Monday, August 21, 2017

Waqf in Oman

The ancient Islamic concept of waqf (plural ‘awqaf,’ meaning religious endowment) recently made headlines in Oman when, in April this year, Meethaq Islamic Banking announced that it would be collaborating with the Ministry of Awqaf and Religious Affairs (MARA) in support of the Organisation of Waqf, which was launched by MARA to encourage innovative uses of awqaf in the Sultanate.

A waqf is a charitable endowment that allows a person to donate property for the public good in the name of Allah. Typically, this is achieved by building mosques, schools or hospitals for the benefit of local communities in perpetuity. The Qur’an does not mention waqf explicitly, though it advocates charitable donations more broadly. The conceptual framework was set out in more detail later in the Hadith.

Waqf is frequently compared with the English charitable trust, with many speculating that the former inspired the latter by way of Crusaders who, during the 12th century, might have been exposed to the concept of waqf in Muslim territories and seen it as flexible device that could be used by both religious and state interests to fulfil a number of purposes.

A waqf is a contract, and it follows that the founder (called al-waqif or al-muhabbis in Arabic) must have the capacity to enter into a contract. A waqf is usually established by a written document, accompanied by a verbal declaration.

Waqf is a special form of disposal of property allowing its owner to freeze the property from subsequent transfer and transmission to others. This power of the owner is inalienable and cannot be rescinded by anyone, except in accordance with the conditions expressly provided for by the owner in the document creating the waqf.

There are several conditions that a waqf must satisfy, the most important of which is that the waqf is perpetual in nature. The subject matter of the waqf can be either movable or immovable, but its corpus must be preserved and remain inalienable.

The property used to establish a waqf must be the subject of a valid contract and should not already be in the public domain. Public property, therefore, cannot be used to form a waqf. Furthermore, the property should be free from any encumbrance.

As explained above, the main characteristic of a waqf is that it should be perpetual. In order to comply with this requirement, the waqf must be maintained at all times. Accordingly, part of the income of the waqf is necessarily spent on its maintenance, renewal and development.

Both natural and legal persons can be beneficiaries of a waqf. However, a waqf cannot be created for the benefit of the founder himself, or for an immoral or sinful purpose. The beneficiaries of the waqf can be specified by the founder.

Waqf institutions earn returns by depositing the income generated from the waqf with Islamic financial institutions. Any further returns so generated are then spent on charitable purposes.
Mazin bin Ghadouba, one of the followers of the prophet Muhammad, is credited with having built the Al-Midmar Mosque - the first mosque in Oman - in approximately 627 A.D. At the time, waqf was limited to building and renovating mosques. Later, Omanis extended the ambit of waqf to helping the poor, and for other charitable purposes.

Now there are over thirteen types of waqf in Oman, including those for mosques, education, Qur’an schools, and the maintenance of graves. Until relatively recently, awqaf were managed by imams. In 1950, the father of the present Sultan, Sultan Said Bin Taimur, established an institution dedicated to the management of awqaf, which in 1997 evolved into the present-day Ministry of Awqaf and Religious Affairs.

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Monday, August 14, 2017

Recent Improvements in the Public Transport Sector in Oman

The Sultanate of Oman has recently seen a shift in public transport methods towards more convenient and accessible means of short-distance travel. Previously, the main forms of public transport available to individuals were the conventional orange and white (or “street”) taxis used for short to medium distances, and Oman National Transport Company (“ONTC”) buses for long-distance journeys.

While the ONTC buses were adequate for long-distance travel, the options for short-distance transport seemed relatively outdated when compared to neighboring countries. Taxis were not required to use a meter unless operating from the airport (as required by Ministerial Decision 34/1998), and commuters were subject to varying and unpredictable pricing. However, in the past year, the ONTC has been rebranded and restructured as Mwasalat, and Marhaba Taxi has begun operations in Oman. These developments have improved and modernized the transport system, and have resulted in an uptick in consumer use.

The rebranding of ONTC to Mwasalat has been hailed as major development, as the company introduced new buses with modern features and operational protocols. Mwasalat has also been granted a licence by Ministry of Transport and Communications (the “MOTC”) to start operating taxis from airports and malls which, in turn, will provide tourists and citizens alike with comfort, ease of mind and modern means of transport.

