Commercial agency law (Federal Law No. 3/2022) and agency contract risk

1. Key takeaways

An agency relationship in the UAE cannot be governed by a commercial contract alone. Federal Law No. 3/2022 on the Regulation of Commercial Agencies sets special rules on how agency relationships are formed, registered and terminated, and once the multi-entity requirements of Article 22 are layered on top, any move to change agents is no longer a purely commercial decision. Our core advice to Chinese manufacturers comes down to three sentences: keep registration-type documents in your own hands; write the termination clauses at signing time, not afterwards; and settle the accounts for stock and handover inside the contract itself.

• Federal Law No. 3/2022 gives registered agency relationships external effect and special termination rules.
• Registration documents held in the agent’s name can leave the manufacturer without legal proof of the right to sell in the UAE.
• Rebuilding a cancelled registration can take the 45 working days review period or longer.
• Stock disposition must be pre-priced in the contract, tiered by shelf life status.

2. Legal basis

The table below combines the commercial agency statute with the decree provisions it interacts with, including the multi-entity designation rules and the administrative fine range applicable to establishments. Read together, these instruments mean that agency disputes are governed on two levels at once: the general commercial agency regime, and the sector-specific medical product architecture, and a contract drafted for only one of the two will leave gaps at exactly the points where termination disputes tend to arise.

3. Expert insights

Insight 1: the stickiness created by commercial registration must be diluted through contract terms at signing time. Agency registration under Federal Law No. 3/2022 has effect against third parties, and once registration is in place the agent often holds the stronger position in a dispute. Our judgement is that rather than wrestling with the problem after the fact, it is better to make the termination conditions executable at the contracting stage: list failure to complete the annual import obligation, failure of qualification verification, and the imposition of compliance penalties as express grounds for termination, and agree on the transitional arrangements that follow termination.

Insight 2: ownership of certificates is where risk concentrates most heavily. If the marketing authorisation, MAH registration and manufacturing site registration documents stand in the agent’s name, then on termination the manufacturer effectively loses the legal credential for selling in the UAE, and rebuilding means going through the 45 working days period or longer all over again. We maintain that an ownership clause should be placed at the very head of the contract: all registration-type documents belong to the rights holder, the agent holds and uses them only within the authorised term, and upon termination must cooperate unconditionally in handing them over within a set period.

Insight 3: stock handling is the real cost of the termination phase and must be priced in advance. With multiple agents operating in parallel, the exit of one usually involves three categories of assets: unsold stock, batches already declared and awaiting release, and goods in transit. If no buy-back price formula and acceptance standard are agreed in advance, the negotiation happens at the most disadvantaged moment. We recommend tiering stock in the contract into three bands, within shelf life and qualified, near expiry, and no longer resalable, with a buy-back ratio and disposal responsibility for each, and incorporating into the disposal plan the requirement of Article 39 that counterfeit, defective and expired products must not circulate.

4. Practical recommendations

• Devote a dedicated ownership clause in the contract, stating that all registration-type documents belong to the rights holder and the agent holds and uses them only on its behalf.
• List failure to meet the annual import obligation, lapse of qualifications and compliance penalties as express termination grounds, with notice method and transition period stated.
• Agree in advance the buy-back price formula and acceptance standard for stock, handled across the three tiers of in-date, near-expiry and non-resalable.
• Confirm whether the agent must complete commercial agency registration; if so, limit the registered product scope and term to avoid unbounded expansion.
• Agree on data handover duties after termination: vigilance records, complaint ledgers and traceable batch records must be handed over within a set period.
• Under the multi-entity architecture, unify the core clause versions across all agent contracts, so that different agents do not enjoy different termination conditions and breed later disputes.

5. Verification checklist

• □ The contract contains a clear ownership clause for registration-type documents, and the rights holder holds the originals of all registration documents
• □ A list of termination grounds has been drawn up, with notice method and transition period length agreed
• □ The buy-back price formula, acceptance standard and three-tier classification for stock are written into the contract
• □ Whether the agent requires commercial agency registration has been confirmed, and the registration scope and term are limited
• □ Handover duties and time limits for vigilance records, complaint ledgers and batch traceability data are agreed
• □ The core clause versions of all agent contracts have been checked against each other
• □ A contingency plan for import and distribution cover in case of a dispute after unilateral termination has been assessed

How GRZAN can help. GRZAN provides medical device and IVD registration, quality system, authorised representative and local testing support for the United Arab Emirates. Our team coordinates local authorised representative and importer arrangements, and supports post-market vigilance obligations. Business enquiries: info@grzanglobal.com