Wednesday, May 25, 2016

The Procedural Steps for Enforcing a Judgment in Oman

With regard to disputes, clients often focus on “winning” their cases, that is, successfully attaining a judgment from the court or the arbitrator, without having given much consideration as to enforcing an award and getting paid the amounts that a court or tribunal so orders.  Therefore, it is not uncommon in Oman for clients to “win” a judgment but to still have to wait for a separate enforcement procedure to complete before any money is seen. It is therefore important for clients to understand that the underlying court case or arbitration is the first of two limbs with regards to attaining monies. The second limb is that of enforcement.

This article sets out the five practical steps involved within the enforcement process in Oman:

  • Step 1:  Obtain a Court of Appeal Judgment / Award from an Arbitration Tribunal.  If the dispute is being resolved by way of litigation, then you can only enforce a final judgment.  For our purposes, a Primary Court judgment is final if thirty days have elapsed since the date the judgment was rendered and no party has appealed to the Court of Appeal.  If an appeal is made within the prescribed time frame, then the judgment is eligible for enforcement on the day that the Court of Appeal renders its judgment.  If the dispute is being resolved by way of arbitration, then an award by the tribunal must be translated into Arabic by way of a certified translator.  
  • Step 2:  File an Application at the Enforcement Department of the Commercial Circuit of the Court.  In simple terms, filing an application at the Enforcement Department is a very simple and flexible process.  The Department requires a form to be completed and copies of all judgments (Primary Court and, if relevant, Court of Appeal Judgments) or awards in Arabic.  It is good practice to ensure that the document containing the original arbitration clause is also available for inspection by the Enforcement Department, should that be required.  No fees are usually paid in this regard.
  • Step 3:  Check the Notification from the Enforcement Department.  The Enforcement Department will notify the opposing party of enforcement proceedings and provide them with a seven-day period in which to file an objection.  It is vital for the party that has filed for enforcement to keep attending upon the Enforcement Department, so as to enquire as to whether this step has been completed. 
  • Step 4:  Check any Objections of an Opposing Party.  The enforcement can only be stopped if the opposing party files an objection (known as an “Ishtikhal”) within the prescribed seven-day period, or if the Supreme Court has issued a stay order.
  • Step 5:  Check to See if a Hearing has been Filed in Response to the Ishtikhal.  The hearing will determine whether the Ishtikhal is relevant or whether it should be ignored. 
Either way, enforcement takes place after the above steps have been completed.  Whilst the process is relatively simple, it can be time-consuming and technical.  For this reason, we always advise clients to consider the issues around enforcement at the outset of any dispute. 

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Wednesday, May 18, 2016

Enactment of New Laws in Oman

Overview of the Omani Legal System
Oman is an absolute monarchy and all laws are promulgated by the Head of State, His Majesty the Sultan, as Sultani Decrees.  Other laws which are subordinate to Sultani Decrees (in the form of Ministerial Decisions and Executive Regulations) are issued from time to time by Ministers as well as the administrative units of the Government of Oman (the “Government”).  

There are two types of legislation in Oman, primary and secondary.  Primary legislation is promulgated by a Sultani Decree directly from His Majesty the Sultan.  Secondary legislation is passed by Ministerial Decisions and the Executive Regulations.  All ministers in Oman are appointed by the Sultan.  Article 74 of the Sultani Decree 101 of 1996, the Basic Law (“SD 101/96”), provides that all Sultani Decrees and Ministerial Decisions must be published in the Official Gazette.  Executive Regulations are sometimes not published in the Official Gazette but issued as an internal regulation for the relevant Government departments to abide by.

Oman has an Official Gazette pursuant to the Sultani Decree 84 of 2011 (“SD 84/11”) in which new legislation is published.  The date of implementation of any new legislation is generally the date of issue of the Gazette in which the legislation is published.  Article 5 of SD 84/11 provides that the publication shall be considered as presumption for the knowledge of all, and no evidence to the contrary may be accepted.  All legislation published in the Gazette is enforceable.

In addition, Oman operates a system of Shari’ah law in accordance with Article 2 of SD 101/96, which states that Islam is the religion of the State and the Islamic Shari’ah is the basis of the law.   However, the role of Shari’ah is limited in certain areas and, in practice, has little influence on commercial activities.

When it comes to the enactment of new laws in Oman, Article 72 of SD 101/96 provides that the application of the Basic Law shall not prejudice treaties and agreements in which the Sultanate has entered into with other countries, international institutions or organisations.  Article 76 of SD 101/96 further provides that treaties and agreements shall not have the force of law until such time as they have been duly ratified.