The commencement of the operations of Marhaba Taxi in Oman has also led to better public transport services, as individuals may now use their smart phones to book taxis in a convenient and safe manner. Marhaba Taxi has also been provided with a licence to operate from Sultan Qaboos Port and hotels, which should lead to better services in general to and from the main hubs used by residents and tourists alike.

It is important to note that the licences given to Mwasalat and Marhaba Taxi have been granted to manage the services in those specific areas, and not to completely replace the current street taxis operating in those areas. In turn, street taxis will not be permitted to offer their services in the specific areas assigned to the two companies, unless they are working under the relevant licensed company. MOTC has urged all taxi owners operating near these specific area to join either Marhaba Taxi or Mwasalat accordingly in order to be permitted to operate therein. Street taxis not operating in these designated locations remain subject to their current regulatory scheme, though the MOTC is expected to issue revised regulations in the near future.

With the implementation of these regulations and the issuance of the above-mentioned licences, MOTC has contributed significantly to the development of the public transport sector in Oman, establishing new services while retaining the services of the conventional orange and white taxi drivers. Moreover, MOTC has been able to provide much-needed security, efficiency and technology in this area as requested and required by the general public. MOTC has also recently provided official and approved tariffs for transport, which could lead the way to implementing a metering system for street taxis as well. MOTC has also sought to provide better training of taxi drivers, particularly with regard to safety and security protocols.

The revamped transport sector in Oman is expected to contribute greatly towards the development of various other sectors, including tourism, whilst also spurring job creation. It is important to keep in mind that taxi drivers must be Omani citizens, thereby contributing to Omanisation and in-country value.

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Monday, August 7, 2017

Protecting Personal Data and Individual Employee Privacy in Oman

While there are no specific Omani laws that explicitly protect the privacy and personal data of employees, there are general laws that govern an employer’s conduct with respect to an employee’s privacy. A summary of the laws that govern privacy and personal data protection of individuals is set out below.

The Basic Law, issued by Royal Decree 101/1996, provides for the individual’s right to privacy in communication.  Article 30 of the Basic Law prohibits any interference with or monitoring of an individual’s telephone calls or written correspondence and guarantees the confidentiality of their contents, except in certain circumstances. It is therefore generally not permitted for an employer at the workplace to impinge upon an employee’s privacy by making a recording without permission, confiscating an employee’s details or revealing confidential information about the employee to a third party. 

Individual privacy is also protected in the Penal Procedure Law promulgated by Royal Decree 97/1999, as amended (“CPL”). Article 90 of the CPL provides that correspondence and cables may not be confiscated or perused; newspapers, publications and parcels may not be confiscated; conversations taking place in private may not be recorded; telephone conversations may not be tapped; and dialogue may not be recorded without the permission of the Public Prosecutor of Oman. The permission specified in Article 90 of the CPL may only be issued by the Public Prosecutor, who would only permit audio or video recording of an individual if there is sufficient evidence of a an offence or misdemeanor punishable by imprisonment for a period exceeding three months. Once granted, the permission is valid for a renewable period not exceeding 30 days, during which the audio or video evidence must be obtained.

In general, the courts of Oman are very protective of employees’ interests.  In practice, therefore, the employer would need to have a compelling reason to obtain permission from the Public Prosecutor and violate an employee’s privacy using one of the methods described above.

Exceptions to the presumption of privacy
Royal Decree 69/2008, enacting the Law of Electronic Transactions (the “ETL”), applies to parties who have agreed to perform their transactions electronically and safeguards the confidentiality of information or data contained in such transactions.

The ETL allows for exceptional circumstances in which personal data may be disclosed (i.e., allowing access to electronic communications and the disclosure of their contents to third parties). According to Article 43 of the ETL, obtaining, disclosing, providing or processing of personal particulars or data shall be lawful in the following cases:

• If such information is necessary for preventing a crime or detecting a crime pursuant to an official request by the enquiring authority;

• If such particulars were required or authorised by any law, or if the collection of such particulars occurred pursuant to a court order;

• If such particulars were necessary for the assessment of any tax or fees; and

• If the processing of such particulars was necessary for the safeguarding of vital interests of the person about whom such particulars were being collected.

