Trade Barriers

Foreign business actors who wish to do business in the UAE (outside the Free Zone Area) must have a local sponsor, agent, or distributor. Once selected, sponsors, sales agents, or distributors are granted exclusive rights to market non-food products (Agency laws do not regulate food products).

Termination of cooperation with agents or distributors is a very difficult step in the UAE. In March 2010, the UAE passed Federal Law No. 2 of 2010 which amends several provisions of the Law on Trading Bodies. The 2010 amendments have also restored the role of a special Commercial Agencies Committee which was repealed in 2006. The Commercial Agencies Committee has jurisdiction over disputes involving registered commercial agents. Any commercial disputes must be referred to the Commercial Agencies Committee in advance.

The amendments prevent the termination of cooperation from commercial agents unless the principal party has material reasons to justify the termination of the agreement. Furthermore, it is not possible for a principal to re-register a commercial agent on behalf of another agent even though the previous period of cooperation with the agency is only valid for a certain period, unless: (i) the termination of the cooperation is carried out amicably by the principal and the agent; (ii) the termination of cooperation is carried out for reasons that can be justified and convincing for the Commercial Agencies Committee in the UAE; or (iii) a final judgment issued by a court ordering the termination of cooperation with the agency.

Subsequently in 2011 the UAE Cabinet issued Resolution No. 3 of 2011, regarding this committee. This resolution assigns responsibility to the Committee to accept applications to resolve agency disputes and is responsible for the cancellation of the registered agent. The committee is permitted not to resolve referred disputes and can advise the parties to refer the matter to litigation. A party may challenge the Committee's decision by submitting their agency cooperation issue to the court within thirty (30) days of receipt of notification of the resolution from the Commercial Agencies Committee. The court established the process for filing an agency dispute application and charged a fee of USD 1,634 (AED 6,000) before the application was recorded. Once recorded, the Committee must schedule a date to examine the dispute within sixty (60) days. The committee is permitted to seek assistance from experts or "appropriate parties" to carry out its duties. The Committee also reserves the right to obtain further information and documentation related to the dispute.

In order for foreign entrepreneurs to participate in government tenders, the UAE government requires companies to pre-qualify, and of course it must be a registered company. UAE government tenders are not conducted according to generally accepted international standards. Government tenders in the UAE can be conducted repeatedly, often three or four times. To enter a government tender, the supplier or contractor must be a UAE national company or a company in which a UAE citizen owns at least 51 percent of the share capital in the company. The government tender must be accompanied by a bond offering in the form of an unconditional bank guarantee of 5 percent of the bid value. However, this regulation does not apply to winning large projects or projects in the defense sector, in the condition that no local company can provide the goods or services required in the project.

The UAE government is working hard to encourage more jobs for its citizens. More and more private companies are being asked, even forced to recruit UAE nationals, in order to maintain the percentage of local workers in their companies.