Monday, January 16, 2017

A Ceiling on the Charging of Interest?


Charging interest on a commercial loan or debt is an important part of any contractual bargain.  For the creditor, the interest charged on a debt encourages quicker repayment by the debtor, and represents the price at which the creditor is willing to lend.  For the debtor, interest charged is important as it is the amount for which he will be liable, in addition to the principal debt.

Omani courts have consistently upheld the payment of interest in commercial cases.  Article 80 of Oman’s Commercial Code (issued by Royal Decree 55/1990) states:

“A creditor shall be entitled to levy interest in consideration of the debtor obtaining a commercial loan or debt.  The interest shall be determined by the agreement of the two parties within such limits as the Ministry of Commerce & Industry shall set in agreement with the Oman Chamber of Commerce & Industry each year, having due regard to the term of the loan, the purposes thereof, and the risks attendant thereon. If the debtor is late in making payment on the due date, the creditor shall be entitled to claim the agreed interest in respect of the period in arrears.”

The Ministry of Commerce and Industry (the “MOCI”) periodically issues a decision on the maximum interest rate chargeable for commercial loans.

Starting from 2001, the limit on the rate of interest set by the MOCI was 10%; thereafter it has been tapered, whereby in 2006 it was set at 9%, in 2008 it was set at 8% and by 2015 it was set at 6.5%.

Ministerial Decision 172/2016 is the most recent decision issued by the MOCI in respect of the maximum interest that can be charged on a commercial debt or commercial loan given by a company that is neither a bank nor a finance and asset-leasing company licensed by the Central Bank of Oman. MD 172/2016 set the maximum interest rate chargeable on commercial loan or debt at 6.5% for a period of one year starting from 20 July 2016.

Thus, as the interest rate in Oman for commercial debts is currently set at 6.5%, any final arbitral award or court decision will likewise apply this rate.

The parties entering into a contract normally agree to a rate of interest chargeable in case of default or delay in payment by one party to the other party as per the contractual terms.

What happens if the contract is silent in respect of the interest rates?

In the event that a contract is silent as to the applicable interest rate regarding a commercial debt or commercial loan, the Omani courts may still award the claim of interest based on the applicable interest rate which is set out by the MOCI’s most recent and applicable Ministerial Decision.  The Omani courts are generally of the view that a claim for interest cannot be denied on the ground that a contract is silent on the subject.

What happens if the parties agree to a higher rate of interest than the rate specified by the Ministerial Decision?

While entering into construction contracts, the parties usually adopt an edition of the Sultanate of Oman’s Standard Conditions. The Standard Documents for Building and Civil Engineering Works – Fourth Edition 1999 sets the rate of interest at 7%.  In general, the Omani courts, or the arbitral tribunal, would award interest at 7% as stipulated in the Standard Documents referred to above (although it is higher than the rate set by the MOCI), unless the parties raise a dispute about the rate of interest in the contract being higher than the rate of interest set by the MOCI.
In the event that litigation is pursued in respect of the rate of interest in a contract being higher than the rate set by the MOCI, the Omani courts would generally uphold those contractual terms each party had agreed to, including the rate of interest.  However, the Omani courts’ interpretation of the issue of the contractual interest rate being higher than the interest rate set by the MOCI is still not clear and will depend on the merits of each case.

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Wednesday, January 11, 2017

An Overview of the Land Transport Law


Overview of Land Transport Law in Oman

Oman has recently taken a very active approach in promoting and boosting transportation services throughout the region.  As part of this vision, the Ministry of Transportation and Communication (the “MOTC”) plans to introduce a road management system whereby it will promote efficiency and maintain clear guidelines on the operation of public transport.  The MOTC has recently issued Ministerial Decision 10/2016 (the “Land Transport Law”).  The Land Transport Law was published in the Official Gazette on 6 March 2016 and it will come into effect on 6 March 2017.

The rules governing the Land Transport Law apply to all transport activities, except those activities where it has clearly been established by particular Sultani Decree or Ministerial Decision.  The Land Transport Law obliges the party seeking to conduct transport activities to obtain an authorization from MOTC.

The main governmental body that is in charge of facilitating and ensuring that companies are in compliance with the Land Transport Law is MOTC.  As part of its objectives, the MOTC is responsible for preparing a comprehensive strategy for land transport services in Wilayat and the Governorates. The MOTC is also responsible for determining the locations of the facilities and their technical conditions and specifications.  The MOTC is also in charge of setting and implementing the transportation fees. 

