Monday, December 5, 2016

Employment of Juveniles in the Sultanate of Oman

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.

Omani law

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).

Enforcement

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.

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Tuesday, November 29, 2016

Terminating Commercial Contracts in Oman

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.

Introduction

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).


Can I terminate the contract for breach?

Termination for breach under contract

The parties are at liberty to include in their contractual bargain terms that govern the circumstances under which a contract can be terminated, and the process which should be followed. Usually, the contract will set out which clauses, when breached, give rise to the option to terminate. When considering termination, the contract must be examined to ascertain that the clause that will be claimed to have been breached gives rise to the option to terminate or, if it does not explicitly do so, determine whether the term is material.

Broadly, for a contractual term to be material, it must be a term that is a fundamental part of the bargain (i.e., it must qualify as a condition). This process of determining the importance of a contractual term is similar to that found in common law jurisdictions. That is, breach of a term not vital to the contractual undertaking will not give rise to the option to terminate. Particular attention must also be given to the provisions that govern notice, ensuring that the notice informing the defaulting party of the breach, the requirement to remedy said breach within a certain timeframe (if any), and the intention to terminate is in the correct format, given on the appropriate date, addressed to the correct person, etc.

A failure to correctly follow the process set out in the contract may preclude an innocent party from terminating the contract or, worse, it may render the innocent party liable for wrongfully repudiating the contract. Wrongful repudiation is a serious breach which could lead to a substantial award in damages against the accuser.

Termination for breach when the contract is silent

When the contract is silent, the Civil Code shall apply. The general provision governing the dissolution of contracts absent specific agreement by the parties for breach is found in Article 171. Should one of the parties, ‘not do what it is obligated to do under the contract,’ the innocent party may, ‘after giving notice to the [defaulting party], demand that the contract be performed or terminated.’

However, no further guidance is provided by the Civil Code on whether any breach, by the defaulting party, may give rise to the option to terminate. In principle, only a material breach will give rise to the option to terminate. Provided that the term is material, the innocent party will be entitled to terminate the contract, regardless of how minor the consequences of the breach may be.

Termination of contract is not automatic. The innocent party must either elect to accept the breach, treat future obligations as discharged and claim for damages, or affirm the contract and demand performance, by providing notice. Once the innocent party notifies the defaulting party of its decision to affirm, and if the defaulting party does not respond, a court order may be obtained under Article 171(2). If failure to perform following a court order continues, compensation will be the only option.

It is important to note that the Civil Code does not specify a particular period in which the election must be made, and notice given to the defaulting party. As such, it is important for the innocent party not to do anything that may compromise its ability to elect termination, either by waiting too long to decide, by carrying on business as usual or by inconsistent conduct. In practice, for ongoing construction contracts this is particularly difficult as the considerations before making a decision are many. Innocent parties may want to notify the party in breach that it is reserving its rights while the work continues.

Upon the election of the innocent party following a breach to terminate and treat its future obligations to perform as at an end, the primary obligation of the defaulting party to perform the contract is at an end, and replaced by an obligation to pay damages for the loss.

It is worth noting that there are no provisions in the Civil Code or in the Law of Commerce that require the innocent party to mitigate the loss caused by the defaulting party.

Can I terminate for convenience?

Termination for convenience under contract

Often, commercial contracts and construction contracts in particular provide the option to terminate for convenience, without the need for a breach, or for a reason to be given by the party electing to terminate. Such clauses are found, for example, in a number of the Omani Standard Form Documents. Yet, this option will be subject to very specific notice provisions, commonly requiring three months’ written notice. It is important to be aware and fully adhere to the notice provisions available because in the case of non-compliance, liability for wrongfully repudiating the contract may arise. As discussed, wrongful repudiation is a serious breach which could lead to a substantial award in damages against the accuser.