The Procedure to Ratify a Law in Oman
There is no fixed procedure for promoting the creation of a new law, whether it be a Sultani Decree or a Ministerial Decision. However, the law in question would have to be sponsored by the relevant Government department and is subject to review by the Ministry of Legal Affairs.  Usually, the Government department that is concerned with the subject matter of the law to be enacted shall be the first to draft, amend and review the new law.  This process does not have a specific timeframe as Government departments have a discretionary timeframe to look at new Sultani Decrees, unless urgency has been placed on the matter by one of the councils, or due to the fact that the legislation has been brought in due to an international treaty.

Once a draft has been issued by a Government department and that draft has been approved by the Ministry of Legal Affairs, the various other Government departments that may be affected by the subject matter of the proposed new law are then asked to review and recommend any amendments to that draft law.   Once approved, the draft law is then sent to the State Consultative Council and the Cabinet of Ministers.

The State Consultative Council has statutory powers to recommend and suggest new legislation for Government departments.  The State Consultative Council consists of the Council of State (Majlis A’ Dawla) and the Consultative Council (Majlis A’Shura).  The Majlis Al Shura will make its recommendation pursuant to Article 29(a) of Sultani Decree 86 of 1997 promulgating the Law regarding the Council of Oman (“SD 86/97”).  The draft is then transmitted to the Majlis Al Dawla, which undertakes a similar exercise (Article 18(d) of SD 86/97).  Both Councils will report to the Ministry of Foreign Affairs to provide final recommendation on the new law.

Once the new law is approved by the parties above, it is then sent to the Diwan Royal Court to His Majesty for his approval, which then leads to the Sultani Decree being published in the Official Gazette.

Further, Article 5 of SD 84/11 provides that new laws and regulations shall be applied from the date of their publication in the Official Gazette or its appendixes, unless specified otherwise.

The Timeframe for the Enactment of New Law
There are no formal prescribed time limits for the completion of the process of promulgation of new legislation.  In theory, the promulgation of a new law can be completed quickly, if one of the councils has expressed the matter concerning the legislation to be urgent, or due to the fact that the requirement for the legislation has been brought about by an international treaty or GCC agreement.

In practice, however, it would be very difficult to predict as to how long each applicable Government unit will take to review and approve the new law as the timeframe is at the discretion of each applicable Government unit.


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Wednesday, May 11, 2016

Islamic Project Finance - Part 2

This is the second part of a series of articles discussing Shari’ah-compliant structures used in project financing transactions. This article discusses the Sukuk (i.e., Shari’ah-compliant capital markets instruments) structure, which is now becoming a popular option for financing infrastructure projects in the Middle East.

Sukuk
Sukuk (plural of Sak) is the Arabic term for financial certificates.  The Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) defines Sukuk as “certificates of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment activity.”  

Sukuk Structures
From a structural perspective, Sukuk can be divided into two types of transactions, namely, asset-based or asset-backed.  Asset-based Sukuk issuances are usually referred to as Islamic bonds whereas asset-backed Sukuk issuances are normally referred to as securitisations.

The Sukuk issuer (normally a special purpose vehicle (“SPV”) issues certificates into the capital markets in both kinds of Sukuk issuances (mentioned above).  In both the structures, the Sukuk issued represents undivided beneficial ownership interests of the Sukuk investors in the assets of the Sukuk issuer.

Of the two structures mentioned above, the asset-based structure is utilised in project financing transactions.  We discuss below the most commonly used asset-based Sukuk structures that are used for project financing, namely, the Sukuk al-Ijarah structure and the Sukuk al-Istisna’a structure.

A.  Sukuk al-Ijarah
An Ijarah is a lease contract for the transfer of the usufruct of an asset to another person in exchange for a rent claimed from that person.

The Sukuk al-Ijarah structure employs the principles of Ijarah, whereby the ownership or benefit/usufruct of corporeal assets are transferred from an originator  to an SPV, which then leases back the said assets to the originator* for a specific duration.

As a first step, an SPV is incorporated/established, which then issues Sukuk into the capital markets. Each Sukuk holder subscribes to the Sukuk issue of the SPV by contributing cash to the SPV in return for its Sak.

The SPV declares a trust over the Sukuk issuance proceeds in favour of the Sukuk holders.  The SPV then applies the Sukuk issuance proceeds to purchase the assets from the originator and pays cash to the originator as consideration for the said purchase.  The cash is utilised by the originator for the purposes for which the Sukuk were issued.