Goods transport contracts

The carrier may inspect the goods to be transferred to check their condition and the accuracy of the data provided to him by the shipper.  If it turns out that the condition of the goods does not allow transferring without damaging them, the carrier may refuse to transport them unless the shipper approves in writing his knowledge about it and he approves the goods to be transported.  The carrier is responsible for the safety of the goods.  He is also responsible for loss, or damage or delay in delivering the goods. The carrier will not be liable to the extent of any error from the shipper or receiver or any hidden defects in the goods.

Commission agent

The commission agent of transport is responsible for the safety of the passengers and goods and cannot contract out of this liability.  Article 47 provides that “Any condition that requires the full or partial exemption of the commission agent of transport’s liability of whatever physical damage that occurs to the passenger shall be considered null and void.

Compensation grounds

If it is proven that the carrier is responsible for the delay in the delivery of the goods, his liability will be within the range of what is equal to half or double of the transportation fees, and shall not exceed the total value of goods transportation fees.

Penalties
Any person contravening the provisions of this law shall be punished by imprisonment for a term not less than one month and not more than six months and a fine not less than OMR 100 and not more than OMR 500, or either of these punishments. The punishment is doubled for repeat offences.

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Monday, January 9, 2017

A Brief Overview of the New Executive Regulations of the Tourism Law


Earlier this year the Ministry of Tourism issued the Executive Regulations of the Tourism Law by way of Ministerial Decision 39/2016 (the “New Executive Regulations”).  The New Executive Regulations supersede the Executive Regulations issued by Ministerial Decision 91/2003 (the “Old Executive Regulations”).  The New Executive Regulations came into force on 1 September 2016 (by way of an amending Ministerial Decision 50/2016).

Whilst the Tourism Law, promulgated by Royal Decree 33/2002 has not been amended, the New Executive Regulations are drafted to bring greater clarity to the booming tourism industry of the Sultanate. The New Executive Regulations also include new categories of hotels, tourist establishments, etc. which are now part of Oman’s tourism industry.

This article aims to provide a brief overview of the New Executive Regulations, their features and where required a comparison with the Old Executive Regulations.

Licensing provisions

One of the most significant changes to the licensing provisions brought about by the New Executive Regulations is the issuance of a preliminary approval.  The Ministry of Tourism will now issue a preliminary approval to the licence applicant in order to fulfill the required conditions for the tourism project and to obtain required approvals from competent authorities.  The preliminary approval will be effective for one year from the date of issuance and shall not be extended or renewed.

By introducing the concept of a preliminary approval, the Ministry has done away with the mandatory requirement to launch the establishment within six months of the date of issuance of license, as provided in the Old Executive Regulations.

Further, in order to ensure that the tourist establishments are managed and operated in a professional manner, Appendix 3 of the New Executive Regulations sets out the minimum qualifications and experience required from the managers of the hotels and tourist establishments.  The qualifications and experience requirement has been further classified into requirements from an Omani and a non-Omani manager.

Revocation of license

Whilst retaining many of the licensing, renewal and revocation provisions from the Old Executive Regulations, the New Executive Regulations have reduced the number of days within which a renewal application should be made. Further, if the business of an establishment is suspended for reasons within the control of the licensee for a period of six consecutive months, then the Ministry has the right to revoke the licence.  The Old Executive Regulations gave 24 months’ time for revocation of a licence in the event the business is suspended.

Unlike the Old Executive Regulations, the New Executive Regulations now provide a cure period of 30 working days to the licensee prior to suspension or revocation of the licence to allow the licensee to rectify the violation or breach.

The New Executive Regulations also provide a mechanism for filing grievance(s) against any decision issued in accordance with the New Executive Regulations.

Increase in fees

Appendix 1 of the New Executive Regulations sets out the types of tourist establishments and the fees and duration for each of their respective licences.  Compared to the Old Executive Regulations, the fees payable under the New Executive Regulations are almost ten times higher.  

Further, the requirements relating to provision of a Letter of Guarantee and the circumstances in which it can be liquidated have been relaxed.

Recognition of Archeological Sites and Tourist Villages

Whilst the Old Executive Regulations recognised and provided for tourism establishments such as hotels, restaurants, hotel apartments and tourist camps, the New Executive Regulations now provide rules related to identified ‘Archaeological Sites,’ specified as castles, forts and other archaeological sites subject to the supervision of the Ministry of Tourism.

