Distribution contracts that are not registered in the Commercial Agency Register of the UAE Ministry of Economy may always be terminated if the conditions of a contractually agreed reason for termination are met. If, on the contrary, the distribution relationship has been registered with the Ministry of Economy, the termination of an unlimited contract or the non-renewal of a fixed-term contract is only permitted for a "material reason". The law does not specify the criteria for such material reason. Instead, it is in the discretion of the courts to determine the relevant criteria. For instance, in the past, courts ruled that - under strict conditions - the distribution partner's failure to achieve contractually agreed sales targets might serve as a material reason. In the absence of a material reason, termination is excluded even in scenarios in which the parties have contractually agreed on a right of termination. A fixed-term contract continues to exist even in the event that the parties have agreed on an automatic termination clause. By contrast, the new commercial agency law, which came into force in mid-June 2023, provides for significantly simpler termination options, at least for new contracts.
Further Questions on Commercial Agency Law
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