<p><strong>SUMMARY<br /><br /></strong>In this case, the exclusive distributor (the  Claimant) filed a case against its principal (the Defendant) for terminating the  distributorship contract, without lawful cause or prior notice.&nbsp; The Claimant  claimed the termination caused him to suffer substantial loss and claimed loss  of profit and other expenses.&nbsp; The Claimant also brought a case against the  newly appointed distributor (the Second Defendant) as well as the First  Defendant for collusion and conspiring with the First Defendant to terminate the  Claimant&rsquo;s distributorship agreement.<br /><br />This case confirmed that exclusive  distributorships are subject to the general rules governing commercial agency  contracts which are set out under Chapter II of the Commercial Transactions Law  (Federal Law 18 of 1993) dealing with specific types of commercial agency  (Articles 220, 225 &amp; 226).&nbsp; Pursuant to Article 227 of the Commercial  Transactions Law <em>&ldquo;a distribution contract, whereby a trader undertakes to  promote and distribute the products of an industrial or commercial establishment  in a specific area on an exclusive distributorship basis, shall be considered a  contracts proxy and be governed by the provisions of Articles 220, 225 and 226  (of this law) hereof.&rdquo;</em><br /><br />Exclusive distributorships need not be  subject to the special provisions relating to commercial agencies contained in  the 1981 Commercial Agencies Law. The Court of Appeal was right to hear the  action involving the distributorship agreement despite the fact it was not  registered in the commercial agencies register, as this requirement is not  necessary for distributorship agreements.&nbsp; Further, unlike commercial agency  disputes, a court can look at the reason for the termination of a  distributorship agreement directly without a requirement that the dispute should  first be referred to the Commercial Agencies Committee, whereas with a  commercial agency, the Commercial Agencies Committee is the competent authority  to adjudicate commercial agency disputes before these are finally referred to  court after the Committee&rsquo;s decision.<br /><br />The Claimant, the exclusive  distributor, successfully won its case against the First Defendant, the  Principal.&nbsp; The Court ordered the First Defendant to pay AED 7,179,518 in  damages.<br /><br /><strong>COURT OF FIRST INSTANCE<br /><br /></strong>The Court of  First Instance appointed an accounts expert who prepared his report confirming  the claim amount. The Court of First Instance rejected the Claimant&rsquo;s claim and  accepted the First Defendant&rsquo;s argument that the action against him should not  be entertained on the basis that the agency had not been registered in the  commercial agencies register at the Ministry of Economy. The Court of First  Instance here treated the agency as a commercial agency and not a  distributorship agreement and relied on Article (3) of the Commercial Agencies  Law which prevents the courts from entertaining disputes relating to commercial  agencies, if the agency is not registered.<br /><br /><strong>COURT OF  APPEAL</strong><br /><br />The Claimant appealed this decision in Appeal number 78  of 2009. The Claimant contended that the Court of First Instance was incorrect  when it rejected the claim simply because the distributorship agreement was not  registered with the Ministry of Economy. The agreement is not subject to the UAE  Commercial Agency law.&nbsp; The Court of Appeal ruled that the Court of Instance  decision should be reversed, that it would entertain the action against the  First Defendant, ordering the First Defendant to pay the amount of AED 7,179,518  in damages.<br /><br />The First Defendant appealed this decision and the case was  sent to the Court of Cassation<br /><br /><strong>COURT OF  CASSATION<br /><br /></strong>The Court of Cassation confirmed the Court of Appeal&rsquo;s  decision and ruled that commercial agencies that are governed by the Commercial  Agency Law (Federal Law 18 of 1981) are subject to strict requirements, such as  the requirement that the business be conducted exclusively through UAE nationals  and that the contract be attested and registered with the Commercial Agency  register at the Minister of Economy.&nbsp; Therefore, parties opting for this type of  contract for their business must comply with these requirements in order to have  all the rights and protections afforded to them.&nbsp; In contrast, commercial  representation and exclusive distributorships are subject to articles 220, 225  and 226 of the Commercial Transactions Law.&nbsp;<br /><br />The Court of Cassation held  that the interpretation of agreements in a manner that reflects the intention of  the parties is for the court.&nbsp; The Court of Appeal, based on the evidence of  record and the expert&rsquo;s report, rightly concluded that the agreement between the  parties is in fact an exclusive distributorship contract and the action should  be heard without the regard to the requirement that the agreement should be  registered in the commercial agencies register.<br /><br />The First Defendant&rsquo;s  appeal was therefore dismissed.</p>