Thereafter, the SPV leases the assets back to the originator under an Ijarah contract, whereby the originator (in the capacity of a lessee) makes periodic rental payments to the SPV (in the capacity of a lessor).  The periodic rental payments are then passed on to the Sukuk holders as periodic distribution amounts.

The rental payments under the Ijarah contract can be structured in a manner so as to provide the desired return on the Sukuk. The rate of return can therefore be set as a fixed rate or a floating rate.
Under a purchase undertaking, the originator repurchases the assets upon maturity of the Sukuk.  The purchase price, being an amount equal to the aggregate face value of all the Sukuk plus any accrued but unpaid periodic distribution amounts, is passed on to the Sukuk holders for repaying their principal.  The said purchase undertaking also grants an option to the SPV (acting as the trustee for the Sukuk holders) to require the originator to purchase the assets upon the occurrence of an event of default.

Under a sale undertaking, the originator is granted an option to purchase the assets for a price equal to the aggregate amount of the Sukuk issuance proceeds plus any accrued but unpaid periodic distribution amounts upon the occurrence of specific events.

The SPV (as owner of the Sukuk assets) and the originator (as service agent) also enter into a service agency agreement where the SPV appoints the originator as its agent to manage the assets comprising the Sukuk and carry out the services with respect to the major maintenance, insurance and payment of ownership-related taxes pertaining to the Sukuk assets.

B.  Sukuk al-Istisna’a
An Istisna’a is a contract of sale where a commodity is transacted before it comes into existence.  It is an order to a manufacturer to manufacture/construct a specific asset for the purchaser in return for a fixed price to be paid up front.

The principles of Istisna’a are used in structuring Sukuk for project financing where an SPV issues Sukuk into the capital markets and uses the proceeds from the Sukuk issuance to pay the originator (in the capacity of a contractor) in exchange for the construction and delivery of the project (i.e., Istisna’a assets) in the future.  This structure has therefore become particularly useful in financing the construction phase of a project.

Under a Sukuk al-Istisna’a, upon issuance of the Sukuk into the capital markets and their subscription by the Sukuk holders, the SPV declares a trust over the proceeds of the Sukuk issuance in favour of the Sukuk holders.  The SPV (in the capacity of a purchaser) then enters into an Istisna’a contract with the originator (in the capacity of a contractor) where the originator agrees to construct specific assets and undertakes to deliver the said assets to the SPV at a future date.  In return, the SPV pays the Sukuk issuance proceeds to the originator as consideration for the construction and delivery of the assets.

Simultaneously with the execution of the Istisna’a contract, the SPV and the originator enter into a forward Ijarah contract pursuant to which the SPV (in the capacity of a lessor) agrees to lease the assets back to the originator (in the capacity of a lessee) under a forward Ijarah (known as al-Ijarah al-Mawsufah fi al-Dhimmah) during the construction period of the project and under a normal Ijarah following the delivery of the assets so that the SPV receives periodic rental payments during the entire tenor of the Sukuk which payments are then passed on to the Sukuk holders as periodic distribution amounts.

The SPV and the originator also enter into a service agency agreement, a purchase undertaking and a sale undertaking for the same purposes mentioned in Section A (Sukuk al-Ijarah) above.


*The term “originator” wherever used in this article means the party initiating the process of obtaining project finance. Usually, the originator is the sponsor of a particular project who is responsible for the incorporation/establishment of an SPV as a medium to raise funds for the project. 

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Monday, May 9, 2016

Liquidated Damages for Delay in Construction Contracts in Oman

It is usual for construction contracts to include provisions by which delay liquidated damages would be payable by the contractor to the owner/client in the event the contractor is delayed in achieving one or more of the construction milestones.  However, the calculation of the value of such delay liquidated damages (usually a daily rate) is not generally considered in detail by the parties, and such amounts are usually randomly ascertained amounts, which do not bear any resemblance to the actual financial loss that is sustained by the owner/client in the event of such delay and are generally subject to a relatively small percentage of the contract price.

Delay liquidated damages are used as a secondary obligation enforceable upon the breach of a primary obligation (the primary obligation in most cases being the completion of the construction or stages of the construction in accordance with agreed construction milestones).  Both the FIDIC Red Book 1999 1st Edition (Clause 8.7 – Delay Damages) and the Omani Standard Documents for Building and Civil Engineering Works 1999 4th Edition (Clause 47 – Penalties for Delay) include liquidated damages provisions applicable in the event of delay to the construction milestones caused by the contractor, and both provisions allow for the contracting parties to agree to the damages amount.  It is important to note that such payment by the contractor of such amounts does not relieve the contractor from its obligation to complete the construction.

