Clyde & Co has successfully represented a registered agent in what is likely to be the first ever Appeal ruling on the admissibility of an agreement to arbitrate contained in a historic registered agency agreement. The proceedings centred on whether the UAE Courts had jurisdiction or whether the parties’ agreement to arbitrate prevailed. The enactment of Federal Law No. 3 of 2022 (the New Agency Law) marked a significant shift by introducing the recognition of arbitration clauses in commercial agency agreements. This legislative development created some ambiguity over the retrospective effect of the New Agency Law over historic agreements registered under the old law.

Clyde & Co represented a registered agent who initiated proceedings before the Commercial Agencies Committee (the Committee) to challenge the unilateral termination of the registered agency agreement by the principal. The principal sought to rely on an arbitration clause contained in the agreement, which had been signed and registered in the 1980’s, arguing that the 2022 law now permitted arbitration rather than litigation before the Committee and UAE Courts.

The agent argued that the arbitration clause was void ab initio, as it was contained in an agreement governed by the old law, which expressly prohibited arbitration in commercial agency disputes. It was also argued that the New Agency Law could not apply retroactively to agreements predating its enactment. The Commercial Agencies Committee agreed and rejected the principal’s arguments and affirmed its jurisdiction.

The principal then challenged the Committee’s decision before the UAE Courts and in parallel it also commenced arbitration proceedings to validate its unilateral termination. At first instance, the principal obtained a Court judgment in its favour, which annulled the Committee’s decision and upheld the arbitration clause. This decision was appealed by the agent before the Federal Court of Appeal, and Clyde & Co advanced arguments based on the principle of non-retroactivity of laws, public policy, and the express provisions of the New Agency Law, which stipulate that its provisions only apply to pre-existing agency relationships after a transitional period of ten years from its effective date.

The Court of Appeal accepted the arguments and overturned the judgment of the Court of First Instance and confirmed that the New Agency Law does not apply. This ruling correctly reinforced a crucial legal principle that new laws or legislative amendments cannot validate clauses that were void at the time of signing, nor can they apply retroactively to rights and obligations created under earlier legislation.

This decision, although subject to one further stage of appeal, establishes a clear judicial non-binding precedent. It is a significant decision for anyone operating under the commercial agency regime in the UAE, providing much needed clarity on the often asked question of applicability of arbitration clauses in registered Agency Agreements.

Clyde & Co’s Dispute Resolution team continues to lead and represent a significant number of clients in complex commercial agency disputes, delivering innovative market-leading winning legal strategies.