Law No. 3 of 2022 Regulating Commercial Agencies. Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law repealed Federal Law No. 5 of 1985 and came into force on 1 June 2026. Other distribution arrangements are generally covered by Federal Decree-Law No. 50 of 2022, promulgating the Commercial Transactions Law.

Disputes commonly arise over exclusivity, commissions, direct sales by the principal, termination, non-renewal, compensation, inventory, customer relationships and the removal of an agency from the Commercial Agencies Register. The first question in any such dispute is therefore whether the arrangement qualifies as a registered commercial agency or an ordinary distribution agreement.

Registered Commercial Agencies

Registration and Validity

All commercial agencies shall be registered in the Commercial Agencies Register maintained by the Ministry in accordance with Articles 3 and 4 of Federal Law No. 3 of 2022. The agent must be appointed by the original principal in a written and notarised contract.

Registration is therefore fundamental. An arrangement that is not registered does not qualify for the statutory rights and protections available to registered commercial agencies under the Commercial Agencies Law.

Under Article 2(1) of Federal Law No. 3 of 2022, the practice of commercial agency business in the UAE is generally limited to individual citizens and companies or establishments wholly owned by a UAE citizen, a public legal person, a private legal person owned by public legal persons, or a private legal person wholly owned by UAE citizens. As an exception, Article 2(3) permits a public joint-stock company incorporated in the UAE to conduct commercial agency business where UAE citizens hold at least 51 per cent of its capital, subject to the procedures, controls and conditions prescribed by the Cabinet under Article 2(4).

Under Article 2(2), the Cabinet may, upon the Minister’s recommendation, permit an international company that is not owned by UAE citizens to conduct commercial agency business in respect of products it owns, provided that the agency has no existing commercial agent in the UAE and is new and has not previously been registered in the UAE.

Exclusivity and Commission

According to Article 7, the principal may choose to seek help exclusively in the defined region from one agent for the United Arab Emirates or from different agents for one or more particular emirates or groups of emirates. According to Article 8, the agent is entitled to commission on any transactions made within that region, whether they are made directly by the principal or through third parties. Article 20 typically forbids anybody other than the registered agent from importing products under a registered business agency without permission from the Ministry or the agent.

Contract Duration and Termination

The parties are generally free to determine the duration of the agency contract. However, Article 6 provides that where the contract requires the agent to establish buildings for display, warehouses or maintenance and repair facilities, the contract term must be five years unless the parties agree otherwise.

This provision is intended to protect agents that incur significant infrastructure and operational expenses in developing the principal’s products in the UAE market.

Under Article 9, a commercial agency contract expires upon the expiry of its term without renewal, termination by either party in accordance with the contract, mutual agreement, a final court judgment, or any other case specified under the Law. Unless otherwise agreed, qualifying agency assets may be transferred to the principal or the new agent at fair value.

Notice Requirements

The intended termination shall be notified to the other party not later than one year before the intended date of termination or when half of the duration of the contract has elapsed, whichever is the earlier, unless otherwise agreed. In case of non-renewal, the same notice period applies. If the termination is challenged before the Committee for Commercial Agencies, the agency shall operate until the Committee’s decision or the end of the period for the notification of the termination. Each party may also file a professional report on the outstanding balances, services after purchase, valuation of the assets and projected damages.

Compensation Claims

If an agency terminates at the end of its term, the agent is entitled to compensation under Article 11 for any consequent damages, unless otherwise specified. The party who is harmed by a contract termination may be entitled to compensation. If the agent can demonstrate that its lawful actions made a substantial contribution to the success, marketing, or customer growth of the principal’s products and that its termination deprived it of profits resulting from that success, it may also be able to recover lost earnings. Evidence of the harm and how it relates to the expiration or termination must be shown in order to justify compensation.

Removal from the Commercial Agencies Register

Under Article 16, where the agent no longer satisfies a statutory condition or the agency expires without renewal, the agent or its legal representative must apply for deletion from the Commercial Agencies Register within 60 days. The Ministry may also delete the registration on its own initiative after verifying that the statutory conditions are no longer met and notifying the concerned parties at least 10 working days in advance. The relevant customs, competent and related authorities must then be notified of the deletion.

Unregistered Distribution Agreements

Not every distributor operating in the UAE is a registered commercial agent. Many suppliers use ordinary distribution, dealership, franchise, supply or reseller agreements that are not registered with the Ministry.

An unregistered arrangement does not receive the statutory status or protections of a registered commercial agency. The distributor cannot rely on the Commercial Agencies Law to claim territorial commission, prevent parallel imports or obtain statutory compensation merely because it describes itself as an agent or exclusive distributor.

However, depending on its content and terms, the agreement may still result in contractual rights and duties under the Commercial Transactions Law and the Civil Transactions Law. Therefore, rather than being based on registered commercial agency status, claims must be stated as regular contractual or commercial claims.

Federal Decree-Law No. 25 of 2025 now governs the general civil principles applicable to contracts. Under Article 221, a contract must be performed in accordance with its terms and in a manner consistent with the requirements of good faith. Contractual obligations are not limited to the express terms of the agreement but also include matters arising from the law, custom and the nature of the obligation.

Article 92 of Federal Decree-Law No. 50 of 2022 provides that, unless a shorter period is provided for by law, an action for a commercial obligation between merchants shall not be heard upon objection and without a valid excuse after the lapse of five years from the date on which the obligation becomes due. The parties cannot postpone claims for unpaid commissions, inventory payments, exclusivity violations and wrongful termination..

Dispute Resolution of Registered Agency Disputes

Under Article 24 of Federal Law No. 3 of 2022 Regulating Commercial Agencies, disputes between parties to a commercial agency registered with the Ministry must first be referred to the Commercial Agencies Committee. The courts will not admit such disputes before referral to the Committee.

The Committee must begin hearing a complete application within 22 working days and decide the dispute within 120 days. If no decision is issued within that period, either party may approach the courts within 60 days after the deadline expires. A Committee decision must also be challenged within 60 days from notification; otherwise, it becomes enforceable as a writ of execution.

Article 26 recognises agreements between the principal and agent to refer commercial agency disputes to arbitration. Unless the parties agree otherwise, the arbitration must take place within the UAE. If arbitration is commenced after the Committee’s decision but within the 60-day challenge period under Article 24, the Committee’s decision ceases to have legal effect. This arbitration provision does not apply to disputes that were already pending before the Committee or the competent courts when the Law was published.

Unregistered distribution disputes are not subject to the Commercial Agencies Committee procedure. They are generally brought directly before the competent civil or commercial court or referred to arbitration in accordance with the dispute-resolution clause in the agreement.

Conclusion

In the UAE, the resolution of distribution and commercial agency disputes largely depends on whether the relationship is governed by Federal Law No. 3 of 2022 or is an unregistered contractual arrangement. Registered agents have statutory rights to exclusivity, commission, import protection, compensation and mandatory referral to the Commercial Agencies Committee. On the other hand, unregistered distributors must look to the terms of their agreements and general principles of commercial and civil law.

Clear drafting is still a necessity for principals and distributors alike. The agreement should specify territory, exclusivity, sales obligations, commission, termination, compensation and dispute resolution mechanism. Parties should also have suitable records of performance, investments, sales and losses. These documents may be determinative in any claim arising from termination, non-renewal or breach.