Monday, November 20, 2017

Decennial Liability for Contractors and Architects in Oman

Many of those familiar with the construction industry in the Middle East region will be familiar with the term “decennial liability.”  In particular, many will be familiar with a requirement that, in relation to works performed under a construction contract:

(a) a contractor and an architect remain legally liable for a period of 10 years after the completion of the works; and

(b) each of the contractor and the architect are required by contract to take out insurance covering the works for that 10-year period.

A number of countries in the Middle East have similar legal provisions in that regard.  Generally, neither a contractor nor an architect can contract out of the liability.  Depending on the circumstances, the liability does not extend to subcontractors, suppliers or subconsultants.  The insurance is readily available in the relevant jurisdictions in the Middle East. 

The liability is a form of strict liability.  There are some differences of opinion among the legal profession as to what extent (if any) a claimant needs to prove fault or causation against a contractor or architect, but it is clear that there is no obligation on a claimant to prove negligence, or a failure to achieve an industry standard, etc.  To put it another way, there is no requirement to demonstrate the contractor or architect was “negligent,” but there are some differing views as to what extent (if any) there is a need to show that some action or inaction by the contractor or architect caused or contributed to the loss and damage.

In most parts of the Middle East, where there is a law imposing decennial liability, it only applies where the relevant structure has collapsed or suffers a major structural defect.  The law in Oman is far more extensive.  Article 634 of Royal Decree 29/2013 (the “Civil Code”) reads:

(1)  Both the engineer and the contractor shall be jointly liable for a period of ten years for any total or partial collapse of the buildings or other fixed facilities constructed thereby, and for any defect which threatens the stability or safety of the building, unless the contract specifies a longer period.  The above shall apply unless the contracting parties intend that such installations should remain in place for a period of less than ten years.

(2)  The warranty set forth in the foregoing Article shall include any defects existing in the buildings and facilities, which endanger the safety and endurance of building.

(3)  The period of ten years shall commence as from the time of delivery of the work.

This Article is typical of what might be found in other jurisdictions in the Middle East, in that liability is limited to total or partial collapse, and defects affecting the stability or safety.  However, Article 22 of the Engineering Consultancy Law promulgated by Royal Decree 27/2016 (the “Engineering Consultancy Law”) provides:

The licensee [i.e., the architect/engineer] shall be jointly liable with the contractor for the faults and flaws that may occur in the project designed by or executed under the supervision of his office, even if such faults and flaws are attributed to the land on which the project is constructed or the owner had approved the flawed installations, for (10) ten years from the date of the handing over of such installations.

If the work of the office is limited to making the designs only without being charged with supervision, the office shall only be responsible for the defects that may be attributed to the design process.  Every agreement and condition meant to exempt the designer and/or the supervisor from this liability or to limit such liability shall be null and void.  Also, claims of responsibility on liability filed after the lapse of (3) three years from the date of discovering the fault or flow without instituting an action within the aforesaid period shall not be considered.

When read literally, the words suggest that decennial liability extends to any defect, not just defects leading to collapse or those affecting stability or safety.  This would suggest that the contractor and the engineer remain liable for ten years for even minor defects.  This wording is not new.  It replaced Article 16 of the old Engineering Consultancy Law, promulgated by Royal Decree 120/1994, which contained near-identical terms. 

We do not know of any reported case that has interpreted Article 22 of the Engineering Consultancy Law to include liability for even a minor defect.  We suspect the Omani courts would be likely to approach the matter from a commonsense perspective, to exclude normal wear and tear, and issues that should be addressed as part of the overall maintenance of a structure.  Also, the limitation period of three years commencing from the discovery of the defect does rule out many likely claims for minor defects, and most that may be visible at the time of completion of the works.  Nevertheless, the law as set out does in principle allow for claims for minor defects.

In summary, decennial liability is broader in Oman than elsewhere in the Middle East, and can cover defects that are not structural or safety-related.  It is important that, when drafting contracts, contractors and consultants consider how best to allocate risk and protect themselves from claims.  It is also critical that parties to construction contracts keep good records to protect themselves from such claims, including photographs of works, and any relevant warranties given by manufacturers and suppliers.


