Does a “sponsorship agreement” have any legal effect on the relationship of the partners to one another?
Although such side agreements contradict and violate the law and have no effect as against others they might bind the parties entered into it. In case of a dispute between the partners of a LLC, e.g. the local partner is claiming his “rights” according to the provisions of the memorandum and articles of association, the UAE courts usually refer to the side agreements to reveal the real intention of the partners of the LLC. In combination with the principal of “duty of loyalty” that nobody shall act contrary to what was really agreed between the parties, such side agreements create rights and obligations between the contractual parties. If a side agreement has been entered into, a claim by the local against the foreign partner based on the provisions of the memorandum and articles of association will most probably be rejected by the UAE courts. However, this always depends on the individual case.
