The law of juvenile employment is one which is developing in Oman, and as such this article will first look at the international conventions which Oman has signed up to, before analysing the available domestic legislation and its enforcement which is significant in ensuring the application of available protections and securing the rule of law.
The International Labour Organisation standard
Although there is no universally agreed definition for the term “exploitative child labour,” under the International Labour Organisation (“ILO”) Convention 138 of 1973, the minimum age of employment or work in any occupation is “not to be less than the age of completion of compulsory schooling and in any case should not be less than the age of 15.” This convention, however, gave the freedom to states with insufficiently developed economies and educational facilities to specify a minimum legal working age of 14. Additionally, Convention 138 specified that national regulations may permit the employment of persons 13 to 15 years of age on light work. Such light work may include work in a family business, on a family farm, after school, and in legitimate apprenticeship opportunities. The government of Oman ratified ILO Convention 138 on July 21, 2005 to ensure the minimum protection of juvenile workers.
The Oman Labour Law promulgated through Royal Decree 11/2003 (the “Labour Law”) supplemented these existing provisions. The Labour Law establishes, by virtue of Article 75, that the minimum age for employment is 15 years, while minors between the ages 15 to 18 years are not permitted to work between the hours of 6 p.m. and 6 a.m. Minors are also prohibited from working overtime or in certain hazardous occupations. The list of jobs that juvenile workers are permitted to do is attached to Ministerial Decision 217/2016, and broadly includes salesman roles. However, there are no specific descriptions of the tasks that can be undertaken by juveniles in these occupations. Further, employers are prohibited from requiring minors to work on official days of rest or official holidays or for more than six hours per day according to Article 76 of the Labour Law. Workplaces that employ minors are required to post certain items for display, including: a copy of the rules regulating the employment of children; an updated log with the names of minors employed in the workplace with their ages and dates of employment; and a work schedule showing work hours, rest periods, and weekly holidays.
As an addition to the Labour Law, Ministerial Decision 217/2016, Article 1 provides that employers must obtain written approval from the person responsible for the juvenile’s care and upbringing. Furthermore, because juveniles compared to adults are developing physically and those children seeking employment might more commonly be from poorer backgrounds, Article 3 importantly provides that at the sole expense of the employer, they must provide a medical check before, during and until six months after the termination of service.
Perhaps in the context of juvenile employment, what is most important is that the occupation undertaken does not hinder the juvenile’s educational development. In this context, within the Labour Law there is no requirement for juveniles to have completed their compulsory education before undertaking employment, nor is there a requirement for the occupation not to affect the child’s attendance at school. Moreover, for juveniles who complete only primary education, there is no apprenticeship regime, whereby they can learn a trade and obtain a certified license through learning on the job (i.e., there is no provision which stipulates that schooling is compulsory).
The worst forms of child labour such as activities which are hazardous, arduous or corrupt morals of children may be an offence under the Penal Code promulgated by Royal Decree 7/1974 (the “Penal Code”) and prosecuted. Forced or compulsory labour by juveniles, or otherwise, is prohibited by Article 12 of Royal Decree 101/1996 promulgating the Basic Statute of the State as amended by Royal Decree 99/2011. Under Article 259 of the Penal Code, anyone who enslaves a person or puts him in quasi-slavery commits a crime that is punishable by a sentence of five to 15 years in prison. Under Article 220 of the Penal Code, the enticement of a minor into an act of prostitution is a crime punishable by not less than five years’ imprisonment.
The Labour Care Directorate of the Ministry of Manpower is responsible for the enforcement of juvenile labour laws. While restrictions on the employment of youth are generally followed, enforcement does not always extend to agriculture, fishing and rural areas where adherence to legislation is irregular. The Labour Law does not apply to workers working for family members on whom they are dependent by virtue of Article 2.2 of the Labour Law. Without further guidance, this might provide a loophole for juvenile exploitation. In practice, most employers will ask prospective employees for a certificate indicating that he or she has completed basic education, although this is not mandated.
Employers who violate the child labour provisions of the Oman Labour Law are subject to a fine of OMR 500 under Article 118 of the Labour Law. A second violation within one year can result in one month of imprisonment in addition to the fine.
Monday, December 5, 2016
The law of juvenile employment is one which is developing in Oman, and as such this article will first look at the international conventions which Oman has signed up to, before analysing the available domestic legislation and its enforcement which is significant in ensuring the application of available protections and securing the rule of law.
Tuesday, November 29, 2016
The commercial contract is not going to plan. Can I terminate this contract for breach? Can I terminate this contract for convenience? Is terminating the contract the best option? These are common questions faced by clients in similar circumstances.
The following article seeks to provide some guidance as to some of the considerations a party should have when thinking of terminating a commercial contract.
