Agents, Distributors & Catholic Marriage
One of the cardinal rules of selecting an agent or distributor in UAE has always been to exercise caution, take your time and do your due diligence, and remember that a registered agency agreement is a lot like a Catholic marriage, very difficult to get out of. Even when non-performance on the part of the agent is the case, the Courts will always favor the local agent. Or will they?
Is this urban legend? Everyone seems to have a second-hand example of a sticky situation between an agent and a principal to share. However, times are changing and so is the Court according to a recent article by Al Tamimi & Co.
Backing up though….the UAE Commercial Agency Law protects the rights of the local agent for good reason. If you find a good distributor or agent, they have invested time and money into building the brand and market share for your products. They deserve protection. Some vendors incorrectly misunderstand the size or growth potential of a market, and think if one distributor is good, two would be better. But that only really applies to donuts.
Sometimes though, and we hear it far too often, a vendor has been persuaded into an agency agreement with little market or legal understanding – eager to just get started, they sign up with the first person to ask them to dance. They will inadvertently lose potential years and $$$ disengaging with a poorly matched dance partner, i.e. an unqualified, unmotivated or disinterested agent/distributor. Or so was the case in the past.
Recently, the Federal Supreme Court found twice that the agent’s poor performance breached the commercial agency agreement which resulted in termination of the agreement and removal from the Ministry of Economy’s register. The principal/vendor was then able to appoint another agent.
Things to bear in mind: 1. the process was long. Problems started in 2004 and after claims, counter-claims, appeals and a final judgement, it was March 2018 before resolution was final. That equates to real staying power through the process and hefty legal fees. You’ve got to be a substantially large company to begin with to follow this process’ due course. 2. This reinforces the need to be able to substantiate your claims of non-performance with documentation. Paper trail! 3. The UAE Courts, while continuing to protect the rights of the agents, will uphold non-performance as viable grounds for agency agreement termination if clearly substantiated.
The moral of this story of the catholic marriage, or rather the commercial agency agreement you may sign with your representative in UAE? Take your time in the beginning to make sure you have found your best match distributor. So many applicable idioms come to mind. Fools rush in. An ounce of prevention is worth a pound of cure. Oh how I do love a good idom!