Penalties for breaching an employee’s privacy
The CPL sets out penalties for those who violate an individual’s privacy. Article 276 of the CPL provides that any person who illegally observes or collects information or data, violates another’s privacy or their right to protect their secrets, or reuses collected information and data shall be punished by imprisonment for a period of not less than three months and not more than two years, by a fine of OMR 100-500, or both.
The Cyber Crime Law, promulgated by the Royal Decree 12/2011, also sets out certain penalties for breaching an individual’s privacy, which include:

(a) Imprisonment for a period of not less than one month and not exceeding one year and/or a fine of not less than OMR 500 and not exceeding OMR 2,000 is applied to any person who uses information technology tools to obstruct or intercept the flow of data or electronic information transmitted by way of information technology.

(b) Imprisonment for a period not less than one year and not exceeding three years and/or a fine of not less than OMR 1,000 and not exceeding OMR 5,000 is applied to any person who uses information technology tools (such as camera phones) to photograph or record individuals without their permission; who disseminates such information, even if it is true; or who uses such information towards slander and defamation.

Conclusion
Taken as a whole, Omani law protects individual privacy, especially that of employees. Employers are prohibited from monitoring or recording their employees, and may only obtain permission to do so from the Public Prosecutor under stringent circumstances.  Employees and private individuals have a reasonable expectation that, if they are photographed or recorded without permission, they will have recourse in the law.

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Tuesday, August 1, 2017

2017: The Year of IPOs for Insurance Companies in Oman

In the Sultanate of Oman, the insurance sector is supervised by the Capital Market Authority and primarily regulated by the Insurance Companies Law promulgated by Royal Decree 12/1979 as amended. The Insurance Companies Law was extensively amended by Royal Decree 39/2014 (the “Royal Decree”), which introduced a new regulatory framework for insurance companies in Oman. We reported on the main features introduced by the Royal Decree in a previous article published in October 2014.

The first two amendments to the Insurance Companies Law set out in the Royal Decree read as follows:

Article (2/1/A)
It shall be a public joint stock company established in accordance with the Commercial Companies Law to conduct insurance business.

Article (3/2/B)
The applicant has to prove that the paid up capital is not less than RO 10,000,000 (Rial Omani ten million).

The most important requirement introduced by the Royal Decree is that, with the exception of foreign insurance companies continuing to operate in Oman as branches, all insurance companies must be incorporated as public joint stock companies.

Under the Royal Decree, these requirements applied immediately to the establishment of new insurance companies, meaning that any new insurance company wishing to set up in Oman following the Royal Decree was required to be incorporated as a public joint stock company with a paid-up share capital of no less than OMR 10 million. However, insurance companies already existing at the time of issue of the Royal Decree were granted a period of three years to meet the new requirements by (a) converting to public joint stock companies by way of an initial public offering (“IPO”); and/or (b) increasing their share capital to OMR 10 million.

This grace period expires in August 2017, and the majority of the eleven locally incorporated insurance companies are now in the process of complying with the new regulations. A number of IPOs are either already open for subscription or envisaged to be within the next few weeks.


With respect to the divestment required, the standard rule for IPOs as set out in the Commercial Companies Law is that the founders must divest and offer to the public at least a 40% stake. However, with reference to the public offerings statutorily imposed upon insurance companies by the Royal Decree, a different tendency emerged.

As regulator of the joint stock companies registered in Oman, the Capital Market Authority has the power to grant exceptions to the rule relating to the statutory minimum divestment required in connection with an IPO. It appears that several insurance companies, while planning their respective IPOs to comply with the Royal Decree, approached the regulator to request such an exemption. Consequently, the Capital Market Authority made a public announcement stating that, in principle, it will grant an exemption to all insurance companies that make a request and that such exemption will specifically allow the divestment of a stake of only 25%. From a review of the actual terms of the now current public offerings, it appears that most companies requested this exemption and are divesting a 25% stake as opposed to the standard 40%.

With respect to capital requirements for insurance companies, the Royal Decree raised the minimum capital from OMR 5 million ($13 million) to OMR 10 million ($26 million). This increase was in addition to 2011 legislation that increased the minimum capital tenfold from OMR 500,000 ($1.3 million) to OMR 5 million ($13 million).

At the time the Royal Decree was issued, the aim of the regulator was to encourage consolidation through mergers in a relatively crowded market and to guarantee adequate capitalisation of insurance companies. Some mergers have indeed been finalised, and the number of small players in the market was marginally reduced as recently reported by Sheikh Abdullah bin Salim Al Salmi, Executive President of the Capital Market Authority. At the same time, the IPOs currently open for subscription are reporting satisfactory results.  

