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Dubai Chamber Working on Franchising Law in UAE


Middle East : 22 March 2013

Source: Gulf News 2013

Dubai: While there is no law for franchising in the UAE, Dubai Chamber is collecting efforts with the legal firms in the emirates to put down the right legislations to protect this business in the UAE.

Business owners and legal profession describe this situation as not ideal pointing to the risk and main difficulties they face while dealing with this business segment.

Unlike other jurisdictions like the US and Europe, there is no standalone franchise law in the UAE, said Carine Souaiby, Head of Corporate & Commercial, Abu Dhabi Office of Habib Al Mulla.

“There are also no provisions in the current legislative framework that specifically deal with the concept of a franchise business,” she added,
Aiming to ease businesses and protect brands owners and investors, Dubai Chamber of Commerce and Industry organised a workshop with the participation of leading legal firms to develop franchising law.

Pointing to the unavailability of franchising law in most of the countries in the region, Carine added that despite the popularity of franchise businesses in the region, many Arab countries still don’t have a law dedicated to regulating franchise agreements.”
From a legal perspective, the absence of specific provisions governing the franchise concept, franchise agreements in the UAE are subject to civil and commercial laws, namely the Commercial Agencies Law, the Commercial Transactions Law and the Civil Transactions Law.

Certain aspects of a franchise agreement may also be governed by the UAE intellectual property laws if the main elements of the agreement involve the transfer know how and intellectual property rights such as trademarks, logos, business processes, she remarked.

“This situation is not ideal, given that there are substantial differences between a franchise and an agency, evidenced by the definitions in each agreement. A franchise agreement is essentially defined as a contractual relationship where the franchisor allows a franchisee to use its trade name, trade mark, brand, logo and know how while exercising control over the franchisee and providing ongoing training and assistance to them, in return for financial investment by the franchisee, “ Carine said.

Despite the fact the flow of franchising into the UAE has achieved a drastic leap between 2000 and 2013, this business is still in the grey zone, said Grace Milan, department manager of group legal of Allied Enterprises, Chalhoub which is running the business of over 30 international high end trade marks.

“Finding such a law would bring more clarity to the market and define the obligation of both parties — the franchiser and franchisee.”

Outlining clear and concrete legislation for franchising will encourage the flow of more franchisees to the UAE as well as boost with market, she added.

Risk

Carine said that there are no accurate figure on these disputes. “In fact, a recent inquiry we have conducted before the courts in Dubai and Abu Dhabi showed that there are no pending disputes pertaining to a franchise agreement as such.”

“However, this survey may not be considered as accurately reflecting the reality as most franchise agreement are treated as commercial agencies and are hence categorised as commercial agencies disputes,” she said.

Riaz Hussain, Finance and Insurance Manager at AW Rostamani Group said: “In the absence of specific statutory provisions setting out legal protection for both franchisor and franchisee, most of the agreements made in the UAE are based on different rules and regulations.”

The most important factor to promote businesses in any market is to have a solid legal infrastructure that protect investors and their businesses, and here lies the significant of developing franchising law according to the international standard, he added.

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