Article 267 of the Civil Code promulgated by Sultani Decree 29/2013 (“Civil Code”) specifically deals with the Oman law position regarding liquidated damages, as follows:

"(1) If the subject matter of obligation is not a sum of money, the contracting parties may determine the amount of compensation in advance by making a provision of same in the contract or in a subsequent agreement. 

(2) In all cases, the court may, upon the application of either of the parties, amend such agreement to make the compensation equal to the damage, and any agreement to the contrary shall be null and void.”

Article 267(1) determines that the contracting parties may agree to a liquidated damages amount but Article 267(2) gives certainty to the generally accepted position that, regardless of the liquidated damages amount included in the contract, the Omani courts are specifically permitted to re-open liquidated damages clauses, and adjust the amounts so that they are commensurate with the value of the actual damage incurred. Article 267(2) is obviously in direct conflict with the freedom to contract for which Oman has previously been well known. However, this provision of the Civil Code merely follows established precedent applied by courts of UAE, Qatar and Saudi Arabia who all take a similar position in that they are also not opposed to re-opening pre-agreed liquidated damages clauses.

Therefore, if either the contractor or the owner/client wish to apply to court to adjust the contracted liquidated damages amount, the burden of proof of actual loss and how it is different from the liquidated damages amount set out in the contract is likely to lie with the party seeking the adjustment to the contracted liquidated damages amount from the court.

Further, whilst we are not aware of any case law directly on this point since the enactment of the Civil Code in August 2013, we are aware of a number of existing cases before the Omani courts in which the argument has been put forward by a contractor that the liquidated damages set out in a commercial contract are too high.  However, in practice, given that it is the owner/client who proposes the rate of liquidated damages, and that the contractor prepares and submits its contract price proposal on this basis, in our view, it would be unlikely that an owner/client could successfully bring a claim in court to increase the rate of liquidated damages.

We will review in more detail the practical application by the Omani courts of Article 267 of the Civil Code in another article later this year.

Therefore, in theory, to reduce the risk of a dispute arising between the parties, the owner/client should consider an amount for liquidated damages that would be a genuine, pre-agreed estimate of the likely damage of a delay, due to a fault of the contractor, to the construction milestones.  However, practically speaking, and as is market practice, the owner/client will typically weigh the risk of completion delay and associated owner/client loss against obtaining a reasonable contract price proposal, since an increased contractor liquidated damages liability is most likely to be reflected in an increased contract price.  An owner/client would then seek to mitigate its exposure through insurance.


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Tuesday, April 26, 2016

An Overview of the Insolvency Regime under Omani Law

Key Legislation Governing Insolvency in Oman
As a general principle, in the Oman Civil Code, promulgated by RD 29/13, Article 277 provides that a restriction may be placed on a debtor by order of the court if his debts due exceed his assets. A restriction order has the following consequences:

• any debts due from the debtor shall become payable; and
• any disposal of his property by the debtor shall be void as against his creditors after the restriction order is issued and from the date the statement of claim is registered.
 
However, it is Book Five of the Oman Commercial Law issued by RD 55/90 (“OCL”) that contains the more detailed provisions governing bankruptcy and insolvency in the Sultanate of Oman.
Penalties for Directors or Business Owners Who Knowingly Trade While their Business is Insolvent
Article 604 of the OCL provides that a bankrupt entity may not dispose of any assets, nor make or receive any payment save where such receipt of payment is for a bona fide commercial purpose.

Article 614 of the OCL, however, permits a bankrupt entity to conduct a new trade with assets other than those of the estate in bankruptcy, provided that the creditors do not suffer detriment as a consequence.

Pursuant to Article 590 of the OCL, the Commercial Court will specify in a judgement the date on which the bankrupt is deemed to have ceased making payments. Under Article 609 of the OCL, creditors may petition the Commercial Court to avoid transactions made by the bankrupt after the cessation date (a) if such a transaction is considered to be detrimental to them; and (b) where the third party to such a transaction is aware at the time that the bankrupt has ceased payment.

The following transactions may be avoided if carried out by the bankrupt after the cessation date:

• all donations, except customary small gifts;
• settlement of debts before their due date;
• settlement of debts by means other than those agreed upon; and
• creation of any security interest.
 