In the Sultanate of Oman, the law of contract is governed by the Oman Civil Code promulgated by
Sultani Decree 29/2013 (the “Civil Code”). The Civil Code sets out the elements required to form a
valid contract and the rights of contracting parties as well as the rules governing termination. However, it is limited by Article 1, which states that where an issue is governed by “special” laws, those laws will apply. Special laws in this regard may include, for example, the Law of Commerce, Sultani Decree 55/1990, as amended. Nevertheless, the Civil Code itself also has provisions relating to specific contracts, such as construction contracts.
Although contracts can be brought to an end through rescission, because of misrepresentation and/or
mistake, the main focus of this article will be on bringing a contract to an end through
termination, due to breach of contract or otherwise, and will mention damages only briefly.
Termination, strictly speaking, means that unrealised future obligations owed by the parties fall
away. However, the contract does not cease to exist. That is, the primary obligations of the parties to perform the contract (e.g., to pay fees, or follow the design specified) are replaced with secondary obligations (e.g., to pay damages).
Monday, November 21, 2016
Oman Labour Law
Chapter 3 of the Oman Labour Law issued by Royal Decree 35 of 2003, as amended, (“OLL”) deals with the management of employees. Article 33 of the OLL provides that an employer is required to provide its employees with access to medical facilities in the establishment. Additionally, if the number of employees in one place exceeds one hundred, the employer shall employ a qualified nurse for providing medical aid and shall assign a doctor to visit and treat the employees at a designated place prepared for such purpose. The employer must also provide the employees with the medical treatment free of charge.
If the number of the employees is more than five hundred, the employer shall, in addition to the above, provide the employees with all other means of treatment, including the assistance of specialist doctors or surgical operations or provide the required medicine, free of any charge to employees. However, the employer is not required to pay the costs for dental, ophthalmic and maternity treatment. If the employee is treated in a government hospital or a private clinic, the employer must pay the costs of treatment, medicine and inpatient care, in accordance with the regulations and financial rules applied by the hospitals, subject to the provisions of the laws on social security insurance.
Accordingly, Article 33 of the OLL creates the legal obligation on the part of the employer to bear the expenses of the employee at a government or private hospital, including the expenses of treatment, medicine and stay in the hospital, subject to the laws in respect of social security.
Medical Insurance for Expatriate Employees
An employer is required to provide medical insurance for its expatriate employees. The employer may satisfy this legal obligation in relation to the payment of medical treatment for expatriate employees by providing medical insurance for its employees with a third party insurer, which insurer would pay the government or private hospital directly when the employee receives medical treatment at these health institutions. The employer may also opt for establishing an arrangement with particular designated medical institutions to provide medical services to its employees and the employer would then settle the dues directly with the relevant medical institution.
Medical Insurance for Omani Employees
In the ordinary course, an employer is not obligated to provide medical insurance to an Omani employee, as Omani nationals are entitled to free medical treatment at all government hospitals. Additionally, all Omani employees are covered under social insurance provided by the Public Authority for Social Insurance (“PASI”).
The Social Security Insurance Law, issued by Royal Decree 72 of 1991, as amended, (“SSIL”) provides the social security system applicable to Omani employees on permanent contracts of employment under the age of retirement. The SSIL deals with two types of security:
1. security against old age, disability and death; and
2. security against occupational injuries and diseases.
In instances of occupational injury, under the SSIL, PASI is required to directly provide the Omani employee with medical care. The employer is required to contribute towards the security against occupational injuries and diseases by paying a monthly subscription to PASI at the rate of 1% of the monthly wages of each Omani employee. Only the employer (and not the employee) shall pay such subscription to PASI.
There is no mandatory requirement under the OLL which requires the employer to ensure health coverage for the employee’s dependents (i.e., spouse and children). Article 33 of the OLL only requires the employer to provide all medical facilities to its employees with the exception of the costs relating to dental, ophthalmic, and maternity treatment.
However, if the employer has been sponsoring the employee’s dependents, the employer is not permitted under the OLL to discontinue such benefit. Article 6 of the OLL provides that an employer may establish a scheme by which its employees acquire benefits more generous than those granted by the OLL, or may provide the employee with other benefits, or may enter into agreements with them, the conditions of which are more generous than those provided for in the OLL. Article 6 further provides that if a condition in the OLL contradicts with any of the condition in such schemes or agreements, the condition that is more generous to the employee shall apply. Therefore, the discontinuation of the dependent’s coverage will be construed as ceasing a benefit that has been previously granted to the employee and thus a violation of the OLL.
Monday, November 14, 2016
As part of a cost cutting initiative, earlier this year, the Government of Oman, through the Ministry of Finance (“MOF”), made efforts to reduce various benefits provided to employees of companies with more than 50% government ownership (the “Affected Entities”). In other words, the Government of Oman sought to curtail a wide array of benefits currently enjoyed by employees of Affected Entities, in addition to their salaries, in order to make them more uniform and performance dependent.
