UAE AMENDS COMMERCIAL AGENCY LAW

UNCLAS ABU DHABI 002561 SIPDIS SENSITIVE SIPDIS NEA/ARP STATE PLEASE PASS TO USTR FOR AUSTR SDONNELLY, DBELL AND FHUEGEL E.O. 12958: N/A TAGS: ETRD EINV ECON AE SUBJECT: UAE AMENDS COMMERCIAL AGENCY LAW REF: ABU DHABI 2455 ¶1. (SBU) Summary: On June 18, the Gulf News reported that UAE President Sheikh Khalifa bin Zayed Al Nahyan amended several provisions of the Commercial Agencies Law. These amendments include: (1) limiting an agency contract to a fixed time period, (2) requiring mutual consent to renew an agency agreement, (3)allowing either party to file for damages, (4) eliminating the Ministry of Economy's Trade Agencies Committee (which handles agency disputes),and (5) allowing the import of "liberalized goods" without the agent's approval. Sheikha Lubna Al Qasimi told Gulf News, "The new amendments will certainly boost the competitive economic climate in the UAE. The law will also ensure the delivery of high quality services to the customer." The law will provide for a one year "grace period" for agents with existing or expired agency contracts to obtain the concurrence of the principal, before the Ministry of Economy cancels the agreement. Any agency agreements without a fixed end date can only be abrogated through court action. End Summary. ¶2. (U) The amended Agency Law limits the term of the agency agreement to the term of the contract and requires both parties to agree to extend an agreement at least a year before the contract expires. A principal can rescind an agency agreement before the contract term expires only if there is a "justified" reason for the termination. If an agreement is rescinded before the contract's term expires, a new agent cannot be listed in the Commercial Agent's Registry unless both parties agree to terminate the contract early or the Court removes the first agent's name from the Registry. Sheikha Lubna Al Qasimi told Gulf News, "The new amendments will certainly boost the competitive economic climate in the UAE. The law will also ensure the delivery of high quality services to the customer." ¶3. (U) Under the amended law, if either the principal or the agent has caused damage to the other party, the injured party may claim compensation for losses incurred. The new law also abolishes the Trade Agencies Committee. Agency disputes will now go directly to court. On several occasions, the local Arabic media have reported that some businessmen in the UAE worry that courts may take years to decide a case. ¶4. (U) Furthermore, under the amended law, no product of the same brand shall be allowed into the country without the agent's approval unless such importation is approved by the Ministry of Economy or the agent or is listed as a "liberalized" good. The Cabinet has already approved the unconditional import of 15 main foodstuffs. Previous press reports quoted Minister of Economy Sheikha Lubna Al Qasimi as saying, "This amendment is in conformity with the government's plan to liberalize any product seen as over-priced by its sole agents." (Reftel) ¶5. (SBU) Under Secretary at the Ministry of Economy Abdullah al-Saleh told Econchief that the Ministry of Economy will send a letter to all registered agents whose agency agreements are about to expire or have expired instructing them to provide the Ministry with a letter from the principal authorizing the renewal of the agency agreement. The agent has one year to provide the principal's authorization before the agent's name is struck from the Ministry's Agent Registry. According to Al-Saleh, the Ministry will not cancel any agency agreements that do not specify an end date (i.e., which are indefinite). A principal will need to go to court to abrogate these agreements. ¶6. (SBU) Comment: These amendments will certainly solve some of the problems facing U.S. companies by preventing an agent from unilaterally extending the agreement, even after a contract's expiration. It remains to be seen, however, whether companies will be able to more effectively cancel agency agreements through court action or will be forced to wait for their agency agreements to expire. End comment. SISON