The New Executive Regulations also include ‘Tourist Villages’ on a site encompassing a number of utilities and services including lodges but essentially having a unique architectural identity that is subject to a single management.

Article 25 of the New Executive Regulations provide that the tourist places and sites, governmental tourist lands and Archeological Sites shall be utilised pursuant to usufruct, lease, management or performance contacts in accordance with the unified forms prepared by the Ministry of Tourism.

As the Sultanate is also evolving into a destination for adventure sports enthusiasts and hikers, the New Executive Regulations specify that the Ministry of Tourism may specify mountain passages and paths in the Governorates and license a party to manage such passages and paths.

Musical groups

Amongst other requirements, the New Executive Regulations specify that only five- or four-star hotels, or a hotel that is managed by an international company in the field of hotel management, can apply for recruitment of musical groups.  It is also essential that the performance of the musical group correlates with the type of restaurant and the cuisine served.

All other requirements in terms of recruiting a musical group remain largely similar to the Old Executive Regulations, including the three months’ license period which can be extended for one or more terms.

Tourism guidance
The tourism guidance licence in the Old Executive Regulations was limited to only Omani individuals provided they fulfill all the requirements for grant of such tourism license.  The New Executive Regulations have broadened the scope by granting a temporary licence to any person to be trained in the ways of tourism guidance for a period of not more than one month.

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Wednesday, January 4, 2017

Board Members in Public Joint Stock Companies: Amending their Responsibilities and Election Provisions


The MOCI has issued Ministerial Decision 201/2016 (“MD 201/2016”), which became effective on 5 September 2016 amending previous Ministerial Decision 137/2002, regarding the rules and conditions for electing the members of a board of directors in a public joint stock company, and the terms specifying their responsibilities.  The provisions introduced by MD 201/2016 are consistent with the Code of Corporate Governance (the “Governance Code”) for Public Joint Stock Companies, which was introduced by the Capital Market Authority (the “CMA”) and came into effect on 22 July 2016, in relation to the composition and responsibilities of the board of directors in Public Joint Stock Companies (i.e., public companies).

MD 201/2016 prohibits executives in a public company, and any person who works for the company and is entitled to receive financial compensation for his/her work, from being a board member in that company.  MD 201/2016 provides that the board of a public company must be comprised of at least one third independent members and have a minimum of two seats.  MD 201/2016 states that a member is not independent if:

  1. S/he holds 10% (ten percent) or more of the shares of the company, company’s parent company, or company’s affiliates or sister companies.
     
  2. S/he is a representative of a corporate body holding 10% (ten percent) or more of the shares of the company, company’s parent company, or company’s affiliates or sister companies.
     
  3. In the two years preceding candidacy, s/he used to hold an executive position or was an employee in the company, company’s parent company, or company’s affiliates or sister companies, was employed by any party contracting with the company (including independent auditors, key suppliers, and NGOs that received finance representing more than 25% of its annual budget) or used to hold about 20% of the shares of any of the abovementioned parties.
     
  4. S/he serves as a member on the board of the company’s parent company, affiliates, or sister companies.
     
  5. S/he is a first-degree relative to any of the board members in or key management personnel of the company, company’s parent company, or company’s affiliates or sister companies.
     
  6. S/he has a material, economic or financial relationship with the company or any of the company’s sister, affiliate or owned entities.

MD 201/2016 prohibits a person from nomination to the board of a public company if that person is an employee in any other private or public joint stock company which has similar objectives to those of the public company s/he is nominating to become a board member in.  It also prohibits board members from interfering in the company’s day-to-day activities and from being held under mandate or assignment for the company.
MD 201/2016 requires the board of directors in public companies to establish a separate ‘Nomination and Remuneration Committee’ from among its members to consider nomination applications for board membership and determine the remuneration for board members.  This committee will also assist the company to produce clear and credible policies on remuneration and board membership nominations which should enhance transparency and professionalism in public companies.  It should be noted that the formation of this committee was one of the major introductions to the Governance Code, which we have discussed in more detail in a previous article on Oman’s Code of Corporate Governance.

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Monday, January 2, 2017

Guarantees and Indemnities in the Sultanate of Oman


Guarantees are a form of security commonly used to secure the performance of a physical or monetary obligation by another party. Rules concerning guarantees are prescribed in various Omani laws including Sultani Decree 04/1974 promulgating the Commercial Companies Law (the “CCL”) (as amended), Sultani Decree 55/1990 promulgating the Law of Commerce (the “CL”) (as amended), and Sultani Decree 29/2013 promulgating the Omani Civil Transactions Law (the “Code”) (as amended).

