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Every Gulf country has laws governing the appointment of commercial agents, and an agency agreement may have to be registered with the Ministry of Economy or some other government department. Great care is needed in selecting an agent. Amongst the factors that you need to look at is the capability of the agent.

Also check out his standing and reputation. It is not going to be easy to run a Dun and Bradstreet check on prospective agents. Instead, you need to make enquiries - of the British Embassy, Bank, other companies - including other principals of the prospective.

Other considerations include the agent’s facilities, location and whether the prospective agent acting for your competitors.

In terms of the Agency Agreement and legal implications in the UAE, Saudi Arabia, Qatar and Oman, only a national or a company wholly owned by a national can act as commercial agent or distributor within the state. In Bahrain and Kuwait a company with foreign participation can act as an agent provided that 51% of the shares are owned by nationals.

In the UAE and Qatar an agent is entitled to commission on all sales of the principal’s products in the territory, irrespective of whether the sales have been made by the agents. In Bahrain and Saudi Arabia, the situation is slightly different. In Saudi Arabia, for example, principals are free to restrict the agent’s commission only to sales which are actually made by the agents.

The general rule throughout the Gulf is that a registered agency agreement cannot be unilaterally terminated by a principal.

An agent can claim compensation for termination or non-renewal based on the success which the agent has brought to the business with the principal.

As a lawyer, I would strongly recommend that you take legal advice before you finalise an agency agreement.

View the other posts in this 4 part series:

• Doing Business In the Gulf And Middle East (introduction)
• Opening an office in the Gulf
• Free Zones in the Gulf

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If you don’t like the idea of having a local partner or sponsor for your business in the Gulf, especially if your business is going to involve having a distribution centre - or an assembly plant - in the region, then you should consider going to one of the free zones. You don’t need a local partner - in effect the Free Zone authority is your local partner and issues your company with a licence. Your company therefore remains 100% yours and free repatriation of capital and profits are guaranteed for 15 years and in some cases for 50 years. Fujairah has a good free zone – and they have an advantage of having their port outside the Gulf, on the Indian Ocean.

Free Zones are not confined to industry – Dubai, currently leading the pack in attracting foreign business to the region has an internet city and has recently set up the DIFC (Dubai International Financial Centre) which has its own legislation, regulatory regime on Western lines and even its own civil court, presided over by an English judge.

View the other posts in this 4 part series:

• Doing Business In the Gulf And Middle East (introduction)
• Opening an office in the Gulf
• Appointing Agents In the Gulf

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There are generally two pre-requisites of setting up an office in one of the Gulf States.

Firstly, unless you are exempt, you need to have a national of that country who is either an individual or a company wholly owned by nationals involved in your Gulf business to a greater or lesser extent. Exemptions are sometimes given to independent professionals.

Secondly, you will need a licence from the concerned authority in the country. In the UAE, for example, his is the Municipality in the Emirate in which your office is established. The licence is very important not only because it is illegal not to have one but also because without a licence, you won’t get your own dedicated phone line electricity supply, and be able to obtain visas etc. for staff.

Before getting the licence you have to establish a business structure.

The Federal Companies law requires that at least 51% of the shares must be held by a UAE national in the emirate. Similar rules apply in the other Gulf States.

It is also possible to have an agreement with the local partner that he takes less than 51% of the profits - i.e. share the profits in a different ratio from the capital.

The Federal law in the UAE provides for several different types of company formation but the limited liability company, not so different from a private company in England, is generally used by foreigners. There are standard forms of Articles of Association to be used when forming the company.

If you do not want to form a local company, you may be able to establish either a branch office or a representative office. Whether you go for a branch or a representative office, you will need a local service agent (“sponsor”) who, in return for an agreed fee, will assist with the formalities, residence permits etc.

View the other posts in this 4 part series:

• Doing Business In the Gulf And Middle East (introduction)
• Free Zones in the Gulf
• Appointing Agents In the Gulf

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There has been a massive amount of new legislation in the Gulf States. Most of the Gulf countries now have sophisticated commercial codes, laws dealing with the incorporation of companies as well as legislation governing copyright and trade marks. Property laws are developing rapidly. The process is continuing - the UAE now has some environmental legislation which is likely to impact on new industrial projects. The increase in project financing and moves towards privatisation, all of which involve international banks, is helping to bring the Gulf states in line with other jurisdictions with a longer history of legislation.

Giles has written an article about doing business in the Gulf and Middle East for the Telegraph Business Club, we’ll be publishing information based on this to the blog in 3 further segments:

• Opening an office in the Gulf
• Free Zones in the Gulf
• Appointing Agents In the Gulf

ContractStore supplies a range of legal documents to assist those wishing to trade in the Middle East, including two free documents:

• Drafting Agency Agreements in the Middle East
• Notes on Commercial Law in the Gulf

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