Financial Publication No. 5 of 2016 (the “MOF Publication”) on the rationalisation of expenditure of Affected Entities, was issued by the MOF on 21 February 2016. The MOF Publication urges all Affected Entities to curb expenses on the basis of a non-exhaustive list which includes bonuses, insurance policies, loans, financial rewards, education allowances and financial reimbursements of any kind (the “Allowances”). Annual salary increments are not included in this list and performance related bonuses are also explicitly excluded.
The stated aim of the MOF Publication is to reduce the disparity between the number and nature of Allowances given to employees in the Affected Entities, and to implement the spending review made necessary by the drop in oil prices.
The decision to reduce or cease the payment of Allowances was issued by the MOF through a “Publication” and not by way of Circular or Ministerial Decision. Publications from the MOF have been, in the past, used as means of communication from the MOF.
The Publication is issued pursuant to Article 6 of the Financial Law (RD 47/98) which authorises the Minister of Finance to undertake certain functions, one of which is to guide and coordinate ministries and government units in respect of financial affairs. Article 6 also includes the right to intervene in the recovery of payments made without justification for salaries, wages, allowances, remunerations or their equivalents in cases and under conditions specified by the executive regulations of the law. However, the content of the MOF Publication may pose legal issues, in particular, considering its interaction with the provisions of the Labour Law (RD 35/2003 as amended).
Individual employees of the Affected Entities are employed in the private sector and therefore subject to the Omani Labour Law. The MOF publication appears to be in contradiction with some provisions of the Labour Law concerning employees’ benefits. Particularly, Article 6 provides that the employer has the option to establish schemes from which his employees may obtain benefits in addition to what is prescribed by the Labour Law. Once these benefits are formalised, usually in an employment contract, the employer is forbidden from unilaterally reducing or revoking such benefits. An amendment to the Labour Law, or a new Law in the form of Royal Decree could override such provisions but, in the case of the MOF Publication, the hierarchy of laws provides otherwise. A Royal Decree will take precedence over a Publication in accordance with Article 80 of the Basic Law of the State (RD101/1996), which states that no authority in the State shall issue regulations, by-laws, decisions or directives that contradict the provisions of the laws and decrees in force, or international treaties and agreements that are part of the law of the country. Thus, where a contradiction arises the Royal Decree will prevail.
Most employees working in Affected Entities have open-ended employment contracts (i.e., for an unlimited term). Such employment contracts include different types of Allowances and the Affected Entities will find it difficult to revoke the Allowances that an employee is entitled to and has been receiving since the commencement of his/her employment. A revocation of such benefits would constitute a breach of the employment contract, opening the door to complaints to the Ministry of Manpower and subsequent litigation whereby the Affected Entities, as employers, may be sued for not adhering to contracts between them and their employees. As a consequence, Affected Entities may face legal and financial issues by cutting Allowances originating from existing contracts. Affected Entities should review and evaluate the potential impact that implementing the MOF Publication would have on the company and its operations to assess the possible effects of such implementation as board members and other company officials should ensure that the policies and plans to be adopted in relation to the company’s operation are in the best interest of the company and its shareholders. Finally, Affected Entities may consider offering more limited benefits in future employment contracts.
The MOF Publication does not provide for sanctions or penalties that may arise in the case of failure to comply with its provisions and does not specify dates with reference to its implementation. Thus, the MOF Publication appears to be structured substantially as a communication and a recommendation to the Affected Entities in the framework of the MOF’s general endeavour to reduce public spending. The MOF may issue further clarifications and take further measures in the matter in the near future, as stated in the MOF Publication in the following terms: “We are currently working on the amendment of the regulations and measures applicable in regard to what is mentioned…”. If and when such amendments to the existing regulations are issued, the matter will have to be reconsidered in the light of the interaction of such amended regulations with the Labour Law and other applicable laws.
Monday, November 7, 2016
A number of limited liability companies (“LLCs”) are set up in Oman to carry out specific contracts for works and services, either as joint foreign and Omani enterprises under Article 2 of the Foreign Capital Investment Law promulgated by Sultani Decree 102 of 1994, as amended (the “FCIL”), or as 100% Omani owned LLCs. However, once the specific contract has expired, it is not always the case that these LLCs are successful in securing further contracts for works or services in Oman. As a result, these LLCs may consider voluntary liquidation.
Justifications for Liquidation
A LLC’s constitutive contract would usually set out the circumstances in which the LLC may be placed into liquidation, but justifications for liquidation are also set out in Article 14 of the Commercial Companies Law No. 4 of 1974 (the “CCL”). These are:
(a) Expiration of the term fixed for the LLC, or the occurrence of any other event requiring
dissolution specified in the constitutive contract or articles of association of the LLC.
(b) Accomplishment of the purpose for which the LLC was established, or impossibility of
accomplishing such purpose.