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Monday, November 13, 2017

Oman Announces First Anti-Injurious Trade Practices Investigation

The Gulf Cooperation Council (“GCC”) forms a common customs union and free trade area between its member states.  The member states share numerous common pieces of legislation relating to trade and customs, including the GCC Common Law on Anti-Dumping, Countervailing Measures and Safeguards (“GCC Common Law”).  In accordance with the provisions of the Common Law and its implementing regulations, any member state may file a complaint with GCC Bureau of Technical Secretariat for Anti Injurious Practices in International Trade (“GCC Technical Secretariat”).  The GCC Technical Secretariat then evaluates the complaint, which must be supported by evidence, and decides whether to initiate an investigation.  The ministries of economy and foreign affairs in each member state liaise with the GCC Technical Secretariat and provide application and communication support to local companies involved in GCC Common Law investigations.

Omani Royal Decree 20/2015 promulgated the GCC Common Law.  The intent behind this decree and its associated Executive Regulations is to take anti-injurious trade measures such as anti-dumping (AD) and countervailing duties (CVD) where dumped or unfairly subsidized imports have injured the domestic industry in Oman.

If a company exports a product at a price lower than the price it normally charges in its own domestic market, it is said to be “dumping” the product.  This is considered unfair competition, and GCC member states may take action against dumping in order to defend their domestic industries.

AD investigations under the GCC Common Law consist of two major stages.  The first stage involves the determination of whether the product under investigation is indeed being dumped.  Once the GCC Technical Secretariat finds that a product is being dumped, it proceeds to the second phase: injury determination.  The GCC Common Law contains more precise definitions, but generally it empowers member states to take AD measures where there is genuine or “material” injury to the competing domestic industry.  In order to do that, the member state must calculate the extent of dumping (or show how much lower the import price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so within the member state’s home market.

In August 2017, Oman’s Ministry of Commerce and Industry announced that the GCC Technical Secretariat approved the commencement of an investigation against the producers and importers of paper and paperboard from Spain, Italy and Poland.  The complaint which led to the investigation was filed by a local Omani producer invoking the Executive Regulations promulgated by Royal Decree 20/2015.

This is one of the first such official investigations stemming from the Executive Regulations promulgated by Royal Decree 20/2015, and indicates Oman’s interest in protecting and promoting local industry by combatting harmful practices in international trade.  It may also reflect Oman’s reaction to Omani companies having been the target of AD/CVD actions in other countries, resulting in some cases in which additional duties have been imposed on Omani exports.  Under the GCC Common Law, Omani companies may now also seek protection from unfairly priced or subsidized imports.


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Monday, November 6, 2017

Offering and Marketing Foreign Securities in Oman - Key Regulations

The main regulation that governs all forms of marketing and sale of foreign securities in Oman is the Capital Markets Law (Royal Decree 80/98) (the “CMAL”) and the Executive Regulations of the Capital Markets Law Decision No. 1 of 2009 (the “Executive Regulations”).

“Securities” are defined in the CMAL as “shares and bonds issued by joint stock companies and the bonds issued by the Government and its Public Authorities, treasury bonds and bills and other securities negotiable in the Market.”  Despite the apparent restricted scope of this definition, the Capital Markets Authority (the “CMA”) in practice regulates any kind of investment product that is offered or marketed in Oman.

Article 117 of the Executive Regulations contains a general restriction on the offering and marketing of non-Omani securities within Oman without the approval of the CMA, and contains provisions governing the offering and marketing of non-Omani securities in Oman.  In general terms, the Executive Regulations provide:

(i) that the marketing and sale of non-Omani securities in Oman should be undertaken by a locally registered company licenced by the CMA;

(ii) that the licence issued to the local broker should include “marketing of foreign securities” as one of its permitted activities, prior to such broker undertaking the activities; and

(iii) the conditions that need to be observed by companies licenced to market non-Omani securities including, among others:

a. Marketing and advice shall be limited to regulated securities.

b. Information pertaining to the regulated securities shall be provided to investors, including the approved prospectus, any amendments thereto, and a copy of the due diligence report.

c. A statement must be submitted to the CMA every six months within seven days from the end of the term, including the details of the issuer of the security and the number and value of the marketed securities.

d. Companies shall not use fraudulent or deceptive methods, or provide false or incomplete information, or conceal any material information in order to promote the securities that they are distributing.

e. Companies shall not use the media to promote the securities.

f. Marketing shall be limited to investors who are financially solvent, have experience in securities investments, and have indicated the same in the Investor Qualification Form.

g. Investors must provide a statement to the effect that they are acquainted with all the documents relating to the security and that they are aware of the rewards and risks of the security.

h. The initial investment of any investor in any security shall not be less than OMR 5,000.

i. Companies shall keep a detailed register of investors who have subscribed to the security including the documents and statements relating to such investors.