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Monday, July 24, 2017

Oman Introduces Witholding Tax for Foreign Investors

The recent amendments to the Omani Income Tax Law that were announced under Sultani Decree 9 of 2017 (“SD 9/2017”) – issued on 19 February 2017 and published in the Official Gazette on 26 February 2017 – made significant changes to the previous law; among these was a change to the former withholding tax structure by expanding the scope of withholding tax to include dividends.

SD 9/2017 introduced a withholding tax of 10% on dividends and interest on shares paid to foreign shareholders in Omani entities. This amount (10%) will be withheld by the Omani entity and shall be remitted to the tax authorities. A Capital Market Authority Circular – CMA Circular 3 of 2017 – was issued shortly after SD 9/2017 and specified the type of Omani entity which will be subject to the 10% dividend and interest withholding tax; the Circular stated that “the entity to which the withholding tax on dividends and interest will be applied to will be Omani joint-stock companies.” Thus, 10% of dividends and interest paid out to foreign shareholders of Omani joint-stock companies will be withheld for remittance to the Omani tax authorities. The CMA Circular further noted that the dividend withholding tax applies to foreign shareholders in both their natural and legal capacities -meaning that foreign business entities that are shareholders in Omani joint stock companies will be subject to the dividend withholding tax, too.

In addition, the CMA Circular addressed the issue of whether non-Omani GCC nationals would be treated as foreigners or as Omanis with respect to the recent amendments to the income tax law. The Circular cites Chapter II (Article 3) of the Economic Agreement between the GCC States – which was adopted by the GCC Supreme Council on 31 December 2001 in Muscat – which declared that, “GCC natural and legal citizens shall be accorded, in any Member State, the same treatment accorded to its own citizens, without differentiation or discrimination, in all economic activities, especially the following: movement and residence, work in private and government jobs, pension and social security, engagement in all professions and crafts, engagement in all economic, investment and service activities, real estate ownership, capital movement, tax treatment, stock ownership, formation of corporations, education, health and social services.” Therefore, non-Omani GCC nationals – whether they are natural or legal persons – will be treated as Omanis for tax purposes, and thus will not be subject to the foreign dividend withholding tax.

Investors and companies operating in Oman should carefully consider these amendments to the Omani Income Tax Law under SD 9/2017 along with their other obligations to the tax authorities, as the restructuring of the withholding tax to include dividends and interest may apply to them differently than it did in the past.

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Monday, July 17, 2017

Navigating Oman's Alcohol Policies and Permits

General overview of alcohol usage in Oman:

Oman is a Muslim country.  Pursuant to the Basic Law of Oman promulgated by the Sultani Decree 101 of 1996, Islam is the official religion and Shariah (Islamic law) principles form the underlying basis for the nation’s laws.  Therefore, in keeping with Islam’s prohibitions against alcohol, the purchase and consumption (and marketing) of alcoholic beverages are generally forbidden in Oman. 

However, the Omani authorities have made certain exceptions to this general prohibition in order to accommodate the tourism sector and expatriates residing in Oman.  Alcoholic products (beer, wine and spirits) are allowed to be sold at (i) liquor shops, (ii) airport duty-free shops, and (iii) certain hotels and restaurants which hold liquor licences issued by the Royal Oman Police (ROP), the Government authority that regulates alcohol-related matters in Oman.  There is little publicly available information with respect to the rules around obtaining alcohol permits in Oman.  Alcohol licences are not governed by published Royal Decrees or Ministerial Decisions, but rather by the ROP acting pursuant to its internal regulations and, to a great extent, pursuant to its ongoing discretion.  In practice, we note that the ROP would only permit restaurant owners, hotels, alcohol suppliers or airport duty-free shops (Applicant) to supply/sell alcohol to the end users.

Process of obtaining an alcohol permit in Oman

In order to obtain an alcohol licence, the Applicant will need to comply with the following requirements or the following circumstances will be taken into consideration:
  1. The Applicant must submit a written request together with certain supporting documents for the liquor licence to the ROP. The ROP will review and evaluate the Applicant’s request and issue a decision on a case-by-case basis.
  2. The Applicant must ensure that the premises are not located within a one-kilometer radius of a mosque.
  3. Proximity of the Applicant’s premises to residential areas.
  4. Religious sensitivities such as restrictions from serving alcohol in areas which are publicly visible.
  5. Suitable classification of the establishment in accordance with the applicable rating described in Ministerial Decision 39 of 2016 of the Ministry of Tourism (MOT) to be submitted along with the written request.
In order to obtain a liquor licence, the Applicant (i.e., restaurant owner) should be classified as a first-grade category entity. This classification is issued by the MOT. The MOT would evaluate each application for the classification on a case-by-case basis and assess the restaurant on the basis of the restaurant’s degree of service and hospitality.

