Outsourcing Agreement Between Two Companies Template for the United Arab Emirates

An outsourcing agreement between two companies is a comprehensive contract that governs the relationship when your business delegates specific functions or services to an external provider. Under UAE law, this document must carefully balance commercial flexibility with strict regulatory compliance, ensuring that your arrangement doesn't inadvertently create employment relationships or violate commercial agency regulations.

When do you need this document?

You need an outsourcing agreement when transferring business functions like IT services, accounting, customer support, or manufacturing to another company. This is essential when engaging international service providers who must comply with UAE foreign investment rules, or when your business requires specialized expertise not available in-house. The agreement becomes critical if you're outsourcing functions involving personal data processing, as UAE data protection laws impose specific obligations on both parties. You also need this document when the outsourced services involve intellectual property creation or when the arrangement could be misinterpreted as a commercial agency relationship under UAE law.

Key legal considerations

Your outsourcing agreement must clearly define the scope of services to avoid disputes over deliverables and performance standards. Include detailed service level agreements with measurable metrics and remedies for non-performance. Address intellectual property ownership explicitly, particularly for any developments created during the outsourcing relationship. Confidentiality clauses are crucial, especially when sharing sensitive business information or customer data. Consider including indemnification provisions to protect against third-party claims arising from the service provider's actions. The agreement should also specify which party bears responsibility for regulatory compliance and how changes in UAE law will be handled.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 8 of 1980, you must ensure your outsourcing arrangement doesn't create an employment relationship between your company and the service provider's staff. The agreement must comply with UAE Commercial Companies Law regarding business relationships and commercial transactions. If your service provider is foreign, consider UAE Commercial Agency Law requirements to avoid creating an inadvertent agency relationship. Include governing law and jurisdiction clauses specifying UAE courts and applicable federal laws. For data processing activities, ensure compliance with UAE data protection regulations by including appropriate data handling and security provisions. The contract should also address UAE tax implications and specify which party handles VAT obligations for the outsourced services.