In short, foreign companies wishing to market securities in Oman should appoint a registered local broker to do so on their behalf.


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Tuesday, October 31, 2017

Supply Contract Tenders in Oman: An Overview for Foreign Companies

A wide array of new projects, many of which are being promoted in the context of the Tanfeedh programme, continue to attract foreign companies wishing to do business in Oman.  This article’s primary focus is with respect to tenders for supplies, one of the four main tender categories, together with contracting, consultancy and training.

The possibility of participating in tenders for foreign companies who do not hold a commercial registration in Oman depends on a number of elements, including the type of tender, in addition to various bureaucratic and logistic issues.

Generally, tenders issued in Oman, both by private and public entities, are either restricted to locally registered companies (sometimes referred to as “local tenders”) or are open to foreign companies (sometimes referred to as “international tenders”).  Foreign companies not registered in Oman may participate independently in tenders that are not restricted to local companies, subject to the other requirements set out below.  In addition, whilst a foreign company is generally required to register in Oman within 30 days from the award of a contracting or construction contract, this does not apply to supply contracts, which rarely (if ever) require a permanent local presence.

Many government entities, government-participated entities and large corporations have a “vendors’ list” or a similar registry of approved suppliers, and only companies that have completed the relevant application process and are registered in such a list may participate in tenders issued by the relevant entity.  A number of these entities allow the registration of foreign companies in their vendors’ lists.

In this context it is worth mentioning that the oil & gas sector has elected to create a new registration system.  The previous registration with the Ministry of Oil & Gas (the “Ministry”) no longer applies and the Ministry promoted, instead, the creation of a joint supplier registration system (“JSRS”).  The sector companies increasingly restrict their procurement to JSRS suppliers.  Registration is available both for local and international companies, but local companies typically pay lower registration fees.

In supply contracts, local distributors of the products concerned or local providers of the relevant services will visually be registered in all or most vendors’ lists and therefore be able to acquire tender documents and participate in tenders issued by the various tendering entities.  Therefore, if there are serious time constraints and the foreign company is unlikely to be able to complete the registration process on time to tender for the specific contract, the foreign company may always consider participating in a joint venture with a duly registered local company.  Locally registered companies may be favoured in tenders, which take into account In Country Value.  The involvement of a local company may be even more beneficial, from this point of view, if it is a small or medium-sized enterprise.

The relationship between a foreign supplier and its local counterparty often takes the form of a distribution agreement which, under Omani law, may be non-exclusive.  In any event, the Commercial Agencies Law, pursuant to Royal Decree 26/1977 (as amended), now allows the direct sale or distribution of goods by foreign companies and, therefore, ultimately permits that a foreign company sells and distributes goods in Oman without the requirement of using a local agent/distributor.

In summary, and subject to any additional rules that may apply, a foreign company wishing to tender for supply contracts in Oman will need to review the relevant tender documents and verify that (a) the tender is open to foreign companies; (b) it is not restricted to companies registered in a vendors’ list (the foreign company may consider registering in the relevant vendors’ list(s) if foreign companies/producers are allowed to do so in the specific instance); and (c) the delivery of the goods can be performed without the involvement of a local company (which would import the goods with its import licence and deal with customs duties and the relating formalities), e.g., by direct delivery to the tendering entity.


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Monday, October 23, 2017

The Corporate Ownership of Land in the Sultanate of Oman

Real estate in the Sultanate of Oman is regulated by the Land Law (Royal Decree 5/80). The law broadly recognises individual and corporate real estate ownership. This article focuses on the corporate ownership of real estate in Oman. The applicable law has sub-categorised corporate land ownership into Omani, non-Omani GCC and foreign ownership.