Further, Article 49 of Ministerial Decision 39 of 2016 provides that a restaurant licenced by the Municipality may apply to obtain classifications from the MOT in accordance with the following requirements: (i) the restaurant shall have operated for at least one year prior to the application; and (ii) the restaurant shall satisfy the requirements and standards of the approved classification system for restaurants set out by the MOT.

Marketing of alcoholic beverages in Oman

The Government’s stance on marketing of alcoholic beverages is that it is strictly prohibited.  In practice, however, modest forms of marketing, such as signage for branded alcoholic beverages, can be found in many of the venues where alcohol is allowed to be sold (e.g., liquor shops and hotel pubs).
 
It is prudent to bear the following general principles in mind:
  • ROP regulates all matters related to alcohol including marketing alcoholic beverages. 
  • Alcohol sales are allowed – and branded alcohol marketing can frequently be seen – in liquor shops, airport duty-free shops, and licenced hotels and restaurants.  However, alcohol sales are – and likewise alcoholic products marketing would be – strictly prohibited outside of these venues. 
  • In the above-mentioned venues where alcohol is allowed, the alcohol marketing materials that can be seen tend to be modest in nature – for example, branded signage and furniture.  A more aggressive form of alcohol products marketing (e.g., promotional models, contests, or sampling) could likely attract a penalty from the ROP.
Consequences (including sanctions and penalties) for failing to comply with the relevant laws and regulations 

It is difficult to give definitive guidance on the consequences for failing to comply with alcohol rules, as there is no publicly available written guidance on the rules for marketing alcoholic products in Oman or the penalties for any violation in this area.  The Omani Penal Code, Sultani Decree 7 of 1974, in Article 228 addresses only a few alcohol-related matters, such as penalties for (i) appearing in public in an inebriated state or disturbing the peace while intoxicated (10 days in jail and/or fine of OMR 200 and (ii) selling alcohol without a licence (6 months to 3 years in jail plus a fine of OMR 300).

The general approach of the ROP to alcohol-related offences by selling establishments is as follows:
  • For first offence, fine of OMR 1000 (US$2600). 
  • For second offence, fine of OMR 2000 (US$5200). 
  • For third offence, 3-month suspension of liquor licence. 
  • For fourth offence, cancellation of liquor licence.
Therefore, it is possible that the ROP could at any time, in its discretion, choose to characterise the display of any alcohol product marketing materials as an alcohol-related offence and thus levy penalties in accordance with the schedule above. Such penalties would most likely fall upon the venue displaying the marketing materials, but it is conceivable that the ROP could also levy penalties against the party that supplied the marketing materials to the venue.

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Monday, July 10, 2017

Understanding Construction Contracts in Oman: An Employer's Perspective

The scope of work represents a key constituent of a construction contract as it is a key factor in a decision of an employer to choose a contractor and the structure of the contract. Accordingly, the scope of work can be summarised as the tasks promised to be accomplished by the contractor and expected by the employer. 

Determining the contractor’s liabilities, the scope of work and its implementation are generally at the source of a significant amount of litigation; therefore, it is key for any business to make sure that the scope is drafted with no ambiguities in the purpose of the smooth running of its project.

The scope of work, specifically in construction contracts, is frequently subject to change (variation); consequently, the parties should be aware that the foreseeability of such variations can be instrumental to ensure the continuity of the progress of work.

We published an earlier article (19 December 2013) which addressed “Variations to Construction Contracts” under the Standard Documents for Building and Civil Engineering Works (Fourth Edition – September 1999); today, Decree 29 of 2013 enacting the Civil Code (“SD 29/13”) provides a regulatory framework on this matter. 

Article 640 of Decree 29/2013 enacting the Civil Code states the following:

1. If a contract is made under an itemized list on the basis of unit prices and it appears during the course of the work that it is necessary for the execution of the plan agreed substantially to exceed the quantities on the itemized list, the contractor must immediately notify the employer thereof, setting out the increased price expected, and if he does not do so he shall lose his right to recover the excess cost over and above the value of the itemized list.

