End of Suspension under the Commercial Agency Law – Termination Rights for Commercial Agencies in the UAE Reinstated

With the entry into force of Federal Law No. 3 of 2022, which fundamentally reformed commercial agency law in the UAE, significant new regulations concerning the rights and obligations of commercial agents were introduced. To protect existing contractual relationships from abrupt changes and to facilitate an orderly transition, a two-year suspension period for the application of termination rights under Article 9(1) of the Law was granted. This protective phase was intended to give the parties sufficient time to adapt to the new provisions and make necessary adjustments, without immediately having to face contract termination.

Article 9(1) of Federal Law No. 3 of 2022 defines the conditions under which a registered commercial agency agreement may be terminated. Specifically, Article 9(1)(a) stipulates that a contracting party does not renew the agreement upon expiry of the agreed term, while Article 9(1)(b) regulates unilateral termination in compliance with statutory notice periods. With the expiry of the suspension period on June 15, 2025, these provisions will again be fully applicable. This means that contracting parties can now once again assert their statutory termination rights, which particularly increases flexibility in terminating commercial agency agreements.

The lifting of the suspension provision entails increased responsibility for companies. Commercial agency agreements should now be carefully reviewed to ensure that notice periods and other contractual clauses comply with statutory requirements. Furthermore, precise documentation of terminations and transparent communication with commercial agents are essential to avoid legal disputes. Compliance with the deadlines stipulated in the law is crucial, as violations of the termination provisions can trigger claims for damages or other legal consequences.

The reinstatement of unrestricted termination authority offers companies the opportunity to review and, if necessary, adjust their contract portfolio to respond flexibly to market changes. At the same time, they must be aware that increased flexibility also entails heightened risks, for example, through premature or unjustified contract terminations that can lead to disputes. Proactive contract and risk management is therefore essential to both minimize legal risks and foster stable and sustainable business relationships.

Should a dispute arise despite all precautionary measures, the law also regulates the judicial procedure for the termination of commercial agency agreements. UAE courts will specifically examine whether the termination was carried out in due form and within the stipulated period, and whether there is a legitimate interest. Unlawful terminations can lead to claims for damages, which may consist of lost commissions, consequential damages, or reliance damages. Therefore, it is important for both contracting parties to be fully aware of their rights and obligations and to be able to provide documented proof.

With the expiry of the two-year suspension period on June 15, 2025, the UAE will return to the regular termination regime for registered commercial agency agreements. Companies are well advised to promptly adapt their agreements and internal processes and to document them carefully to meet the increased requirements and prevent legal disputes. A thorough understanding of the statutory provisions and a clear strategic approach to dealing with commercial agencies are indispensable for legally sound and efficient business operations.