Any application to have a transaction declared void by the receiver must be made within twelve months of the declaration of bankruptcy. Creditors may in any event bring an action for restitution.

What Options Does a Business in Distress Have?
The only option available to a business in distress is to apply to the Commercial Court for a declaration of bankruptcy. On the adjudication of bankruptcy, the Commercial Court appoints a receiver to administer the bankrupt’s estate (Article 589).

What Options Do the Creditors of a Business in Distress Have?
Pursuant to Article 589 of the OCL, creditors may file an insolvency petition at the Commercial Court. As noted above, under Article 609 of the OCL, creditors may ask the Commercial Court to avoid transactions made by the bankrupt after the cessation date (a) if such a transaction is considered to be detrimental to them; and (b) where the third party to such a transaction is aware at the time that the bankrupt has ceased payment.
Priority of Creditors
On declaration of bankruptcy there is constituted, by operation of law, a group of creditors whose claims against the bankrupt were validly established before the declaration of bankruptcy. Secured creditors with mortgages do not form part of the group of creditors until they participate in the bankruptcy for the recovery of any amounts that have remained unpaid after the sale of the secured assets.

The Government has priority under RD 32/94 for sums it is owed, whether by way of taxation or otherwise. Such decree provides that debts owed to certain Government bodies have priority claim over all debts, secured or otherwise, owed by that debtor to any other person, and sets out specific mechanisms for precautionary attachment and execution of the debtor’s assets.

The Oman Labour Law safeguards employees’ rights to receive any salary and other benefits still owed to them upon the bankruptcy of a business and, accordingly, their dues will rank higher in priority to payments due to other creditors.

Restructuring the Debt
There is provision for judicial composition (akin to a restructuring or a scheme of settlement) in Chapter Two of Book Five of the OCL.

The commissioner in bankruptcy notifies the creditors whose debts have been finally or provisionally admitted to attend the deliberations on composition.

Where the debts are not contested, such notice is sent within the seven days following the drawing up of the final list of the debts, and, where the debts are contested, within fifteen days following the expiry of the time for appeal against the last decision of the judge commissioner in bankruptcy as to whether the debts are to be admitted or rejected.

No composition shall take place without the approval of a majority of the creditors whose debts were finally or provisionally admitted, and provided that they hold two thirds of such debts.

Article 708 (in Chapter Two of Book Five of the OCL) provides that the composition may grant additional time for the debtor to discharge its debts and may provide for the release of the debtor from part of the debt.

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Friday, April 22, 2016

Curtis adds Islamic finance experience to Muscat team

Curtis has added a U.K and Pakistan qualified banking & finance lawyer, Sikander Nafees Siddiqui, to its Muscat team.

He focuses on banking and finance matters, both conventional and Islamic finance products, structured finance, project acquisition finance, trade finance and debt capital markets, particularly in the transportation and power sectors. He has advised on Sukuks issuance, Commodity Murabaha and Wakala placements and the full range of syndicated and bilateral facilities.

Before he joined Curtis, Sikander was the vice president of legal of Dubai Islamic Bank, the world’s first Islamic bank. He has also worked at top banking & finance and corporate law firms in Pakistan.

“Clients are already benefiting from Sikander’s hands-on experience in Islamic finance, and his track record in the power and water sector”, says Curtis Oman managing partner Bruce B. Palmer. “He has structured, drafted and negotiated documentation for the OMR 15.5 million Islamic project financing (based on the Istisna’a – Forward Ijarah structure) of a Greenfield cement project, an OMR 50 million conventional project financing of a dairy project and a secured syndicate foreign currency term loan facility of over OMR 100 million provided by a consortium of local and international banks.”


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Tuesday, April 19, 2016

Public Prosecution Investigations and Criminal Complaints within the Commercial Context


In Oman, corporations may find themselves involved in commercial disputes that end up in arbitration or litigation. Within that context, it is not unusual to find that a party in those disputes has chosen to separately lodge a criminal complaint at the Royal Oman Police (“ROP”). The supposed rationale behind such an action is that a criminal complaint may place commercial pressure on another party and could lead to a settlement within the commercial dispute.

However, what makes the above scenario slightly unusual is that, pursuant to the Omani Penal Code, crimes in Oman are treated as strictly personal. As such, corporate entities – faceless abstract giants as they are – cannot be named as the accused. To be rendered valid, a criminal complaint must be lodged against an individual employed by the corporation in question and not against the corporation itself. Sadly, to what extent a named particular individual is personally responsible for the grievance for which they are charged is less important than the extent of their proximity to that grievance.

