Hourani secures favourable Dubai Court of Cassation ruling in landmark exclusive commercial agency infringement case involving an international FMCG confectionery brand

The Dubai Court of Cassation has issued a landmark judgment clarifying key principles of the UAE Commercial Agency Law (Federal Law No. 3 of 2022), in a precedent-setting dispute involving the unauthorised distribution of branded confectionery products in the UAE.

The judgment provides authoritative guidance on the legal position governing registered commercial agencies during disputes before the Commercial Agency Committee (CAC) between the principal and the commercial agent and confirms when third parties may lawfully import and distribute products subject to an agency relationship.

The case arose from the termination in July 2023 of a registered commercial agency agreement between one of the UAE’s major FMCG distributors, and the manufacturer and trademark owner of well-known branded confectionery products. Following the termination, the parties of the commercial agency initiated proceedings before the CAC, where the dispute remained pending for approximately ten months.

During the dispute period, the principal appointed a third party as an alternative distributor, which commenced importing and distributing branded confectionery products in the UAE while the agency dispute was ongoing.

Hourani & Partners acted for the commercial agent against the third party in preparation and filing of a major damages claim for unlawful distribution of commercial agency products seeking compensation for loss of profits and reputational damages. Complaints were filed with the Ministry of Economy and the Dubai Department of Economy and Tourism (“DET”), leading to inspections of the third party’s warehouses. The Ministry of Economy seized significant quantities of branded confectionery products and issued official seizure reports documenting the unauthorised distribution.

Subsequently, Hourani & Partners filed proceedings before the Dubai courts seeking compensation for losses suffered as a result of third party’s unlawful importation and distribution. The case involved complex factual and legal issues, and the Court of First Instance initially dismissed the claim in its entirety. On appeal, Hourani & Partners challenged multiple legal issues of the court of first instance judgement and the court of appeal successfully overturned the judgment and awarded AED 4 million in damages in favor of Hourani’s client, a decision that has now been upheld in full by the Court of Cassation.

In its ruling, the Court of Cassation confirmed that a registered commercial agency agreement remains valid and legally effective throughout the dispute period before the CAC, until either the expiry of the statutory notice period or the issuance of a final decision by the Committee. The Court rejected arguments that the mere existence of a dispute suspends or terminates the agency relationship.

Crucially, the Court also clarified the application of Article 9(3)(a) of the Commercial Agency Law, holding that responsibility for importing goods shifts to the principal during a dispute only in case the Ministry of Economy formally approved the appointment of an exclusive source. In the absence of such approval, third parties are prohibited from importing or distributing the products, and unauthorised activity may give rise to liability and damages.

Commenting on the judgment, Mohamed Abdelrehiem, Partner and Head of Litigation at Hourani & Partners, said:

“This judgment provides much-needed clarity on the operation of commercial agency relationships during disputes before the commercial agency committee, particularly under the new legislative framework. It confirms that registered agencies remain effective until formally resolved and draws clear boundaries around when third-party distribution is permitted. The ruling will have a significant impact on how principals, agents and distributors manage agency transitions in the UAE.”

Mahmoud Hamed acted as counsel in the proceedings and successfully advanced the legal arguments adopted by the Cassation Court in its reasoning.

The decision is expected to have wide-ranging implications for commercial agency disputes in the UAE, particularly in sectors where distribution rights and market access are commercially critical.