In July 2022, the Supreme Court ruled whether a bankruptcy judgment in a foreign jurisdiction provided sufficient grounds for the UAE Ministry of Economy to remove a company from the Commercial Agencies Register.
Commercial agency registrations
Foreign companies entering the UAE market from abroad can do so through trade agency structures.
These relationships are registered with the Ministry of Economy and are separate from general unregistered contractual relationships, concessions or otherwise.
Commercial agencies are governed by a specific law (Commercial Agencies Law No. 18/1981) and afford protections to the agent which are, to some extent, guaranteed by the Ministry of Economy.
The Ministry of Economy registers commercial agencies, and the deregistration of agencies requires the consent of the parties (agent and principal), or a court order, or a decision of a special committee of commercial agencies.
The legislative purpose of restricting disbarment is to protect the officer.
Ergo to ensure that the agent’s efforts and investments in developing a market for a principal are not abused by the principal through abrupt terminations.
Litigation of commercial agencies
Disputes between the agent and the principal are generally governed by the contractual relationship between the parties.
However, disputes related to registrations or the general status of a commercial agency registration arise from decisions made by the Department of the Economy and are subject to the jurisdiction of the federal courts (as federal administrative disputes).
Facts of the case
An Emirati company has been registered with the Ministry of Economy as a commercial agent for three Japanese companies.
In 2019, two of the companies filed a joint request with the Ministry of Economy to remove the third company from the register of commercial agencies on the grounds that the third company had been in liquidation since 2005.
The Commercial Agencies Committee accepted the request and deregistered the third company.
The agent was not informed of the Committee’s debarment decision.
The agent argued in federal court that he had no knowledge of the liquidation of the Japanese company since 2005 and that in 2015 the agent was informed that the apparent restructuring was due to a name change and that the agency relationship continued between the parties.
In 2021, the agent challenged the decision of the Ministry of the Economy (Commercial Agencies Committee) before the Federal Court of First Instance.
The agent argued that the Japanese courts’ winding-up order had no effect on the agent’s rights (including his registration rights) because (i) the agent was not a party /a litigant in the winding-up proceedings in the Japanese courts, and (ii) the agent was not subsequently informed or notified of the decision.
Supreme Court decision
The Supreme Court held that:
“Section 16 of the Commercial Agencies Act No. 18 of 1981 and its amendments provides that any registration, modification or removal of a commercial agency from the register of commercial agencies must be accompanied by supporting documents.
The commercial agency [principal] of the appellant was judicially liquidated by a decision rendered by one of the courts of Japan, and therefore the effects of this decision in the courts of the United Arab Emirates apply only after the competent court [UAE] the judge issues the enforcement order [the foreign judgment] in accordance with article 85 of the implementing regulations of the law on civil procedures.
In the contested decision, the court ruled on the legality of the Ministry’s decision to remove the foreign company from the register of commercial agencies on the basis of a foreign judgment which was not confirmed at the national level, which renders the judgment defective and should be set aside.
Section 85 of the Civil Procedure Regulations
The Supreme Court’s ruling is that foreign orders and judgments that may affect the status of a commercial agency’s registration in the UAE cannot be presented to the Ministry of Economy for action without first obtaining recognition. courts in the UAE.
Section 85 of the Civil Procedure Regulations governs the procedure for enforcing foreign judgments, orders and obligations.
When a request to the court is filed for the enforcement of a foreign judgment, this enforcement order can be appealed by all persons concerned.
In this situation, agents would have the possibility of formulating or presenting reservations or challenges to foreign orders likely to affect their commercial agency relationship and their registration.