To this end, the ROP and Public Prosecutor are tasked with ascertaining which person or persons are closest to the crime at hand. The Public Prosecutor is the pivotal figure in cases of this nature. He/she holds the power to decide whether or not the complaint brought forward against a corporate entity can be filed as a criminal court case. In effect, the Public Prosecutor exercises his/her discretion. Whilst they are meant to identify the face of the corporate entity, they can elect to name any employee they so deem as being a person of interest. For example, if an individual is injured at a playground due to a faulty slide, the criminal investigation could be against the maintenance manager of the playground apparatus.

The Public Prosecutor and ROP may move to confiscate travel documents at an early stage. Even though the legal system is known to operate in a more flexible manner, ample precedent exists for seizing travel documents. Passports may be taken early on during investigations to curtail all movements of the accused until a decision is reached.

The matter becomes even more convoluted when the accused is not an Omani citizen. Expatriates can find themselves embroiled within a criminal judicial system that they do not understand and that causes them great anguish. This can be especially crippling for the accused. It then becomes vital for a lawyer to conduct an exhaustive investigation of the case at hand and carry out a methodical examination of the known facts. Documentary evidence, witness statements and third-party reports are often painstakingly obtained to protect a client’s interests, and ultimately to procure their freedom.

Expatriates often make the mistake of assuming that legal principles such as “burden of proof” and “innocent until proven guilty” apply within Oman. As stated earlier, the Omani legal system is far more fluid. Accordingly, a crime usually has to be proven beyond a measure of a doubt before any punishment is meted out to the accused on behalf of his/her employer. In practice, this is not always followed through, making any outcome difficult to predict in advance. However, an appeal system exists so as to offer an opportunity to remedy miscarriages of justice.

From a practical perspective, the procedural timeline with regards to a criminal complaint within a commercial setting is as below:

1. A criminal complaint is made to the ROP or the Public Prosecutor against an individual attached to a company.

2. The ROP/Public Prosecutor carries out his/her own investigation of the complaint and decides whether the individual is the appropriate person to be investigated. This step may involve inviting the individual to attend an interview. The individual MUST attend. Failure to attend may result in an arrest warrant being issued and/or a travel ban being imposed. The Public Prosecutor may allow the individual to be accompanied by a lawyer or may refuse to do so.

3. The Public Prosecutor documents the investigation and decides whether to file a criminal case with the Primary Court or not.

4. If there is to be no criminal case, the ROP/Public Prosecutor will inform the individual and may keep the file open. However, no further action would be taken at this stage.

5. The entity which reported the complaint has a mechanism whereby it can seek to have the decision not to proceed overturned. This would be by way of an ex parte application to the Appeal Court asking the Court to look into the decision and explaining why the decision is wrong. The Appeal Court can then provide an order to the ROP/Public Prosecutor to continue investigating or to investigate in a different manner or to file a criminal case.

6. If there is to be a criminal case, the individual may need representations being made for bail and evidence must be gathered quickly.

7. Expert and witness testimony must be examined immediately as the case must be rigorously defended.

As can be seen, lawyers play a critical role in relation to Public Prosecution investigations and criminal complaints within the commercial context. It is vital to engage the assistance of a lawyer from the outset so that all matters can be dealt with expeditiously and so that all avenues are explored with the client early on.

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Thursday, April 14, 2016

Curtis Oman promotes new Head of Disputes in Muscat

Curtis is pleased to announce the promotion of its litigation partner, Simon Ward, to become Head of Disputes in its Muscat office.

Simon Ward is a popular and well known figure in the Muscat litigation arena. An experienced litigator in the Oman and Middle Eastern markets, he was appointed two years ago to the Oman Court of Appeal Roll of Arbitrators. He is dedicated to the Oman market and has conducted commercial arbitrations, litigation and dispute resolution on behalf of Omani and international clients in the market.

Simon Ward has acted as both arbitrator and lead counsel before the Omani Courts and in domestic and international arbitrations, including under the auspices of the ICC and the London Court of International Arbitration and in Omani/UNCITRAL ad hoc arbitrations.

As a litigator, his experience spans a wide range of litigation fields, including commercial, construction, regulatory, health and safety, environment, and employment, in Oman, the region and overseas.

The legal commentator Chambers Global 2016 recommends Simon Ward as “hailed by clients for his "pragmatic and no-nonsense approach, which demystifies the legal process".”