(c) Transfer of all the shares or stocks in the LLC’s capital to one member.
(d) Bankruptcy of the LLC, or loss of all or most of the LLC’s capital if such loss renders
the effective use of the remaining capital impossible.
(e) Agreement of the members to dissolve the LLC.
(f) If at the request of any interested party, and for any of the foregoing reasons or for
any other reason seriously impairing the LLC’s ability to accomplish its objectives, the Commercial
Court orders the dissolution of the LLC.
Monday, October 31, 2016
Implications of Narrowing the Scope of Sovereign Immunity Imposed by the Justice Against Sponsors of Terrorism Act
The Justice Against Sponsors of Terrorism Act (“JASTA” or “Act”) was passed by Congress on 28
September 2016 and according to Act, was implemented to permit persons and entities injured as a
result of terrorist attacks committed in the United States (“US”) to pursue civil claims against
foreign countries. President Obama had earlier vetoed the Act which, for the first time in his
administration, Congress has overridden.
Before the implementation of JASTA, it was not permissible for a US national to pursue civil claims
of this nature against a foreign state on the basis of sovereign immunity. JASTA amends the
federal judicial code (the “United States Code”) in order to narrow the scope of foreign sovereign
immunity from the jurisdiction of US courts. The resulting effect of JASTA may open the gate for
US nationals to seek compensation from foreign states for injuries sustained as a result of acts of
international terrorism where a foreign state or any of its officials, employees or agents has also
engaged in a tortious act or acts in connection therewith.
As JASTA legislation pertains to civil actions “arising out of an injury to a person, property or
business on or after September 11, 2001” 1, it is widely recognised that JASTA was implemented as a result of the 9/11 terrorist acts committed in the US. Although the Saudi Arabian government
strenuously denies ever having supported the terrorists of 9/11, it is expected that Saudi Arabia
will be affected by the Act, given that fifteen of the nineteen 9/11 terrorists were Saudi Arabian
What is the Purpose of JASTA?
As mentioned above, JASTA seeks to allow all persons and entities injured as a result of terrorist
activities the recourse to civil claims against those responsible for inflicting injuries to such
persons or entities.
Specifically, JASTA’s stated purpose is to provide civil litigants with the “broadest possible
basis … to seek relief against persons, entities and foreign countries … that have provided
material support or resources, directly or indirectly, to foreign organisations or persons that
engage in terrorist activities against the [US].”2
In enacting JASTA, Congress found, among other things, that “persons, entities or countries that
knowingly or recklessly contribute material support or resources, directly or indirectly, to
persons or organisations that pose a significant risk of committing acts of terrorism that threaten
the security of nationals of the United States or the national security, foreign policy, or economy
of the United States, necessarily direct their conduct at the United States, and should reasonably anticipate being
brought to court in the United States to answer for such activities” (emphasis added)3.
What is the Scope of JASTA?
The concept of sovereign immunity prevents a state from having a civil action being brought against
it (by individuals and states), subject to certain exceptions, without its consent. JASTA,
however, has narrowed the scope of sovereign immunity with respect to acts of international
terrorism by asserting as follows:
“… a foreign state shall not be immune from the jurisdiction of the courts of the [US] in any case
… for physical injury to person or property or death occurring in the [US] and caused by
(1) an act of international terrorism in the [US]; and
(2) a tortious act or acts of the foreign states, or of any official, employee, or agent of
that foreign state while acting within the scope of his or her office, employment or agency,
regardless where the tortious act or acts of the foreign state occurred.”4
The resulting impact of the provisions in (1) and (2) above means that if an act of international
terrorism occurs on US soil (by a national of a foreign state) irrespective of whether the person
acting on behalf of the foreign state is outside of the US, the sovereign immunity previously
applicable to that foreign state may no longer apply. Put simply, a civil litigant may pursue a
civil action in the US courts against the foreign state.
JASTA makes clear that reference to “international terrorism” has the same definition as in the
United States Code, meaning violent acts that are dangerous to human life and are a violation of
the criminal laws of the US or any State, and that would constitute a criminal violation if
committed in the US. Further, the terrorist act must be intended to intimidate or coerce civilians,
influence government policy, or affect a government’s conduct by mass destruction, assassination or
kidnapping and occurs primarily outside of the US.5
The Act further clarifies that a foreign state will still retain its sovereign immunity if an
omission or a tortious act “constitutes mere negligence”6. Therefore, any omission or tortious
act committed by a foreign state or an official, employee or agent of such foreign state must constitute more than negligence in order for the foreign state to lose its immunity protection under JASTA.