Corporate ownership of real estate in Oman is subject to a number of restrictions under Omani law. Only limited liability companies which are wholly Omani or GCC-owned, and joint stock companies with at least 30% Omani shareholding, may own real estate in Oman. Furthermore, corporate ownership of property is limited to holding real estate for use as a warehouse, staff accommodation, administrative offices or as a similar special purpose premise for achieving the company’s objectives. An exception to this rule applies to real estate development companies, which can use land to construct and resell residential and commercial units.

While wholly Omani-owned companies may hold freehold rights, there are varying degrees of restrictions on other GCC and foreign entities with respect to property ownership. For instance, a GCC entity purchasing a vacant plot of land is legally obliged to develop it within four years of date of purchase. In addition, wholly GCC-owned companies may only own real estate for investment purposes.

It is important to note the impact of certain amendments to Omani land law and its usage. Royal Decree 76/2010 enables both public and closed joint stock companies with a minimum of 30% Omani shareholding to develop and own land in the Sultanate. In addition, the amendments to this decree allow these companies to engage in real estate development as a business object.

Usufruct rights 
Companies which are not entitled to own land in Oman may nevertheless be eligible to hold a usufruct right in land. This right continues to be the closest thing in Oman to a freehold right. A usufruct right enables its holder to exploit and use the land for the purposes of the applicable project, in the capacity of an owner. Nevertheless, this right is subject to restrictions in the usufruct contract and the obligation to return the land to its owner upon the termination or expiry of the usufruct agreement. A usufruct right on government land can be held for a maximum period of 50 years, which can be extended for similar additional terms. One of the most important features of the usufruct right is the ability for the usufruct land to be mortgaged and, thus, the mortgagee’s right with respect to the land is protected even where the usufruct right is terminated.

However, in the case of entities that are not entitled to own land in Oman, usufruct rights will only be granted over land for the purpose of carrying out a particular project which contributes to Oman’s economy or social development.

Integrated tourist complexes 
The law of Integrated Tourism Complexes (Royal Decree 12/2006, as amended) was issued to market and promote tourism in Oman. This law allows foreign companies to own land or build units for residential and investment purposes in areas designated by the government as “integrated tourism complexes” (“ITCs”). ITCs are typically required to comprise commercial, residential and tourism components. Foreign companies may purchase residential and non-residential units from a developer and register ownership title with the Ministry of Housing. Ministerial Decision 191/2007 set forth broad rules relating to the obligations and rights of developers and third-party purchasers, such as succession, transfer of freehold title and creation of security interest for financing ITC projects.

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Monday, October 16, 2017

Enforcement of Foreign Judgments in Oman

It is not uncommon for disputes emanating from commercial transactions to have cross-border effect. Quite often parties to a transaction are located in different jurisdictions. It is also not uncommon for commercial agreements to grant jurisdiction to the courts of a place where one or more of the parties are not domiciled or located. This may be for a variety of reasons. It is hence extremely important for a party having a foreign judgment in its favour (“Judgment Creditor”) to fully appreciate its ability to enforce that foreign judgment in another jurisdiction against the judgment debtor.

The enforcement of foreign judgments in Oman is governed under provisions of the Civil and Commercial Procedures Law issued pursuant to Royal Decree 29/2002 (as amended) (the “Civil Procedures Law”). Generally, while foreign arbitral awards can be readily enforced in Oman under the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1954, commonly referred to as the New York Convention, the same is not the case with judicial decisions.

Foreign judgments are, in theory, enforceable in Oman. It is possible to seek ready enforcement of foreign judgments in Oman, in particular under (a) the 1983 Convention on Judicial Co-operation between States of the Arab League (the “Riyadh Convention”), and (b) the 1995 Protocol on the Enforcement of Judgments Letters Rogatory, and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council (the “GCC Protocol”). Both the Riyadh Convention and the GCC Protocol provide that each member state will recognise the judgments of the courts of any other member state, subject to fulfillment of prescribed conditions, that had proper jurisdiction over the case and where the judgment had been finally adjudged.

