Doing business in the UAE: distribution of products without a local agent

In this guide, we look at the main provisions of the law and the steps required to take advantage of this opportunity.

General rule

Under the UAE Commercial Agencies Law, a commercial agency must have an exclusive and binding contractual relationship between the principal and the agent to be registered with the Ministry of Economy (MOE). The Agency Law has traditionally been very protective of local registered agents and ensures that the agent has the sole right to distribute the principal's products within the UAE.

Generally speaking, a registered agency agreement must be an exclusive arrangement with:

• a UAE national;
• a company wholly-owned by a UAE national;
• a UAE public joint stock company (PJSC) that is at least 51% owned by UAE nationals; or
• a private UAE company owned by such a PJSC.

Exception to the rule

However, there is an important exception to this general rule. According to Clause (2) of Article (2) of the law, the UAE Cabinet, upon the recommendation of the relevant minister, may allow global companies to engage in commercial agency activities without being owned by UAE nationals, provided that:

• the commercial agency does not have an existing agent within the UAE; and
• the commercial agency is new and has not been previously registered in the UAE.

Application requirements

If a company meets the above conditions, it can submit a written request to the MOE. It is important that this request contains all the relevant information, including details about the company’s corporate structure, global investments and the ways in which the company will add value to the UAE economy, as well as all relevant supporting documentation.

The MOE will review the request and attachments to ensure all legal conditions and requirements are met. If everything is in order, the matter will be escalated to the Ministry’s leadership for a decision.

If the Ministry’s leadership approves the request, a memorandum will be prepared for submission to the Cabinet for the final decision. Additional clarifications or documents may be required during this process.

Post-approval registration

Upon Cabinet approval, the company or its UAE branch will be registered as the exclusive commercial agent for the products listed in the commercial agency. This registration provides legal protection to prevent the sale of these products by others in the UAE.

It will be important to have in place an arm’s length intragroup contract between the company’s manufacturing entity and the UAE distributing entity, which will need to be incorporated as the correct type of entity. This contract should include key terms such as:

• the scope and territory of the arrangement;
• exclusivity;
• the type of products and responsibility for special registration requirements;
• minimum order standards and targets;
• limitations on liability for breach;
• ownership of intellectual property;
• consequences of termination;
• import and export costs;
• taxation;
• the impact of competition laws, particularly where distribution arrangements include direct or indirect price fixing or limit distribution channels; and
• dispute resolution mechanisms.

Obtaining Cabinet approval is not straightforward. However, by navigating these requirements and successfully obtaining approval, a company can leverage the UAE's strategic position to expand its market presence without the need for a local agent.