Aiding and Abetting
In addition to lifting the doctrine of sovereign immunity, JASTA also provides secondary liability,
asserting that “… any person who aids and abets by knowingly providing substantial assistance, or
who conspires with the person who committed such an act of international terrorism.”7 This
secondary liability is only applicable however to international terrorism that is planned or
authorised by an organisation that has been designated as a foreign terrorist organisation as
provided by the Immigration and Nationality Act. A foreign terrorist organisation is categorised
as a foreign organisation that “… engages in terrorist activity or terrorism (… or retains the capability and intent to engage in terrorist activity or terrorism); and … the organisation
threatens the security of US nationals or the national security of the US.”8 Contrary to the above section regarding sovereign immunity, “person” for purposes of this Section of JASTA is broadly defined and includes natural persons.
When did JASTA come into effect?
The amendments made to the United States Code by JASTA are applicable to any civil action pending on, or commenced on or after, the date of enactment of JASTA; and arising out of an injury to a person, property, or business on or after 11 September, 2001.
Stay of Actions Pending State Negotiations
Notwithstanding its narrowing effects on sovereign immunity, JASTA does permit the US Attorney
General to intervene in any action in which a foreign state is subject to the jurisdiction of a US
court for the purpose of seeking a stay of the civil action. The court may stay a proceeding
against a foreign state if US Secretary of State “certifies that the United States is engaged in
good faith discussions with the foreign state defendant concerning the resolution of the claims
against the foreign state, or any other parties as to whom a stay of claims is sought.”9 A
stay brought under JASTA may be granted for no longer than 180 days; however the Attorney General may petition the court for an extension of the stay for additional 180-day periods, provided that a recertification is given by the US Secretary of State as to the state of negotiations with the
Potential Implications of JASTA
Proponents of JASTA argue that it is justified on the basis that governments should be able to be
held accountable where their people commit acts of international terrorism and the government
committed a tortious act or acts in connection with such acts.
Critics of JASTA, including President Obama’s administration and the Central Intelligence Agency
(“CIA”), argue that JASTA will have severe implications for the national security of the United
States, so much so, that CIA Director John O. Brennan has recently stated that “any legislation
that affects sovereign immunity should take into account the associated risks to our national
security.”10 This viewpoint is based on the fact that sovereign immunity is a reciprocal
arrangement, with the concern being that it could make the US exposed to similar litigation in
foreign courts that could affect US officials working overseas if other states impose retaliatory
legislation. In addition, critics also argue that JASTA could significantly weaken the relationship
the US has with other states, such as Saudi Arabia which, as mentioned above, is one foreign state
that could largely be impacted by JASTA.
Despite being passed by Congress with 97 – 1 in favour in the Senate and 348 – 77 in favour in the
House, following the severe criticism of the Act, there has been speculation that legislators may
seek to revisit and modify JASTA after the US Presidential elections in November 2016. However, it is not yet clear to what extent legislators shall seek to modify the Act, or indeed whether the
narrowing in scope of sovereign immunity shall be amended.
1 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §7.
2 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §2(b).
3 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §2(a)(6).
4 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §3 to be codified
at 28 U.S.C. §1605B.
5 18 U.S.C. §2331.
6 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §3.
7 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §4 to be codified
at 18 U.S.C. §2333.
8 8 U.S.C. §1189.
9 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §5(c)(1).
10 Statement from Director Brennan on JASTA, available at: https://www.cia.gov/news-information/press-releases-statements/2016-press-releases-statements/statement-from-director-brennan-on-justice-against-sponsors-of-terrorism-act.html
Wednesday, October 19, 2016
The costs associated with construction litigation are often disproportionate to the quantum in dispute due to their complex and technical nature, and the proliferation of associated documentation. Arbitration costs (often promoted as a less expensive and more expedient process as compared to the court process) often rival the costs associated with a court-adjudicated process. Rarely does either party exit a litigious process unscathed. A more collaborative philosophy of contracting and dispute resolution may be helpful in this region to effectively resolve construction disputes early on, particularly if the relationship of the parties is ongoing and one that requires preservation. Dispute review boards (“DRBs”) and dispute adjudication boards (“DABs”) are two dispute adjudication processes that have been effective in other jurisdictions at reducing the time and costs associated with resolving construction disputes.
What are DRBs and DABs?
DABs are designed to provide decisions in relation to matters arising between contracting parties throughout a project, and the parties are generally bound by these decisions if provided for by contract. However, where non-binding recommendations are provided, and the DAB acts in an advisory capacity, the DAB would generally be referred to as a DRB. DRBs have the dual purpose of assisting the parties to avoid disputes and also resolving disputes, ensuring, as far as possible, that disputes do not escalate to a more adversarial and hostile forum. DRBs and DABs are implemented at the outset of a project, rather than at the time of the dispute such as with an arbitration process. The DRB has intimate knowledge of the project at all stages, attends site and meetings every few months and produces reports on an ongoing basis to the parties. The board in each case is generally comprised of an engineer selected by each party and a third engineer, generally with dispute resolution and contractual interpretation experience selected by agreement of each party’s engineer.