A judgment issued by a special court of a member state to either the Riyadh Convention or the GCC Protocol, such as the Dubai International Financial Centre Courts in the United Arab Emirates, is treated as a domestic member state judgment. Hence, that judgment would also be enforceable in Oman under the relevant treaty.

The enforcement of foreign judgments of countries that do not have mutual enforcement arrangements with Oman are subject to a judgment to be issued in compliance with the usual procedures followed in suits before the Primary Court. To enforce a foreign judgment in Oman, the Judgment Creditor is required to approach the competent Primary Court. Before enforcing that foreign judgment, the Omani courts will satisfy themselves that the conditions set out in Article 352 of the Civil Procedures Law have been met. Article 352 sets out the requirements for enforcement of foreign judgments, a translation of which is as follows:

(a) that the judgment or the order is issued by a competent judicial body pursuant to the principles of international rules of judicial competence determined by the domestic law of the country in which it was delivered and has become final according to that law and was not delivered on basis of deception;

(b) that the litigant parties to the case in which the foreign judgment was delivered had been rightfully notified and represented;

(c) that the judgment or order does not contain a request which breach an operative law in the Sultanate;

(d) that the judgment or order does not contradict a previous judgment or order delivered by a Court in the Sultanate, and does not contain something against public order or decency; and

(e) that the country in which the foreign judgment was delivered accepts the enforcement of judgments delivered by Oman Courts within its own territories.

At times, a Judgment Creditor seeking to enforce a foreign judgment in Oman may not be able to satisfy all the requirements prescribed by Article 352 of the Civil Procedures Law. However, should a foreign judgment not be enforceable pursuant to the above rules, then it is possible that such a judgment would nevertheless be of evidentiary value and the matter may be litigated de novo in Oman in a full hearing before the competent Omani court.

Arabic is the official language of Oman. In case a foreign judgment that is sought to be enforced in Oman by a Judgment Creditor has been issued in a language other than Arabic, the judgment together with all other documents should be translated into Arabic.

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Monday, October 9, 2017

What's New in the 2017 FIDIC White Book?

In March 2017 the Fédération Internationale des Ingénieurs Conseils (“FIDIC”) issued the Fifth Edition of the White Book, or the Client/Consultant Model Services Agreement to give it its full name. The White Book forms part of the FIDIC suite of documents and is one of the most commonly used professional services agreements in the world.

The Fifth Edition contains some major amendments to the Fourth Edition, which was published in 2006. We consider below some of the more important changes introduced by the latest update.

Form of agreement 
The Fifth Edition introduces an order of precedence to the documents listed as forming and to be construed as part of the agreement, both under the Form of Agreement and in the General Conditions.

By omitting to do so, the Fourth Edition was unclear as to which document’s terms would take precedence in the event that provisions in one document contradicted those in any of the others. 

Standard of care 
The enhanced standard of care set out in clause 3.3.1 now conforms more closely with wording typically found in client-bespoke agreements. The new wording provides that the consultant must exercise the “reasonable skill, care and diligence to be expected from a consultant experienced in the provision of such services for projects of similar size, nature and complexity.”

Further, the consultant must “perform the services with a view to satisfying any function and purpose that may be described in Appendix 1 (Scope of services).” The above wording stops short of introducing a “fit for purpose” clause, though in Oman the absence of such wording will not affect the consultant’s statutory decennial liability for the collapse of a building.

The Fifth Edition makes clear that the standard of reasonable skill, care and diligence only applies to the performance of the services. Under the Fourth Edition, the consultant had “no other responsibility than to exercise reasonable skill, care and diligence” in the performance of all its obligations in the agreement, including commencement, completion dates, procurement and maintenance of insurance, and any reporting. In the Fifth Edition these are now treated as absolute obligations.

Intellectual property rights 
The new edition distinguishes between background intellectual property (intellectual property owned by either party prior to the commencement of the services) and foreground intellectual property (intellectual property created by the consultant during the performance of the services). Foreground intellectual property remains the property of the consultant, but the client will have a licence to use it for any purpose connected to the project. The licence is broad, however, and would allow the client to use the foreground intellectual property in any future extensions of the project.

Dispute resolution 
The dispute resolution provisions now include adjudication as part of a multitiered dispute resolution process. If a dispute cannot be resolved amicably, it must first be referred to adjudication before any arbitration proceedings can be commenced.