2. If the excess required to be performed in carrying out the design is substantial, the employer may withdraw from the contract and suspend the execution, but he must do so without delay and must pay the contractor the value of the work he has carried out, assessed in accordance with the conditions of the contract.

Article 641 of the same Decree states as follows:

1. If a contract is made on the basis of an agreed plan in consideration of a lump sum payment, the contractor may not demand any increase over the lump sum as may arise out of the execution of such design.

2. If any variation of addition is made to the design with the consent of the employer, the existing agreement with the contractor must be observed in connection with such variation or addition.

With the two above-mentioned articles, it is clear that the Civil Code adopts a clear segregation between contracts based on the type of pricing and subjects each to a specific regime with regard to the effect of the variation in the scope: 
  • The first type of contract is the one in which the pricing is set based on a “unit price”; in this case the legislator subjects the possibility of increasing the price to two conditions:
    • Discovery during the work for the necessity of substantially exceeding the scope of work; and
    • The immediate notification to be made by the contractor to the employer of the excess.
  •  
    The lack of an immediate notification would lead directly to the loss by the contractor of its right to recover the excess.
     
    In this first type, Article 640 offers to the employer the possibility, in case of a substantial increase, to withdraw from the contract and resort to remedies, such as the suspension of the contract.
    • The second type of contract is the one in which the pricing is set based on a “lump sum payment” where the contract, in principle, may not demand an increase over the lump sum for the execution of the design agreed on earlier; any change to this design should be made with the consent of the employer.
In practice, for this second type of contract, a recent court ruling has shown that the Omani Court of Appeal is adopting a broad approach towards the interpretation of the “consent of the employer” where, in some cases, remote factual indications, presumptions or clues, such as providing the contractor with the paperwork or administrative support to obtain necessary licences for the execution of the design resorting to a more expensive implementation mean, is deemed an acceptance of the increase.

Facing this broader interpretation of the employer’s consent, it is in the interest of the employer to properly document, in explicit terms, its position in relation to matters in connection with the scope of work in a construction contract.

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Wednesday, July 5, 2017

Drafting, Enforcing and Terminating Power of Attorney in Oman: Key Considerations

Definition of Power of Attorney under Omani law

While there is no specific law in Oman governing the granting and use of a power of attorney (“POA”), POAs are described and regulated through various Sultani Decrees and other laws. According to Article 44 of the Property Registry Act, promulgated by Sultani Decree 2 of 1998 (“SD 2/98”), each POA shall refer to the specific contract which allows a person (the “attorney”) to undertake certain business for the sake of the principal. The attorney shall not be permitted to enter into an agreement with himself, unless the POA clearly refers to such an arrangement.

Article 45 of SD 2/98 requires that a POA be specific and explicit. A POA in relation to sales, mortgages, donations, distributions, or waivers must state the specific transaction that needs to be effected. In contrast, a POA that contains general expressions only authorises the attorney to undertake administrative works.

With respect to lawyers, the Advocacy Law promulgated by Sultani Decree 108 of 1996 (“SD 108/96”) does not permit lawyers to represent clients in a dispute unless a POA specific to this purpose is issued and certified. According to Article 43 of SD 108/96, this POA should be granted with specific reference to the lawyer, who may only act within the limits assigned to him by the client in accordance with the claim. Unless specifically prohibited by the POA, a lawyer may delegate acts permitted by the POA to other lawyers associated with his office. In practice, Omani judges generally request lawyers to provide a copy of their POA during the first court hearing in order to verify their powers and obligations in representing their clients.

Enforceability of POAs

In order for a POA to be valid and enforceable, it must be executed and signed before a notary public in Oman. Alternatively, if the POA is executed outside Oman, it must be: (i) signed before the notary public in that country; (ii) stamped by the Ministry of Foreign Affairs in that country; and (iii) stamped by the Omani Embassy in the country where the POA is issued.

The notary public in Oman only certifies POAs that are issued in Arabic. If a POA is in another language, before taking it for signature before the notary public, applicants must ensure that the POA is translated into Arabic, stamped and attested by an official translator (who is certified and registered as a translator by the Ministry of Justice), and attested by the Oman Chamber of Commerce and Industry.