DABs and DRBs have gained popularity in many jurisdictions over the years. DABs are provided for in each of the FIDIC Red, Yellow, Silver and Gold Books and the International Chamber of Commerce (“ICC”) has released its own dispute board procedure in October 2014. However, despite the significant success of dispute boards elsewhere in the world, neither DABs nor DRBs are popular in Oman.
Forms of dispute resolution in Oman have, to date, been primarily restricted to mediation and, more often, arbitration. This, in part, is due to the prevalent use of the Oman Government Standard Form Construction Contracts that are based on a modified form of the standard forms of contract issued by FIDIC. As standard, in the Oman Government Standard Form Construction Contract, provisions relating to resolution of disputes via arbitration are retained, and the clauses relating to DRBs/DABs are omitted. It is normally not possible to amend these Standard Form Contracts.
Dispute adjudication processes
Currently, courts in Oman and across the Middle East are reluctant to enforce DAB or DRB decisions, particularly where an arbitration clause is also in the contract or at all. Arbitrators are likewise reluctant, or without jurisdiction, to enforce the decisions of a dispute board without hearing the issues in dispute afresh. Additionally, during a DRB or DAB process, matters are not discussed on a “without prejudice” basis and information disclosed can be used if the matter proceeds to an arbitration or court- adjudicated process. The absence of recognition of “without prejudice” negotiations is a major reason methods of alternative dispute resolution such as mediation or dispute boards are not used in the region. Further, a contractually agreed confidentiality agreement does not afford reliable protection. The Oman courts may allow any evidence to be presented which sheds light on the matters before it. Further, and most importantly, dispute board decisions are not likely to be enforced by the courts in Oman.
Other jurisdictions have introduced a statutory framework to support the implementation of effective alternative dispute resolution methods, rather than simply a contractually agreed framework. Such frameworks were introduced in the UK in 1996, followed by Australia in 1999, New Zealand in 2002 and Singapore in 2004 and have enabled alternative dispute resolution (particularly DABs and DRBs) to be a legitimate and enforceable means to resolve construction disputes.
It is advisable to seek legal advice before considering whether to contractually implement a dispute board to resolve contractual disputes at any stage of the dispute process. There are considerable merits in that high-quality opinions from a DRB or DAB may provide the deep understanding and rational compass for construction projects necessary to keep litigation at bay. However, the lack of enforceability of dispute board decisions continues to greatly detract from their usefulness in Oman. If a statutory framework is developed in Oman such that dispute board decisions can be enforced, DRBs and DABs may become an attractive alternative to arbitration.
Wednesday, October 12, 2016
The May edition of the Client Alert contained a comprehensive discussion on the procedural formalities that must be met in order to establish an Engineering Consultancy firm under the new Engineering Consultancy Law, entitled “Issuing the Law Regulating the Work of Engineering Consultancy Offices” (“Engineering Consultancy Law”) (Royal Decree 27/2016). The primary focus of this article is to identify key features that have been introduced by the legislature in the new Engineering Consultancy Law.
Engineering consultants play a vital role in administering large-scale infrastructure projects. Broadly speaking, the engineering consultant is responsible for providing both technical and administrative support needed to ensure that a construction project runs smoothly.
The scope of an engineering consultant’s responsibilities may be classified into two distinct categories, namely as a project’s administrative manager and as a project’s technical expert:
a) Administrative manager: In its capacity as administrative manager, the engineering consultant’s responsibility may include administering the tendering process, managing contractors and sub- contractors on behalf of a project owner, as well as reviewing and approving contractor’s variation requests. In some instances, engineering consultants may also be tasked with reviewing any potential disputes that arise between contracting parties.
b) Technical expert: Engineering consultants are often called upon to provide technical, engineering and/or quantum expertise on a specific project. In this regard, the scope of an engineering consultant’s responsibilities may include conducting and interpreting feasibility studies, such as soil and/or rock investigation, producing the detailed project design, and resolving any potential design related issues that may arise.
In light of the number of large-scale construction projects in Oman, engineering consultants, perhaps unbeknownst, play a pivotal role in the Sultanate’s long-term economic and infrastructural development plans. It is in this context that the Omani legislature considered it necessary to appraise and, ultimately, to modernize the Engineering Consultancy Law in Oman.
The new Engineering Consultancy Law – Royal Decree 27/2016
Until very recently, the primary legislation which regulated Engineering Consultancy profession was the Engineering Consultancy Law of 1994, promulgated by Royal Decree 120/1994 (“Previous Law”). However, on 22 May 2016, the Omani legislature issued a new, and more comprehensive, Engineering Consultancy Law, under Royal Decree 27/2016. The Engineering Consultancy Law replaces the Previous Law, and thus provides a new and comprehensive framework to regulate the engineering consultancy profession.