Termination for convenience when the contract is silent

In the case where the contract is silent, the Civil Code will apply. The Civil Code does not contain a provision allowing one party to unilaterally terminate a contract without the other party’s agreement. Therefore, in the absence of a specific clause allowing for termination for convenience, a contract may only be terminated, for convenience, with the agreement of the other party. In this case the contract will be considered to have been terminated mutually by an offer made to terminate which is accepted, under Article 169.

Would it be the best course to terminate?

The commercial factors that need to be considered are many. An innocent party should carefully consider whether terminating is the best option as discussed, the future obligations by the defaulting party will be cut short, and a new contract may have to be negotiated. In summary, from a legal standpoint the most important thing to consider is that any attempt to terminate a contract must be done with the utmost of care and be in accordance with the procedural requirements found in the contract, or in the prevailing law. This entails ensuring that there is a breach, the breach is a material term, the defaulting party is notified of its breach and the innocent party’s intention to terminate.

In any event, a party wishing to terminate a contract should obtain legal advice prior to doing so.


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Monday, November 21, 2016

Insurance Coverage Obligations

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.


Is it mandatory, according to the OLL, for the employer to provide immediate health coverage to the employee’s dependent(s)?

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.

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Monday, November 14, 2016

Payment of Allowances – An Overview of Financial Publication No.5 of 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.


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Monday, November 7, 2016

Voluntary Liquidation in Oman

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.

For the purpose of this article, we will consider the process to be followed where there is agreement of the members of an LLC to dissolve the LLC, although the main processes set out below would apply to the other justifications for liquidation.

Liquidation Process

Agreement to Liquidate
In accordance with Article 168 of the CCL, an LLC may be liquidated with the agreement of the 
shareholders representing 75% of the LLC’s capital.

Appointment of Liquidator

The shareholders will need to execute a resolution confirming their decision to liquidate the LLC 
and the appointment of a liquidator (usually a local law firm).   The shareholders resolution and 
appointment of the liquidator would then need to be filed by the liquidator in the commercial 
register of the Ministry of Commerce and Industry (“MOCI”) with a cheque for OMR 50 payable to the Ministry of Legal Affairs (“MOLA”).

Cessation of Business and Notices

Once the shareholders resolution discussed above is executed, the LLC must cease all of its business. The MOCI will liaise with MOLA to publish a notice of liquidation in the Official Gazette of Oman. The publication in the Official Gazette will invite the LLC’s creditors to present any claims they may have against the LLC. In accordance with Article 25 of the CCL, the creditors have six months from the first publication to present such claims, although the Minister of MOCI may authorise a shorter period, depending on the financial state of the LLC.

Any contracts, receipts, notices or other documents issued by the LLC after the publication of the notice of liquidation, must indicate that the LLC is under liquidation.

Liquidators Duties and Powers

The liquidator will take possession of the LLC’s ledgers, registers, documents and stock and with the LLC’s auditors or managers (if any) will prepare a detailed list of the LLC’s assets and liabilities. The liquidator will represent the LLC and manage its activities and take all measures necessary to liquidate the LLC’s assets and settle its debts. The liquidator will represent the LLC in law as either plaintiff or defendant and take appropriate steps to safeguard the interests of the LLC.

However, the liquidator will not be permitted to conclude any settlement arrangements with the LLC’s creditors, or to accept arbitration on its behalf or to relinquish any insurance or any other types of security belonging to the LLC at less than its full value. The Liquidator may not commence any new undertakings unless such undertakings are necessary to liquidate the LLC.

Return of Stake to Shareholders

After settling all valid claims made against the LLC, the liquidator shall repay to each of the shareholders the remaining value of his stake or shares in the LLC’s capital as set out in the LLC’s constitutive contract, and distribute among the shareholders any remaining assets in accordance with the provisions of the LLC’s constitutive contract. In the absence of a specific provision to this effect, the remaining assets will be distributed among the shareholders proportionate to each of their stakes or shares in the LLC’s capital.