In Oman, it is likely that these provisions will be amended so as to refer any dispute straight to arbitration.

Good faith 
The Fifth Edition introduces a broad good faith obligation (applying to “all dealings”) which has the potential to be at issue in almost any dispute. The governing law and jurisdiction of the contract will have a significant bearing on the extent of this “good faith” obligation.

Good faith under Omani contract law can be interpreted as a requirement to act reasonably and moderately, not to use the terms of a contract to abuse the rights of the other contracting party, and not to cause unjustified damage to the other party.

In Omani law an act of bad faith by one party may constitute a cause of action for the other party to the contract. Accordingly, the duty of good faith is overarching, in contrast with the position at English law. Under English law the extent of the obligation depends on the context and how explicitly it is defined. However, it is clear that the English courts are reluctant to construe a good faith obligation as imposing a positive obligation on a party to act against its commercial interest, or to give precedence to such an obligation over an express contractual right.

Liabilities 
In the new edition, default must be not only “deliberate,” as was the case in the Fourth Edition, but also “manifest and reckless” in order for the exclusion of the cap on liability to apply.

The Fifth Edition also provides for the mutual exclusion of liability for a number of heads of loss or claim. This is favourable for the consultant, as in many jurisdictions, without express wording excluding liability for loss of profit, etc.; the consultant would be liable insofar as these constituted “direct losses.”

Programmes 
The Fifth Edition sets out more detailed requirements as to what programmes should contain. There are also more detailed provisions obligating the consultant to provide a programme within 14 days of the commencement date; specifying which information the programmes should include; and obligating the consultant to revise the programme if the client does not reasonably believe the project will be completed on time.

Variations 
The new edition expands on: the circumstances which could constitute a variation; the procedure for initiating variations and agreeing on their impact on the programme; and the consultant’s remuneration.

Termination 
The Fifth Edition now explicitly provides that the client is not entitled to terminate for convenience in order to carry out the services itself or through a third party. In the Fourth Edition, this was not expressly stated.

The Fifth Edition now allows for immediate termination where there is corruption or insolvency. It also permits the client, with 28 days’ notice, to suspend the services for convenience.

There are more extensive rights of suspension, including an express right for the consultant to suspend if the client fails to demonstrate that it has made satisfactory arrangements to meet its payment obligations.

Summary 
The allocation of risk between the parties under the new edition of the White Book appears to remain broadly similar to that set out in the previous Fourth Edition. However, the Fifth Edition has gone a long way to remedying many of the shortcomings of the Fourth Edition.

 As a result of the changes, the parties should now be better able to understand and manage their risk allocation.

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Monday, October 2, 2017

Oman Becomes Fourth GCC Member State to Implement the Unified GCC Trademarks Law

Oman has recently become the fourth Gulf Cooperation Council (“GCC”) state to implement the Law of Trademarks for the GCC States (“GCC Trademarks Law”). Royal Decree 33/2017 was issued in Oman on 25 July 2017 with immediate effect. However, the nuances of how this new law will be implemented in Oman remain to be seen, as the implementing regulations have yet to be published.

The GCC Trademarks Law was approved by the GCC Trade Cooperation Committee in 1987, with further amendments made in 2006 and 2013. However, the Trademark Law only came into force upon the issuance of the Implementing Regulations in December 2015. Since then, Saudi Arabia, Bahrain, Kuwait and now Oman have fully adopted the GCC Trademarks Law to replace their respective national trademark laws.

Although Oman has not yet published the implementing regulations, the GCC Trademarks Law itself provides an instructive preview of the main features of the law.

Under the GCC Trademarks Law, once a party submits an application for a trademark the examination much be completed within ninety days of filing. Any requests for further information from the relevant Trademarks Office must be met with a response also within ninety days. The GCC Trademarks Law provides a period of sixty days for parties to oppose published trademark applications; note that currently the opposition period in Oman is ninety days. Applicants must respond to oppositions within sixty days of notification, or risk their applications being considered abandoned.