Bruce B. Palmer, Curtis’ managing partner in Oman said “Simon's promotion is well-deserved and reflects the key role he has been playing in Curtis' disputes practice.  He is a highly respected practitioner and we look forward to Curtis’ continuing excellence in the disputes field.”

Curtis, Mallet-Prevost, Colt & Mosle LLP (Curtis) is a leading international law firm providing a broad range of services to clients around the world.  The firm operates through 17 offices in the United States, Latin America, Europe, the Middle East, and Central and East Asia.  For more information about Curtis, please visit the Curtis website.

Curtis’ Muscat office was established in 1997 and is served by US, UK, Italy, India, Pakistan, Australia, New Zealand and Omani qualified lawyers. It offers the full range of domestic and international legal services in the fields of real estate, corporate and commercial law, banking, energy, arbitration, insurance, shipping and port development, tourism, employment and public procurement, amongst others.

Notes to Editor
Curtis, Mallet-Prevost, Colt & Mosle LLP is a New York limited liability partnership with affiliated partnerships and entities operating in the United States, Argentina, China, England & Wales, France, Germany, Italy, Kazakhstan, Mexico, Oman, Turkey, Turkmenistan and United Arab Emirates.


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Tuesday, April 12, 2016

Mining Law Oman


Introduction

The Public Authority of Mining (the “Authority”) is affiliated with the Ministry of Commerce and Industry (the “Ministry”) and aims to develop the mining sector, achieve optimal exploration of mineral resources and invest resources in such a way as to develop goals and economic diversification in Oman. As natural minerals in Oman are property of the state, the Authority is responsible for granting licences for exploration and mining activities as well as implementing and monitoring such activities. The scope of this article focuses on the Authority’s role in supervising all mining-related activities once a licence has been granted.

 

Powers of the Authority Where Mining is Concerned

The Authority was established in accordance with RD 49/14 giving extensive power to the Authority in the governance of mining activities. The powers and prerogatives, allocations and assets of the Ministry have been transferred to the Authority. Although not an exhaustive list, some of the Authority’s powers include the ability to:


• supervise all activities that are related to the exploration of minerals and develop resources; and

• preserve the geological landscape and set out the appropriate controls to protect it.

 

Article 19 of the Mining Law as promulgated by RD 27/03 also stipulates that officials designated by the Authority shall be entitled to:


• access, inspect and examine the mine or quarry at any time during duty hours, provided they do not interrupt or obstruct the operations flow; and

• investigate the mine or quarry status to assess the suitability of the adopted safety and other measures.


Mining Regulation No. 77 of 2010 (the “Regulations”) goes further to specify how officials may monitor mining activities. In accordance with Article 77 of the Regulations, relevant judicial inspectors may:

• enter into the area of the concession or licence at any time during the working hours for the purpose of physically inspecting the work progression and assessing steps taken to ensure the health and safety of workers;

• view and collect production details, mining operation records and accounts during the working hours;

• issue instructions and directions to employees in charge of the mining operations for the purpose of improving the work and specifying violations, if necessary;

• investigate violations committed by the holder of mining concession or licence; and

• review the production reports and the guaranteed and potential mining reserve of the extracted metal and compares the same with the reports submitted to the director as per conditions of the concession or licence.

 
Any failure to adhere to the provisions above shall be considered an explicit breach of the Mining Laws and Regulations and, as such, shall be referred to the relevant judicial department and is subject to penalty. If any licence holder causes obstruction to any official being able to perform their duties by rejecting or delaying their access to the mine or quarry or rejects or delays their required inspection, examination or investigations, they may be liable to a fine not exceeding OMR 5,000.

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Tuesday, April 5, 2016

Entire Agreement Clauses: An Omani Law Perspective


Introduction

Entire agreement clauses – sometimes referred to as merger or integration clauses – are common boilerplate provisions in many commercial contracts.

 

The purpose of such clauses is to prevent the parties from adducing evidence extrinsic to the written contract in order to show that the terms of the bargain were different from those recorded in the contract.

 

That is to say, the parties include an entire agreement clause to prevent statements and representations made either before or after the contract was entered into from having any contractual force (unless they were duly incorporated into the contract by amendment in accordance with its terms).

 

One reason for excluding evidence outside the written contract is that, particularly in the case of oral statements, it may take time to resolve what was said and agreed to by the parties. Secondly, the parties have greater certainty as to their contractual rights and obligations when they know these are all contained in one written agreement. Finally, written and oral statements made prior to entering into the final agreement may be misleading in that they are as likely to amount to mere aspirations as they are to evidence of any final consensus arrived at between the parties.

