I. Background of the Two-Year Suspension Period
With the enactment of Federal Law No. 3 of 2022, which significantly reformed commercial agency law in the UAE, important new provisions regulating the rights and obligations of commercial agents were introduced. To protect existing contractual relationships from abrupt changes and to ensure an orderly transition, a two-year suspension period was implemented during which the termination rights under Article 9 (1) of the law were temporarily suspended. This protective phase provided parties with sufficient time to adapt to the new legal framework and make necessary contractual adjustments without the immediate risk of contract termination.
II. Legal Termination Provisions Following the Suspension Expiry
Article 9 (1) of Federal Law No. 3 of 2022 sets out the grounds upon which a registered commercial agency agreement may be terminated. In particular, subsection 9 (1) (a) provides that a party may refuse to renew the contract upon expiry of the agreed term, while subsection 9 (1) (b) permits unilateral termination with due notice. With the suspension period ending on 15 June 2025, these provisions are now fully effective again, allowing parties to exercise their statutory termination rights and thereby increasing flexibility in ending commercial agency agreements.
III. Impact on Contractual Drafting and Risk Managment
The expiration of the suspension period places greater responsibility on companies. Commercial agency agreements should now be carefully reviewed to ensure termination clauses and notice periods comply with statutory requirements. Meticulous documentation of termination notices and transparent communication with commercial agents are essential to avoid legal disputes. Strict adherence to the prescribed notice periods is critical, as violations may expose companies to claims for damages or other legal consequences.
IV. Practical Implications and Strategic Considerations
The reinstatement of full termination rights offers companies the opportunity to review and revise their contract portfolio to better respond to market developments. At the same time, it entails increased risks arising from premature or unjustified terminations that may trigger litigation. Proactive contract and risk management are therefore indispensable to mitigate legal risks while fostering stable and sustainable business relationships.
V. Judicial Procedures and Claims for Damages
In the event of disputes, the law also governs judicial procedures related to the termination of commercial agency agreements. UAE courts will assess whether terminations were made in compliance with the required form and notice periods and whether there was a legitimate reason for termination. Unlawful terminations may give rise to claims for damages, which can include lost commissions, consequential damages, or damage to business reputation. It is thus imperative for both parties to fully understand and properly document their rights and obligations.
VI. Conclusion
With the expiry of the two-year suspension period on 15 June 2025, the UAE has reverted to the standard legal regime governing the termination of registered commercial agency agreements. Companies are well advised to promptly update their contracts and internal procedures and to maintain thorough documentation to meet the heightened requirements and prevent disputes. A comprehensive understanding of the legal provisions and a clear strategic approach to managing commercial agency relationships are essential for legally secure and efficient business operations.
