The United Arab Emirates regulates commercial agency relationships through Federal Law No. 3 of 2022 Concerning the Regulation of Commercial Agencies, which came into force on 16 June 2023 and repealed the former Federal Law No. 18 of 1981. The new legislation represents a significant shift in the regulatory framework governing agency arrangements in the UAE, while still preserving the core principle of protecting national commercial agents. It introduces greater contractual flexibility, clearer termination rules, and limited avenues for international participation, all within a structured and regulated environment.
The law defines an “Agent” as “A Natural or legal person who is proven to be a representative of the Principal by virtue of the Commercial Agency Agreement.” The law clearly outlines who is eligible to conduct commercial agency activities in the UAE. Commercial agency activity remains largely restricted to UAE nationals and UAE-owned entities.
The activity is restricted to individuals and entities wholly owned by any of the following:
In the case of public joint stock companies incorporated in the UAE, at least 51% of the shareholding must be held by UAE nationals for the company to act as a commercial agent, at the time of appointment.
The law also introduces a limited exception to this exclusivity. The Cabinet may, upon the recommendation of the Minister of Economy, permit an international company that is not UAE owned to act as its own commercial agent. This exception applies only where there is no existing registered commercial agent for the relevant products in the UAE and where the commercial agency is new and has not previously been registered in the country. The Cabinet is expected to issue specific resolutions governing the procedures and conditions applicable to such cases.
In effect, while the law maintains the traditional protection of UAE agents, it acknowledges the commercial realities of new market entries and permits carefully controlled international participation.
Registration remains a central requirement under the new law. All commercial agency agreements must be registered in the Commercial Agencies Register maintained by the Ministry of Economy in order to be legally effective. Registration is mandatory for an agent to benefit from the statutory protections and rights provided by the law. Any commercial agency agreement that is not registered is deemed invalid for the purposes of the law and does not enjoy its protections. For a commercial agency to be considered valid, it must be concluded directly with the original principal, be in writing, be notarized, and be duly registered with the Ministry of Economy.
The law also provides clarity on the appointment of agents across different territories within the UAE. A principal may appoint one agent for the entire State i.e. UAE or may appoint separate agents for individual emirates or groups of emirates such as Emirate of Dubai and Abu Dhabi. In all cases, exclusivity applies within the defined agency territory, meaning that the distribution of the relevant goods or services within that area must be limited to the appointed agent. This preserves the exclusive nature of agency relationships while allowing principals greater flexibility in structuring their distribution networks.
Termination and expiry of commercial agency contracts are addressed in greater detail under the new law. The commercial agency contract shall end in any of the following cases:
This aligns agency contracts more closely with general contractual principles, while still subjecting them to additional statutory safeguards.
Notice requirements are now expressly regulated. Where a party seeks to terminate an agency contract in accordance with its terms, or where a party does not wish to renew the contract upon expiry, notice must be given at least one (1) year in advance unless the parties have agreed otherwise. If the contract term is less than two (2) years, notice must be given during the first half of the contract term. These provisions are designed to provide commercial agents with predictability and sufficient time to adjust to termination or non-renewal.
The law also recognizes the agent’s potential entitlement to compensation upon termination. An agent may claim fair compensation for investments made in connection with the agency, including expenditure on infrastructure, inventory, facilities, or other assets required for the performance of the agency. In addition, agents may seek compensation for loss of profits if they can demonstrate that their efforts contributed to an increase in the principal’s market share or sales in the UAE.
Special transitional rules apply to agency contracts that were already in force at the time the law was issued on 13 December 2022. The new termination and expiry provisions do not apply to existing registered agency contracts until two years after the law came into force. Furthermore, where an agency has been registered with the same agent for more than ten years, or where the agent has invested more than one hundred million dirhams in the agency, the new termination entitlements do not apply until ten years after the law became effective. These transitional measures are intended to protect long standing agency relationships and significant investments from abrupt disruption.
The law also addresses the minimum duration of certain agency contracts. Where an agency contract requires the agent to establish premises for the display or sale of products, or facilities for maintenance or repair, the minimum contract term is deemed to be five years unless the parties agree otherwise. In practice, this provision is most relevant where the written agency contract does not specify a fixed term, as it ensures that agents who are required to make substantial capital investments are afforded a reasonable period to recover those investments.
Overall, Federal Law No. 3 of 2022 modernizes the UAE commercial agency regime while preserving its core protective philosophy. It provides greater clarity on eligibility, registration, termination, and compensation, balances the interests of principals and agents, and introduces limited flexibility for international companies under strict regulatory oversight. For businesses operating in or entering the UAE market, a careful understanding of these provisions is essential to structuring compliant and commercially sound agency arrangements.
For businesses operating in, or seeking to enter, the UAE market, a thorough understanding of the revised commercial agency framework is essential to structuring compliant, enforceable, and commercially viable agency arrangements, as well as managing risk throughout the lifecycle of the agency relationship.
MBG advises principals, agents, and investors on all aspects of UAE commercial agency law. Our support includes, without limitation:
Yes. Registration with the Commercial Agencies Register maintained by the Ministry of Economy is mandatory for an agency agreement to be recognized and protected under the law. Unregistered agreements do not benefit from statutory protections.
As a general rule, commercial agency activity is restricted to UAE nationals and UAE-owned entities. However, the Cabinet may permit a foreign company to act as its own agent in limited circumstances, subject to strict conditions and where no registered agent exists.
Yes. A principal may appoint different agents for different emirates or groups of emirates. Exclusivity applies within the defined territory of each registered agent.
Unless otherwise agreed, a minimum notice period of one year is required. For contracts with a term of less than two years, notice must be given during the first half of the contract term.
Potentially, yes. An agent may claim fair compensation for investments made and, where applicable, for loss of profits if the agent can demonstrate that its efforts contributed to increased sales or market share for the principal.
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