Shareholder approval

A company or government entity may guarantee the obligations of its parent, subsidiary or, as the case may be, government-owned company.  However, before a guarantee can be given by a company, it is essential that the necessary internal approvals are obtained from the shareholders.  There are certain restrictions placed on partners, managers and directors of a guarantor company. Article 8 of the CCL stipulates that these individuals cannot, without the prior consent of the members of the company, or in the case of a joint stock company its consent at a general meeting, use the company’s property for the benefit of third parties.  In other words, shareholder consent is required if a company wishes to provide a guarantee.

Additionally, to guarantee third-party debts outside the ordinary course of business, or to mortgage company assets for matters other than securing company debts, express authorisation is required by the articles of association of a joint stock company, or by resolution of the company’s members at a general meeting, in accordance with Articles 102(c) – (d) of the CCL.

Notification

Article 758 of the Code stipulates that if a debt becomes due and the beneficiary under a guarantee does not claim the same from the debtor, the guarantor is entitled to notify the beneficiary that legal proceedings are necessary against the debtor to settle the debt.  If the beneficiary fails to initiate proceedings within six months of the date of such notification, and the debtor does not make the requested payment, the guarantor is discharged from his liability towards the guarantee, save where the debtor provides adequate security in respect of the guaranteed obligation.

Accordingly, from a lender’s perspective, it is advisable to add wording to the guarantee agreement explicitly excluding and dis-applying Article 758 of the Code.

Joint and several liability

Guarantors are jointly and severally liable together with the debtor under Article 238 of the CL.  As such, the beneficiary of a guarantee can claim against the debtor, the guarantor or both at his option, and does not forfeit his right to claim against the other, until he has received full satisfaction of the debt owed and covered by the guarantee.  Notwithstanding this, it is advisable that, when drafting a guarantee, the beneficiary requests the inclusion of a clause that allows him to make a claim directly against the guarantor under the guarantee in the event of default of the debtor, without first having to exhaust all claims against the debtor.

Obligations of the beneficiary

If a beneficiary receives any property (i.e., security) from the guarantor securing the guarantee, Article 241 of the CL imposes on the beneficiary an obligation to safeguard this property and, in doing so, take account of the interests of the guarantor.  If the beneficiary does not fulfil his obligation and the guarantor suffers a loss to the property as a result, the guarantor is released from his obligation to the extent of the loss suffered.

If the debtor becomes bankrupt, the beneficiary of a monetary guarantee must make a claim for the debt in bankruptcy.  If he does not, as stipulated by Article 242 of the CL, his right of recourse against the guarantor will be barred to the extent that the guarantor suffers loss as a consequence of the creditor being at fault.

The beneficiary is further under an obligation to seek the approval of the guarantor prior to granting the debtor an additional period of time in which to fulfil his obligation.  In the event that the beneficiary does not obtain the consent of the guarantor, the guarantor may be ‘release[ed] [from] his liability for the guarantee’ under Article 246 of the CL.

Obtaining a release of guarantee

The most common way to be released from a guarantee is through performance of the guaranteed obligation, or to receive the consent of the parties to the guarantee.  If a party in the latter case does not consent, and the debtor’s obligation is deferred, the guarantor’s obligation must also be deferred in accordance with Article 235 of the CL.

Indemnities

The courts of the Sultanate of Oman have not drawn a clear distinction between the two concepts. Whilst the CL specifically provides for guarantees, it is silent on the issue of indemnities.  However, if an indemnity has been agreed in contract, in principle there is no reason such agreement should not be recognised by the courts of Oman.  The contract would have to make explicitly clear that the beneficiary has the right to claim directly against the guarantor for a fixed amount without having to prove his losses were caused by the default of the debtor; and without any duty to mitigate his losses.

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Monday, December 19, 2016

Oman's Public Authority for Social Insurance - PASI

What is PASI?

The Social Security Law and its amendments promulgated by Sultani Decree 72/91 came into force on July 1, 1992 (the “Social Security Law”). Article 5 of the Social Security Law provides that a public authority shall be formed under the name of Public Authority for Social Insurance (“PASI”) with administrative and financial independence, and is responsible for the implementation of the Social Security Law.