Following the applicant’s response is a hearing session, after which the Trademarks Office issues its decision within ninety days. Appeals to the Trademarks Office’s decision rejecting an application shall be filed within sixty days to the Objections Committee. The decisions of the Objections Committee are also subject to appeal to the competent court within sixty days. This is a shift from the previous Omani law, which provides that decisions in opposition were appealable to a Trademarks Office within the relevant Ministry, with a further opportunity to appeal to the competent court afterwards.

In the determination of well-known trademarks, the GCC Trademarks Law provides criteria similar to those provided by the World Intellectual Property Organization (“WIPO”). For a mark to be declared as well-known, the GCC Trademarks Law requires that the mark be widely recognisable by consumers due to the marketing efforts of the trademark owner; that the mark be registered and used widely across countries; and/or that the mark be widely valued or useful in promoting the products or services to which it is applied.

Along with an increase in application fees, an increase in penalties for trademark infringement will be seen in Oman. According to the GCC Trademarks Law, the penalties that apply “where a person counterfeits a registered trademark in a manner which misleads the public [or] in bad faith uses a counterfeit trademark and who affixes this mark to its products” include a fine between OMR 500 (USD 1,300) and OMR 100,000 (USD 260,000) and/or imprisonment for up to three years. Where a person “knowingly sells goods which contain a counterfeit or unlawfully affixed trademark,” a fine of between OMR 100 (USD 260) and OMR 10,000 (USD 26,000) and/or imprisonment for up to one year are applicable.

Although Oman has yet to publish the implementing regulations of the GCC Trademarks Law, it is clear that the adoption of a unified trademarks law is a beneficial development. Rights holders will take comfort in claiming similar levels of protection throughout the GCC, and new applicants and businesses will be attracted by the ease of a single set of provisions for the registration and enforcement of their trademark rights.

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Monday, September 25, 2017

Capital Increases for Joint Stock Companies in Oman

Joint stock companies in Oman seeking to increase their issued share capital have the option by way of a rights issue, or through private placement. The board of directors may, in accordance with the Commercial Companies Law of Oman (“CCL”), approve the rights issue through a board resolution within the limits of the authorised share capital of the company, provided that five years have not elapsed from the date on which the shareholders approved the increase in the authorised share capital. In the event that five years have lapsed from the date on which the increase of the authorised capital of the company was approved, the rights issue will require the approval of the shareholders of the company through an extraordinary general meeting.
In relation to a capital increase through a rights issue, Article 82 of the CCL provides that each shareholder has a preferential right to subscribe for the new shares in proportion to the number of shares currently owned by such shareholder. Accordingly, the additional new shares will be offered to all the shareholders of the joint stock company on a pro rata basis.
Once the approval of the shareholders or board of directors has been obtained and in order for a shareholder to exercise their right and proportionately subscribe for the new shares, a written notice must be sent to each shareholder at their address registered in the shareholders’ register informing them of such preferential right.  For shareholders of a public joint stock company, the notice must be accompanied by a copy of the prospectus duly approved by the Capital Market Authority (“CMA”) and the notice must be published in two daily newspapers for two consecutive days after being certified by the Department of Company Affairs. The said notice must, inter alia, indicate the specified period during which the preferential right may be exercised, provided such period shall not be less than 15 days from the date of publication.
The prospectus should include satisfactory information about the company’s past business performance and the financial position including the certified balance sheet and profit and loss account for the previous financial years or the period that begins from the date of the establishment of the company, if such date goes back less than three years.
With respect to subscription and allotment of shares post a rights issue, Article 83 of the CCL provides that new shares which are not subscribed for by the present shareholders of the company within the offer period may be offered for public subscription or, alternatively, the board may reduce the issued share capital of the company to the extent of shares that are not subscribed for. However, it may be noted that offering the unsubscribed shares to the public is possible only for public joint stock companies.
Notwithstanding the above, a further issue arising out of Article 83 of the CCL is with regard to the shareholders of a public joint stock company being entitled to waive or assign or transfer to a third party their preferential right in respect of the rights issue in accordance with the provisions of the Rules for Waiver of Rights Issue, issued by Ministerial Decision 156/2002 (“MD 156/02”). MD 156/2002 provides that the shareholders’ preferential rights may be assigned/transferred within the period specified for exercising the pre-emption right.
Finally, public joint stock companies need to fulfil an additional requirement of disclosing any material information in respect of the rights issue to the public. Accordingly, Article 3 of the Capital Market Authority Law issued through Royal Decree 80/1998 provides that no securities of any joint stock company may be offered for public or private subscription except in accordance with the prospectus approved by the CMA. A summary of the approved prospectus should be published in two daily newspapers, one of which must be in Arabic. The prospectus must be made in accordance with the form specified by the CMA. Any omission or avoidance of any material information or the inclusion of incorrect statements or information shall be the responsibility of the entity preparing the prospectus.