It is important to note that the notary public in Oman takes an active approach when certifying a POA. According to Article 42 of SD 2/98, prior to undertaking the authentication, the certifier (i.e., the notary public) shall verify the identity of the contracted parties and their eligibility, as well as the relationship of the representative and the scope of his authorisation. Article 43 of SD 2/98 requires that prior to the concerned parties signing the POA, the notary shall read the POA in its entirety and explain its legal effect to the parties.

In order for the notary public to comply with these obligations, the notary public generally requests the applicant to provide a valid passport copy (if the applicant is a foreign national) or a copy of the Omani identity card (if the applicant is Omani). If a POA is executed on behalf of a company, the notary public will require the company’s valid commercial registration document to verify the powers of the authorised signatories signing on behalf of the company.

Key considerations when drafting a POA

Omani law does not provide a comprehensive list of what needs to be included in a POA, but in practice the notary public tends to review POAs in detail to ensure that the following items are included:

1. the duration of the POA;
2. the obligations of the attorney;
3. the limitations on the authority of the attorney;
4. if applicable, the party signing on behalf of the company (i.e., whether he is authorised to act on behalf of the company); and
5. the governing law of the POA.

Validity period of POAs


POAs executed in Oman must be issued for a defined period of time, and cannot be indefinite. The Ministry of Justice has recently announced that the validity period of all POAs executed in Oman must be two years or less from the date of issuance. Prior to this, all POAs issued in Oman were valid for a period of five years. It is now necessary to renew POAs every two years, and it may also be advisable in certain cases to include an undertaking to renew within the POA itself.

Termination or revocation of POAs

Generally, a POA will automatically terminate upon the death or the insolvency of the principal, or after two years from the date of execution of the POA. Omani law does not allow for a POA to be irrevocable, and principals are entitled to revoke a POA prior to the lapse of the two-year validity period. In order to revoke a POA, the principal must sign a revocation deed before the notary public. If the principal is a company, the notary public requires that the revocation deed be signed by the authorised representative(s) of the company holding unlimited powers to act on behalf of the company. The principal must also ensure that the original POA is attached to the revocation deed, along with a valid commercial registration document in the case of a company.

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Monday, June 26, 2017

Declaring Bankruptcy in Oman: What to Expect

The Law of Commerce issued by Royal Decree 55/1990 and the Civil Transactions Law issued by Royal Decree 29/2013 set out various provisions relating to insolvency and bankruptcy in Oman. Under the laws of Oman, bankruptcy of a person must be declared by the Court. An application for bankruptcy may be made by the insolvent person him or herself, or by a creditor of the insolvent person.

Following the declaration of bankruptcy of an insolvent person, interest will cease to accrue on the debts of the bankrupt person. On declaration of bankruptcy, debts shall be settled in the following order of priority:

(i) salaries of employees;
(ii) government dues and taxes;
(iii) preferred or secured creditors; and
(iv) unsecured creditors.

Under the provisions of the Law of Commerce, upon being declared bankrupt, the bankrupt is required to relinquish, in favour of the appointed administrator in bankruptcy, the management of all his or her assets. The fact that a person has been declared bankrupt does not have the effect of vitiating, or automatically terminating, those contracts that were entered into by the bankrupt person prior to his or her declaration of bankruptcy. Any contract entered into by the bankrupt prior to the date of declaration of bankruptcy remains valid and continues to exist although certain obligations under those contacts may become suspended by reason of bankruptcy. It is common for commercial contracts to include a right of termination for a party in the event the other party under the contract is declared bankrupt.

Effect of bankruptcy on a company 

The Commercial Companies Law issued pursuant to Royal Decree 4/1974 sets out the various grounds for dissolution or liquidation of a company. The declaration of bankruptcy of a company is one of the grounds for its dissolution. As a result of being declared bankrupt, a company is liable to be liquidated and struck off the Commercial Register.

Effect of bankruptcy on employees 

Under the provisions of the Oman Labour Law issued by Royal Decree 35/2003, an employer is responsible for all obligations towards its employees arising under the contract of employment and the Labour Law. Article 47 of the Labour Law states that the liquidation, insolvency or bankruptcy and final authorised closure of an employer is valid ground for termination of the employment contract by that employer. To the extent that the employer terminates its employees on the ground of its insolvency, that would be considered a valid ground for termination of those employees.