The Engineering Consultancy Law in many ways resembles the Previous Law. However, there are many new and noteworthy features in the new law, some of which we discuss below:
Credentials necessary to register an Engineering Consultancy Office
Significantly, Article 7 of the Engineering Consultancy Law has raised an applicant’s credentials required to establish an engineering consultancy office.
The legislature now draws an important distinction between an “Engineering Office” and an “Engineering ‘Consultancy’ Office” under the aforesaid Article 7. In order to qualify to open an Engineering Consultancy Office, an applicant must first have a registered Engineering Office. The applicant must also meet one of the following criteria: (i) gained a minimum of five years of specialized work experience after having obtained a BSC (Bachelors); (ii) gained three years of specialized work experience after having obtained an MSC (Masters); or (iii) gained two years of specialized work experience after having obtained a PhD in the same area of specialization.
However, as mentioned above, an applicant for an Engineering Consultancy Office must first have an established Engineering Office. In order to establish an Engineering Office, Article 7 provides that the applicant must have either: (i) obtained at minimum three years of specialized work experience after having obtained a BSC (Bachelors); or (ii) gained one year of specialized work experience after having obtained a PhD in the same area of specialization.
The qualifications set out above are more stringent than what was provided under the Previous Law. Under Article 3(c) of the Previous Law, an applicant only needed to have either: (i) gained five years of specialized work experience; (ii) gained three years of specialized work experience after having obtained a BSC (Bachelors); or (iii) obtained a PhD in order to open an Engineering Consultancy Office.
Chapter 3 – “Working Engineer”
The Engineering Consultancy Law has introduced new provisions intended to elevate professional engineering standards under Chapter 3, Working Engineer. For example, Article 17 restricts the right to sign off on key documents, including schemes, graphics, designs, specifications, project report samples, and supervision bonds, to only the licensee, and to engineers who: (i) are registered as authorized signatories with the MOCI; (ii) have met the requirements to obtain the professional degree from the authority; and (iii) work exclusively for the specific office.
Chapter 5 – Violations Committee
Chapter 5 of the new Engineering Consultancy Law has introduced a formalized Violations
Committee, to be chaired by the undersecretary of the MOCI. Once formed, the Violations Committee will be comprised of four experienced engineers, with two of the four serving as representatives of the Omani Engineer’s Association, each for a five-year term.
The Violations Committee is to serve as a quasi-adjudicatory board, to consider any complaints and/or potential violations of the Engineering Consultancy Law. The Violations Committee will be authorized to levy one of the following penalties: to issue warnings, to suspend a licence up to one year, or to cancel a licence altogether. Any adverse decisions issued by the Violations Committee may be appealed to the Minister within 60 days from the date of the Violations Committee’s decision.
Chapter 6 – Penalties
Perhaps most notably, Article 29 of Chapter 6, Penalties, introduces criminal culpability for acts of “gross negligence,” or for having failed to “take necessary precaution which jeopardized the safety of the people or the properties or the environment” by an engineering consultant. The Previous Law does expressly provide for criminal culpability for any violations of its provisions.
It is reasonable to assume that the legislature has included criminal penalties for gross misconduct, as perpetuation of its firm commitment to protecting those who may be unnecessarily placed in harm’s way due to any compromised or unsafe civil structures.
Wednesday, October 5, 2016
Arbitration is one of the most popular types of alternative dispute resolution methods used by parties to resolve a dispute, both in the private and public sectors in Oman. An often-cited reason for selecting arbitration is to reach a final resolution of a dispute in a timely, inexpensive and less formal manner.
Under the Omani Arbitration Law issued by Royal Decree 47/1997 (as amended), Article 4 defines “Arbitration” as the arbitration agreed upon by both parties to the dispute at their own free will, irrespective of whether the body that would be attending to the arbitration proceedings, in accordance with the agreement between the parties, is an organization, a permanent arbitration centre, or otherwise.
To ensure that disputes are resolved expeditiously, the Omani Arbitration Law (Sultani Decree
47/1997) sets time limits within which an award must be issued.
- clearly record the date of commencement of the arbitration proceedings in writing at the start of the arbitration; and
- both parties should communicate their consent for an extension beyond the initial arbitration period plus the six-month extension period before expiration of the extension period to the arbitral tribunal.
Thursday, September 29, 2016
In recent years, the Sultanate of Oman has established a number of free zones, predominantly to boost foreign investment as part of its wider diversification plan for the country. The focus of this article is the Sohar Free Zone (“SFZ”), in particular, the regulations applicable to companies operating within the SFZ.
