top legal firm urges overhaul of commercial agency law process
Faster, fairer procedures will boost economy, says Bin Shabib
Radical adjustments to the application of the law of commercial agency in the United Arab Emirates (UAE) will have a positive economic impact and help bring the nation in line with World Trade Organistation (WTO) standards, according to a top legal firm.
Dubai-based Bin Shabib and Associates (BSA) claims that following the outcry from local agents over the rise in scrapped agency agreements after the introduction of Law No 13 of 2006, fairer, faster measures need to be brought in by the Ministry of Economy.
In practice, Law No 13 and Article 1 of Ministerial Decision No 381 of 2006 allowed deregistration of a commercial agency agreement by letting principals end the partnership independently upon the contract’s renewal date. As a result, the number of agencies deregistered from the Ministry of Economy soared to 826 after the law was enacted in June 2006, compared to just 218 the previous year. In addition, the number of agency renewals slumped from 3,444 in 2005 to 2,956 after the law’s introduction.
A chorus of protests from UAE commercial agents contesting the application of the law between September 2006 and the beginning of 2007 led the Ministry of Economy to take some action to improve matters.
But, according to Bin Shabib and Associates, it’s been too little, too late.
Now, when the Ministry of Economy receives a request for deregistration of a commercial agency from a principal, they will request a response from the UAE commercial agent.
If the UAE commercial agent accepts the deregistration, the Ministry of Economy will deregister the commercial agency from its records. Should the agent contest the principal’s request for deregistration, however, the Ministry of Economy will give the commercial agent a reasonable time to refer the matter to court. Failure to do so is considered as consent to the principal’s request for deregistration.
But, says Bin Shabib and Associates, the current procedure is unfair for both parties. “But most of all it jeopardizes market stability in terms of availability of products and services,” says Michael Kortbawi, Partner, Corporate at BSA. “In many cases, disputes between commercial agents and principal have resulted in products or services being unavailable in the market during the duration of the dispute.
“From one side the agent is in dispute with the principal who refuses to send him goods. From the other side the principal is unable to import goods in the name of another agent due to customs ban.”
Kortbawi recommends that the Ministry of Economy should have a more proactive approach towards agency disputes and should set in place procedures which are fast, effective and contain a minimum guarantee to all parties’ rights.
“A bank guarantee in favour of the agent can be imposed on the principal as a condition for deregistration,” adds Kortbawi. “Such a bank guarantee should be equal to the estimated compensation the agent will be entitled to under UAE Law. This will guarantee that the agent will receive the compensation he is claiming and that products and services will be available at all times in the UAE market.”
Bin Shahib further believes that the court’s involvement be limited to calculating compensation in line with spirit of the law.