Effect of bankruptcy on parties to a contract and third parties 

As a general rule, a contract counterparty is not responsible or liable to third parties, including employees of the other party, if the other party to the contract becomes insolvent or bankrupt. Any obligation of the bankrupt or insolvent party towards its employees remains with that party. Nonetheless, it is important to consider the scenario in which the contract with the bankrupt party is terminated and the counterparty would like to replace the bankrupt party with another contractor (the “Replacement Contractor”).

Under Article 48 bis of the Labour Law, a Replacement Contractor is required to employ the national manpower which was employed on the same project that has passed, either in whole or in part, to that Replacement Contractor. Accordingly, when a contract comes to an end and the remaining scope under that contract passes to a Replacement Contractor, in that case the Replacement Contractor is required by law to take over the Omani employees of the last contractor who were involved in performing that contract. Furthermore, the Replacement Contractor is required by law to provide those employees with the same benefits and financial incentives they were receiving earlier as long as their work exists and continues.

Conclusion 

The insolvency and bankruptcy of a contract counterparty can potentially affect other parties to the contract and third parties. The recent slump in oil prices has affected the economy as a whole. This has the effect of rendering various businesses and companies insolvent and potentially liable to be declared bankrupt. It is important to consider the risks involved in dealing with companies that are potentially liable to be declared bankrupt or projects that are taken over from those companies. This also signifies the need for proper due diligence of contract counterparties and companies from whom projects are being taken over and having in place a strategy to mitigate the risks involved.

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Monday, June 19, 2017

Petition Orders: Oman's Injunctive Relief Mechanism

What are petition orders? 

A petition order, or an application for injunctive relief, is a mechanism that allows a petitioner to seek a declaratory judgment on an emergency basis when irreversible harm is reasonably feared to be imminent.

Common examples of when a petition order would be appropriate are when a petitioner reasonably fears that key evidence is at risk of being physically destroyed or damaged and when there is reasonable belief that recoverable assets will be removed from a sovereign territory.

A petitioner’s right to seek interlocutory or injunctive relief is established in Chapter 10 of the Civil Procedure Law (promulgated by Royal Decree 29/2002). Article 190 thereof expressly provides:

“In cases where the law sets out the legal right of the litigant to bring about an injunction he shall apply by petition to the judge for the provisional matters or to chairman of the panel which examine the case. The said petition shall be of two counter parts and includes facts of the application and supporting documents besides stating a domicile of choice to the applicant at the city in which the court is located.” 

The application for a petition order must be sufficiently detailed so as to enable the judge to review the file and to make an informed determination on its merits. Further, the application, and all assertions made therein, must be fully substantiated with evidence.

What is the process for filing a petition order? 

A petition order should be filed with the Primary Court – Commercial Circuit. The Primary Court will have exclusive jurisdiction to review the application, and to determine whether to issue a petition order. There is a presumption that the petition order will be immediately enforceable in the event that a favourable decision is granted by the Primary Court.

It is important to note that petition orders are not ex parte applications, that is, the party against whom the petition order is filed (i.e., the respondent) must be served, and must respond. Notwithstanding this, the Primary Court still may issue an interim decision prior to considering the respondent’s rejoinder, if it believes the circumstances indeed warrant immediate action.

The respondent will have the right to appeal the Primary Court’s decision to the Appeal Court, and, if necessary, to appeal the Appeal Court’s decision to the Supreme Court. However, a petition order issued by the lower courts will remain enforceable even if the respondent elects to appeal. It is only if the respondent is successful upon appeal that the petition order will be lifted.

Under what circumstances will a petition order be granted by the Omani courts? 

Article 190 of the Civil Procedure Law only permits the courts to consider injunctive application when the application itself is substantively grounded in a specific law. The legislature has chosen to regulate petition orders in this manner in order to prevent frivolous and groundless injunctive applications from being filed.

We touched on a few common examples as to when an injunctive order may be grounded in a specific law. Some further examples include:

  • the right to arrest a ship, pursuant to the Omani Maritime Law (promulgated by Royal Decree 35/1981), when it is reasonably feared that a vessel may leave Omani territories when there is a commercial debt owed; 
  • potentially freezing assets when parties are in the midst of a financial dispute; or 
  • seeking a travel ban on an individual when a criminal investigation may be forthcoming, pursuant to the Omani Penal Code (Royal Decree 77/1974).

Conclusion 

Injunctive relief is available in Oman in certain circumstances. Such a mechanism can be a valuable tool in disputes in which issues might be time-sensitive, or there is a risk that key evidence may be lost.

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