Earlier this year, the Ministry of Commerce and Industry (“MOCI”) issued Ministerial Decision 35/2016, on the Governing Regulations for Operation of SFZ (“MD 35/2016”), which came into force on 8 February 2016. MD 35/2016 is to be read in conjunction with the Establishment of the Sohar Free Zone Law issued by Royal Decree 123/2010 (“Sohar Free Zone Law”) and was implemented in order to set out how companies (or rather “Working Companies,” a term defined by MD 35/2016) are able to operate. Such detail includes:
- how to acquire licenses;
- benefits and incentives for operating in the SFZ;
- tax exemptions available in the SFZ;
- rules governing the import and export of goods;
- rules of responsibility relevant to Working Companies; and
- incorporation fees (including license, permit and service fees) for setting up within the SFZ.
There are two categories of licenses for operators within the SFZ; the Working Company License and a Service Provider’s License. Each license shall specify the activity permitted to be conducted by the licensee and, in the event that the licensee wishes to add activities, it must obtain an additional license for each additional activity. Each license application must be submitted to the Operating Authority (the “Sohar Free Zone LLC” or “OA”) who is responsible for the management and development of SFZ.
If a license application is refused by the OA, a party may re-apply six months later. However, there is an option to appeal against refusal within a period of 60 days from the date of notification or from the date that the Working Company first became aware of the refusal decision, whichever is earlier.
Benefits and incentives of the Working Company
Further to the incentives available under the Sohar Free Zone Law and the tax incentives below, provided certain measures are adhered to, the Working Company is permitted to sub-let plots of land by virtue of a sub-lease agreement. Measures include but are not limited to obtaining the OA’s written approval of the sub-lease, registering the tenant as a Working Company, and providing a written undertaking evidencing the responsibility of the Working Company jointly with the tenant for any liabilities to the OA.
Working Companies are exempt from taxes for a period of ten years, provided they register within the SFZ, obtain a license (in accordance with the above heading), enter into a lease agreement or investment agreement with the OA, conduct business within the SFZ, and have not less than 15% Omanisation of its total workforce. In order to benefit from tax exemption after the first ten years, the following Omanisation percentages must be met:
- 25% for years 11 to 15;
- 35% for years 16 to 20; and
- 50% for years 21 to 25.
Import and export of goods
Chapter 5 of MD 35/2016 describes the arrangement of the import and export of goods into and out of the SFZ. For example, goods shall freely enter into the SFZ (and may remain for an unlimited duration) and goods exported out of Oman or to another free zone are not subject to customs duty.
Certain goods, however, are prohibited from entering the SFZ including but not limited to, narcotics, arms and ammunitions and explosives, chemical materials or radioactive substances, toxic waste that is harmful to the environment and any goods which shall violate the laws protecting intellectual property, commercial, industrial, literary and artistic property rights.
Procedures must be adhered to for importing and exporting goods into the SFZ, for instance:
Goods imported into the SFZ from outside of Oman
a) Customs officers shall prepare a statement of transit addressed to the SFZ at the border crossing point (i.e., the point of entry where the goods enter the SFZ). The goods are treated as goods passing the “Customs Territory” (defined by MD 35/2016 as any territory within Oman) provided that the owner of the goods submits a guarantee equal to the value of customs taxes, in accordance with the Unified Customs Law.
b) Customs officers in the SFZ shall verify the statement of transit and record the detail in the relevant register.
c) The OA or the Working Company shall take delivery of the goods, after a preliminary inspection of the goods has been carried out by customs and the inspection form is duly completed.
Foreign goods that are imported from the Customs Territory must enter the SFZ through customs by virtue of a certificate of origin and a bill from the exporter together with an export or re-export customs statement.
Goods exported out of the SFZ
a) The owner of goods shall submit an application to the OA together with payment of any fees and relevant invoice.
b) Upon the request of customs in the SFZ, the owner of the goods shall arrange for the goods’
c) A customs statement shall be prepared by the owner of the goods. d) The OA’s approval must be acquired before goods can be exported.
Any goods taken out of the SFZ and into the Customs Territory are treated as foreign goods, regardless of whether the goods contain domestic primary materials. Any goods manufactured or assembled within the SFZ shall be treated as goods of domestic origin with the purpose of being exported overseas.
In addition, Chapter 7 of MD 35/2016 sets out the penalties that may apply to Working Companies where the OA may withdraw a license or terminate a lease if any of the following circumstances apply:
a) failure to start building, construct works and prepare the site within six months from the issuance of a license without a justifiable reason;
b) failure to carry out the activity provided for in the license for six months from the date of issuance without a justifiable reason;
c) if the licensed activity is suspended for six months;
d) if rent is delayed by a period of six months from its due date;
e) bringing prohibited goods into the SFZ; and
f) a violation of the provisions of MD 35/2016.
Penalties for non-compliance with MD 35/2016 and the Sohar Free Zone Law include written
warnings, fines amounting to no more than 5,000 Omani Rials, prohibition from entering the SFZ for a period of one year, suspension from working for a period of three months, or prevention from conducting business within the SFZ, including being prevented from removing goods out of the SFZ until such violation is rectified.