The Social Security Law aims to provide security against old age, disability, death or occupational injury and disease, thereby ensuring a social stability for the insured and their dependents. The Social Security Law only applies to Omani nationals employed in the Sultanate of Oman.

What are the employer’s contribution and obligations?

Under the Social Security Law, the employer is solely responsible for the payment to PASI in respect of each relevant employee, and the payments must be made on the basis of the actual wage drawn by that employee. Currently, the employer is required to contribute a total of 11.5% to PASI (10.5% of the employee’s gross salary, plus an additional 1% for occupational injuries and disease). The employee is required to contribute an amount equal to 7% of its gross salary.

Each company in Oman has online access to the PASI scheme (which sets out the details of each Omani employee and his or her salary). As a standard practice, in January each year, PASI updates the contribution that the employee and employer are required to make based on the standard minimum 3% increment to the gross salary. However, if the employer grants an increment of more than 3%, it is the employer’s obligation to notify PASI of the new salary by updating the employee’s salary details online. Generally, PASI would require the company to amend and notify PASI of the employee’s salary within a period of one month from implementing the revised salary.

Is it compulsory for companies to comply with the rules under Social Security Law? Or can companies provide their own scheme?

Article 16 of the Social Security Law requires the employer to undertake payment of the full social security subscriptions to PASI, and the employer is solely responsible for payment of these subscriptions, and may deduct the employee’s contribution from the secured employee’s salary.

However, if a company has a workers savings fund scheme by which the Omani employees receive more than the PASI entitlement that the employer is required to contribute (i.e., the contribution made by the employer is equivalent to, or more than, the 10.5% of the gross salary to be contributed by the employer), then such scheme is acceptable and the employer is exempted from making PASI contributions on behalf of its employees. However, if it falls below what is defined under the Social Security Law, then it is important to note that the company may be foreseen as breaching the Omani Labour Law and the Social Security Law.

Article 7 of the Social Security Law provides that an employee has one year from the date of leaving to bring any claim regarding PASI. In such case, the concerned employee will have one year from when he or she leaves to raise a grievance against the company.

What happens if the employer defaults?

Article 17 of the Social Security Law provides that the employer who is subject to the law, but does not pay the contribution according to actual wages of the employees, or does not pay the insurance contribution for all or some of his employees, or does not pay the end of service benefits or refuses or delays the payments of the due contribution at the time, then the employer shall be obliged to pay to PASI an additional amount estimated at 13.5% of the contribution which the employer failed to pay, or of the amounts which are due for end of service benefits, unless there are unavoidable reasons, to be evaluated by the Board of Directors of the PASI.

In addition to the penalty imposed under Article 17, PASI also sets out an additional penalty under Article 74 of the Social Security Law, whereby if the employer violates any of the provisions of the Social Security Law, the employer shall be punished with a fine of not less than OMR 100 and not more than OMR 500, and the limits of the punishment will be double in case of repetition of the violation, and the fine multiplies according to the number of the employees with respect to whom the employer commits one or more violations.

Therefore, it is important for a company to comply with PASI rules. If the company has revised the employee’s salary, it is the responsibility of the company to notify PASI of the new salary and undertake to pay the full subscription to PASI accordingly.

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Monday, December 12, 2016

Protecting Intellectual Property in Oman

General overview of intellectual property in Oman

Intellectual property (“IP”) protection is considered crucial for every business. Businesses now operate in an increasingly competitive marketplace, thus protecting and securing its IP is essential for a business’s future success. By having knowledge about IP, businesses can shield themselves from infringing others’ IP rights and avoid cost and legal action. Moreover, IP provides individuals with a sense of protection and encourages them to engage in more creative ventures.

The World Intellectual Property Organisation (“WIPO”) defines IP as “creations of the mind, such as inventions, designs, literacy and artistic works, names and images used in commerce.”

While it’s argued that the Omani courts may struggle with IP cases, the Omani government has initiated various steps towards IP protection, from the implementation of domestic laws to the participation in conventions and international treaties. The Sultanate of Oman is a member to several international treaties, conventions and protocols including: The Gulf Cooperation Council, The World Trade Organisation, The World Intellectual Property Organisation, the Berne Convention, the Paris Convention, the Madrid Protocol and the Patent Cooperation Treaty.


In addition to the international treaties and conventions listed above, the Sultanate of Oman has enacted several domestic laws protecting IP rights.