Completion of Liquidation Process

When the liquidation process has been completed, the liquidator shall submit a final report and a 
statement of account on their work to the LLC’s shareholders for approval.  If the LLC’s 
shareholders do not agree unanimously to the final report and the statement of account, the 
liquidator may request the competent Court to approve.

he approved final report is then presented to the Tax office at the Ministry of Finance (the “MOF”) to confirm that all taxes have been paid.  The liquidator will also be required to receive a 
statement from the Ministry of Manpower (the “MOM”) confirming that all amounts due to the 
employees have been settled.

The liquidator is then required to submit the final report along with the MOF and MOM confirmations to the MOCI and file the announcement of completion of the liquidation process on the Commercial Register at the MOCI.

The announcement of the completion of the liquidation process will also be published in the Official Gazette, after which, an official request is made to the MOCI enclosing a copy of the publication for closure of the LLC. Upon filing this request, the liquidation shall be deemed to be completed and the LLC shall cease to exist.

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Monday, October 31, 2016

Implications of Narrowing the Scope of Sovereign Immunity Imposed by the Justice Against Sponsors of Terrorism Act

Introduction
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
nationals.

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?

Sovereign Immunity

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
foreign state.

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


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Wednesday, October 19, 2016

Dispute Avoidance Processes in Oman - Friend or Foe

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.

Historically

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.

Conclusion

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.




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Wednesday, October 12, 2016

Oman's New Engineering Consultancy Law

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.




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Wednesday, October 5, 2016

Extending the Period of Arbitral Proceedings in Oman

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.


Per Article 45 of the Omani Arbitration Law, the arbitral tribunal shall have to pass a final award in respect of a dispute within the time period agreed upon by the parties.  Article 45 further says that if the parties fail to agree on the timeframe for adjudicating the dispute, then the award shall be required to be passed within 12 months from the date of commencement of the arbitration proceedings.

Once an arbitrator is appointed, for the purposes of these timeframes, the commencement date of the arbitration proceedings can either be a date agreed between the parties in an arbitration agreement, or a date determined by the arbitral tribunal (in which case it will often be the date of service of notice of arbitration by one party to the other party).

Period of extension under Oman Arbitration Law

If the dispute is not settled by the arbitral tribunal within the initial timeframe described above, Article 45 of the Omani Arbitration Law allows the arbitral tribunal to extend the period of the arbitration proceedings for a further period of six months from the date that the initial arbitration period expired. The arbitral tribunal’s decision for an extension of a further period of six months must be in writing.

However,  parties  to  a  dispute  must  keep  in  mind  that  any  further  extension  of  the  period  for arbitration proceedings beyond the above-referred six months requires consent of the parties as per Article 45 of the Omani Arbitration Law.

Article 45 (2) of the Omani Arbitration Law says that if the arbitration award has not been passed within the period specified above, either party to the arbitration may request the President of the Commercial Court to pass orders prescribing an additional period or have the arbitration proceedings brought to an end. In such a case, either party may file their claims before the competent court.

If the arbitration award is not issued within the initial timeframe plus the six-month extension period, the parties should send written notice to the Arbitrator requesting a further extension of the arbitration period proceedings.  This must occur before the initial arbitration period plus the six-month extension period expires.  In this way, the parties can avoid the premature closure of the proceedings, or an application to the courts.

In summary, the most important points to note are:

  • 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.

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Thursday, September 29, 2016

Regulations for Working in the Sohar Free Zone

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.


Licenses

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.

Tax exemption

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.
To qualify for the tax exemption status, under Chapter 4 of MD 35/2016, each Working Company is required to present a tax statement at the end of each year, including a list of its employees and the achieved level of Omanisation to date.  In a situation where the Working Company has not achieved the required Omanisation percentages described above for any given year: (1) it shall not be permitted to extend the period of exemption for that year; (2) any profit mentioned during that tax year should be subject to the applicable income tax; (3) it shall not be possible to transfer any accumulated losses in the annual profit and loss statement; and (4) the tax exemption shall not be effective unless the OA has otherwise issued a tax exemption certificate.

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’
inspection.

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.


Penalties

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.

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