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Monday, September 18, 2017

Anti-Monopoly and Competition Law in Oman

Introduction

This article provides a brief overview of the legal framework of the Anti-Monopoly/Competition Law in Oman, its implementation, and consequences of businesses in violation of its provisions.

The Competition Protection and Monopoly Prevention Law (the “Competition Law”) was promulgated by Royal Decree 67/2014 in order to establish a control regime and prohibit agreements that would result in abuse of market dominance. The provisions of the law are applicable to all production, trading, or services activities, including any economic or commercial activities that are practiced inside or outside Oman and have an influence on the Omani market.

Under the Competition Law, the concept of the relevant market is defined as a market that is based on two elements: i) the relevant products, and ii) the geographical scope. The relevant products are the those regarded as interchangeable or substitutable from the point of view of the recipient of the service or commodity. This includes products that are provided by competitors in other markets that are accessible by the consumer. The geographical scope refers to the geographical area in which the conditions of competition are homogeneous, with both sellers and purchasers contributing towards the setting of prices. Interestingly, the geographical scope is not limited to Oman, as the Competition Law applies to any economic or commercial activity that has effects inside Oman.

Impact of the Competition Law on businesses

While the Competition Law does not apply to wholly owned government entities, it has significant implications for private-sector businesses that have a dominant market share.

Under the Competition Law, private-sector businesses with dominance in the market are prohibited from engaging in practices that would undermine, lessen, or prevent competition. A juristic or legal person is considered in a “dominant position” if it has control of, or has an influence over, more than 35% of the relevant market, including the acquisition of a market share. This market share is the sole determinant of a business’ dominant position; the Competition Law does not include any references to local turnover or other financial indicators.

If a business is considering taking acts that might result in market dominance, whether directly or indirectly, to avoid sanctions under the Competition Law it must submit a written application before undertaking these acts (see below).

The Competition Law also prohibits businesses or individuals from entering into agreements or contracts, whether inside or outside Oman, for the purpose of monopolising the import, production, distribution, sale, or purchase of any commodity.

Enforcement of the Competition Law  
The Public Authority for Consumer Protection (the “PACP”) implements the Competition Law. When a business applies for approval of an act, it must provide PCAP the information relevant to the specific situation. The PACP then has a period of time to consider the application; interestingly, if the period expires without a response, this is considered an approval of the act. However, the PACP may withdraw an approval after its issue in case it discovers that the information submitted by the applicant is incorrect or deceptive. In any case, any act that will result in a market share of more than 50% is prohibited and no such approval may be granted.

The PACP is rather strict in enforcing the Competition Law provisions and the consequences are wide- ranging as explained above. By virtue of Article 17 of the Competition Law, any person may submit a complaint to the PACP, including competitors and the general public. The PACP receives a large number of complaints and investigates them thoroughly. We are aware of a number of such proceedings and therefore we do not advise any entity to take such a risk, especially considering the severity of the penalties.

Consequences of violating the Competition Law  
A business’ failure to apply to the PACP for approval, followed by acts resulting in market dominance, may result in sanctions under the Competition Law. These range from imprisonment to administrative fines depending on the violation committed. Under the Competition Law, the PACP may also choose to refer a case to the Public Prosecution. The chairman and members of the board of directors, the chief executive officer, and the authorised managers of the violating business may face penalties depending on their awareness of the violation of the Competition Law. Finally, the Omani courts may force businesses to take measures in compliance with the Competition Law.

Unfortunately, the PACP current policy in respect to this issue is not to disclose details of the filings received and this, coupled with the fact that the Executive Regulations of the Competition Law have not been issued yet, contributes to the general uncertainty on the actual application of the Competition Law.


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