The applicable laws in Oman

The Industrial Property Rights Law (“IPRL”) promulgated by Sultani Decree 67/2008 governs the protection and use of patents, trade marks, trade secrets, utility models, industrial drawings, geographical indicators, topography of integrated circuits and protection against unlawful competition in the Sultanate. Ministerial Decision 105/2008 sets out the Executive Regulations for the IPRL.

Law on trade marks

Article 36(1) of the IPRL provides that the exclusive right to a mark is acquired by registration. Article 36(2) sets out circumstances when a mark cannot be validly registered, which includes inter alia:

  1. if the mark is identical or similar to an extent that creates confusion or is like the translation of a mark or a well-known title in Oman in relation to identical or similar goods or services of another enterprise or if it is known and registered in Oman as regards the goods or services not identical or similar to those for which the registration of the mark is being sought, provided that the use of the mark as regard the goods or services, in the latter case, gives the impression of the presence of a link between these goods or services and the owner of the well-known mark and that such use undermines the interest of the owner of the well-known mark; and

  2.  if the mark is identical with or similar to a mark of another owner already registered or if there is an application that precedes the registration of the concerned mark in respect of the date of deposit or date of priority as regard the same goods or services, or goods or services closely linked therewith or if they are similar to an extent that is misleading and confusing.
Law on patents

Just like trade marks, patents are also governed by the IPRL. WIPO defines a patent as an “exclusive right granted for an invention, a product or process that provides a new way of doing something, or that offers a new technical solution to a problem.” Under the IPRL, an invention is patentable in Oman if it is new, involves an inventive step and is susceptible of industrial application. Moreover, it should not be preceded by any previous industrial technology declared to the public in any part of the world by publication in a tangible form or by verbal communication or by use or any other method prior to the date of the deposit of the application or date of precedence of claim of the right to the invention. In order to protect the patent, the inventor or his agent must submit the patent application to the Ministry of Commerce and Industry’s Department of Agencies and Intellectual Property.

Remedies available under IPRL

Invalidation/removal

The IPRL grants a right to any interested person to request the court/registrar to invalidate/remove a trade mark from the register. A trade mark registration may be invalidated if it is proved that the requirements of the IPRL were not fulfilled. A trade mark may be removed from the register in respect of any of the goods or services in respect of which it is registered, on the ground that up to one month prior to the date of the deposit of the application for the removal, the mark was not used by the owner of the trade mark or the licensee during a continuous period of three years or more, unless it is proved that special circumstances existed that were beyond the control of the owner or the licensee that prevented the use of the mark during the aforementioned period and that the owner has no intention not to use or abandon the mark in respect of those commodities or services.

Civil action

  1. The IPRL provides that civil action for infringement may be initiated within five years from the date the right holder knew or had reason to know of the infringing act. However, there is no time limit to bring a suit in case of infringing use of distinctive signs in bad faith or for unfair competition purposes.

  2. The IPRL sets out the remedies that the court may offer to a party whose rights have been infringed. Article 75 states that the court shall include an appropriate compensation to the possessor of the right for the infringement of his IP property right. The court may, in case of infringement of a trade mark, pass a judgement on the value of the compensation claimed or one specified by it and, while estimating the compensation value, take into account the profits made by the offender. The compensation shall, in all cases, be sufficient to undo the damage caused to the possessor of the trade mark right on account of the infringement. The Court shall, while fixing the compensation for damage for the infringement of the rights prescribed under this Law, keep in view the value of the commodity or service subjected to infringement measured against the proposed retail price or any other legal measure for the value submitted by the possessor of the right.

  3. The court may pass a judgement obliging the offender to pay compensation for damages related to the acts of infringement committed on or after the date on which the decision on the acceptance of the registration application, if any, was issued by publication in the Official Gazette or the date on which the registration applicant notified the offender of the contents of the application or one on which the offender came to know of the contents of the application.

  4. The IPRL provides that the court shall order the destruction of goods involved in infringement except in exceptional circumstances without decreeing any kind of compensation. The court shall order the destruction of substances or equipment the majority which were used in manufacturing the commodities involved in infringement or in exceptional circumstances and their disposal outside the trade channels in a manner that brings the infringement risks to the lowest level without decreeing any kind of compensation.

Criminal action

Deliberate infringement at a commercial level of an industrial property right shall be punishable by imprisonment for a minimum period of three months and a maximum of three years and/or a minimum fine of OMR 2,000 and a maximum of OMR 10,000. The minimum and the maximum penalty shall be doubled in case of repeated infringement.

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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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