The registration at the Ministry of Economy (the “MOE”) of a range of reseller, distribution, agency and franchise agreements with local agents, is commonplace in the UAE. Registration predominately extends various statutory rights to local agents, which go beyond those contained in the contract, in particular, exclusivity and the right to compensation on termination. But registration can also be a helpful evidentiary tool in the prosecution of counterfeiters and the prevention of parallel imports, which protects the agent’s interests in the territory, but also help the supplier/principal to preserve brand value, by controlling the way in which its products are sold.
Registration of a distribution arrangement (as opposed to say, a franchise agreement relating to the provision of services) focuses on the products in question. They are specifically identified and catalogued in the MOE agency register with reference to the particular registered agreement. Often it is the case, however, that registered agreements lack specificity in their description of the products the subject of the agreement. It follows that broad, generic words are then used in the MOE agency register to describe the products, which fundamentally leads to confusion over the scope of the registered agency. This ambiguity, and in many cases all-encompassing resulting scope of the registered agreement, is often not what the parties intended when they contracted together. It can also cause serious problems for principals looking to introduce new product lines into the market. Customs can seize products deemed to fall within the scope of registered arrangements which are being imported by parties other than the registered agent. Disputes between principals and agents can ensue which, regardless of the outcome, invariably damage the business in the territory.
The lesson here is for parties to take care at the outset when defining the products the subject of their distribution agreements, and to ensure that any changes to those products are clearly evidenced in writing, with the agent being responsible for ensuring that the agency record held by the MOE is promptly updated.