 

General Considerations

When reviewing an entire agreement clause, there are some important pitfalls to be aware of and to avoid:

 

Schedules and Attachments

If the contract includes schedules or other attachments, it is important to check that the definition of the “contract” includes these schedules or other attachments.

 

Multiple Contracts

If there are multiple contracts forming part of the same transaction, it is important to include them in the wording of the entire agreement clause, for example: “This agreement and [list other agreements] constitute the entire agreement between the parties….”

Special Considerations under Omani Law


Excluding Misrepresentation

Entire agreement clauses in common law jurisdictions typically aim to exclude liability for misrepresentation, but carve out liability for fraudulent misrepresentation. In other words, the parties agree not to claim for “negligent” or “innocent” misrepresentation in connection with the agreement, but also state expressly that they are not seeking to limit or exclude claims for fraudulent misrepresentation.

 

Such distinctions are not, however, meaningful under Omani law. Article 103 of the Omani Civil Transactions Law (Royal Decree (“RD”) 29/13) (the “Civil Code”) defines misrepresentation as follows:

Misrepresentation is when one of the two contracting parties deceives the other by means of trickery of word or deed which leads the other to consent to what he would not otherwise have consented to. Deliberate silence concerning a fact or set of circumstances shall be deemed to be a misrepresentation if it is proved that the person misled thereby would not have made the contract had he been aware of that fact or set of circumstances.

 

Omani law does not recognise negligent or innocent misrepresentation. On the contrary, there must be an intention to deceive by fraudulent means. The onus is on the party alleging misrepresentation to establish that (a) they were deceived by the misrepresentation; and (b) the deception was intentional.

 

Accordingly, the provisions relating to liability for misrepresentation in standard entire agreement clauses should be tailored to accord with the different treatment of the concept in Omani law. Any attempt to limit or exclude liability for negligent or innocent misrepresentation would be at best superfluous and at worst confusing.

 

Construction of the Contract

There are other considerations to be borne in mind when drafting entire agreement clauses under Omani law. The Civil Code provides, in Article 165, guidance in the construction of contract terms:


If the wording of a contract is clear, it may not be departed from by way of interpretation to ascertain the intention of the parties. If there is scope for an interpretative construction of the contract, an enquiry shall be made into the mutual intentions of the parties beyond the literal meaning of the words, and guidance may be sought in so doing from the nature of the course of dealings, current trade custom, and the trust and confidence which should exist between the parties.

Further, the Omani courts have long applied the civil law principle of ‘pacta sunt servanda,’ the Arabic rendering of which is equivalent to ‘the contract is the law governing the parties.’ A recent Omani Supreme Court judgement held that the parties to a contract are obliged to fulfil their respective obligations under the contract in good faith, and the terms of the contract may not be amended or invalidated by the court seized of the matter save where there is manifest ambiguity in their construction.

 

The principle is codified in Article 156 of the Civil Code, which provides that a contract must be performed in accordance with its contents. However, the article goes on to state that the parties’ obligations go beyond those contained in the contract, and include their obligations under the law, custom, justice and normal conduct.

 

A generic entire agreement clause will not exclude any of the above, but an express and specific term of the contract could arguably prevail over trade usage. Even specific clauses would, however, be unlikely to be effective in excluding the requirement to act in good faith, or legislative provisions considered to go to public order.

 

Elements of an Entire Agreement Clause

An entire agreement clause in an agreement expressed to be subject to Omani law should contain the following elements:



An Entire Agreement Statement

A statement in the contract that the parties agree that all the terms of the contract between them are to be found within the text of the contract document and nowhere else, and these terms supersede any prior written or oral agreement between the parties.

 

Non-reliance on Representations Not Contained in the Agreement

A statement that the parties have not relied on any statements or representations other than those contained in the written contract.

 

Summary

Entire agreement clauses seek to prevent a party to a contract from citing evidence not contained in the body of that contract to support a claim that the agreement between the parties was in fact different from that set down in the written contract. Such claims are often brought in connection with alleged misrepresentation.


Under Omani law, misrepresentation must involve an intention to deceive by fraudulent means. It goes to the root of the contract and gives the victim of the misrepresentation the right to rescind the contract. It follows that the provisions in standard entire agreement clauses relating to misrepresentation, and the remedies therefor, are redundant under Omani law.

Negligent and innocent misrepresentation are not recognised concepts in Omani law; and the remedy for (fraudulent) misrepresentation is provided for at law and cannot be limited or excluded by contract.

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