Wednesday, September 21, 2016

Oman Officially Ratifies the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Royal Decree 41 of 2016 (“RD 41/16”), was issued on the 18th of August 2016 in relation to approving the Sultanate of Oman joining and becoming a party to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”).  The Organisation for Economic Co-operation and Development (the “OECD”) created the anti-bribery convention as a means of establishing certain legally binding standards to criminalise the bribery of foreign public officials in international business transactions and to allow the nations who join the convention to have effective measures in this regard.  RD 41/16 comes in the wake of the Sultanate of Oman’s recent focus on combating bribery, money laundering, fraud and other financial crimes.

The Convention was drafted in a manner to give parties a certain amount of flexibility in applying its articles, as it generally makes recommendations regarding the measures that parties should implement rather than forcing the parties to implement them.  The Convention deals with offences committed by persons who promise or give bribes, as opposed to dealing with the offence committed by the official who receives the bribe.   The Convention is the first international anti-corruption mechanism that focuses on this side of bribery transactions and it allows parties to implement the recommendations contained within the Convention without the need to initiate changes in the fundamental principles of the laws of any given party.  It also seeks to maintain efficient uniformity among the measures taken by all the parties in deterring bribery of foreign public officials.

In essence, the Convention allows the parties to implement penalties that they deem fit which would normally apply within their own legal systems. This was illustrated in article three of the Convention which states that the bribery of a foreign public official shall be punishable by effective, proportionate and dissuasive criminal penalties which are comparable to the penalties applicable to the bribery of the party’s own public officials in a manner that allows effective mutual legal assistance and even extradition if the case calls for it.

In order to achieve its main purpose, the convention clearly outlines the required measures needed to be taken by the “accounting” department in order to combat bribery. These measures include the prevention of establishing off the books accounts, recording non-existent transactions, keeping false expenditure records. The Convention strongly urges members that such methods should result in either a civil, administrative or criminal penalisation.

The Convention includes several recommendations for member countries regarding reporting foreign bribery, maintaining external audits and compliance.  Moreover, in order to raise awareness in the public and private sectors for the purpose of preventing foreign bribery, the Convention includes numerous recommendations for parties to have strong ethics and compliance regulations as well as obliging companies to maintain external auditing. Business organisations should be encouraged by the member countries to assist companies in developing internal controls, ethics, and compliance programmes or measures.

Additionally, member countries should necessitate that companies reveal the full scope of material liabilities within their financial statements.   Furthermore, the convention encourages a company’s management to disclose in their annual reports or otherwise publicly disclose their internal controls, ethics and compliance measures, including those measures which contribute to detecting bribery.

Fundamentally, companies should consider visible policies in prohibiting bribery. Clear and strong support from senior management to maintain high standards in ethics and compliance can be considered as one of the expected recommendations from the articles of the Convention. Likewise, a financial and accounting procedural system with internal controls which are reasonably designed to ensure the maintenance of fair and accurate records are required under the Convention. The guideline encourages companies to provide positive support for the observance of ethics and compliance programmes or measures against foreign bribery. Companies should ensure that they have periodical reviews of the ethics and compliance programmes in a manner designed to assess their efficiency in avoiding foreign bribery, taking into account related developments in the field.

With regards to reporting foreign bribery, members should ensure having easily accessible channels in place for the reporting of suspected acts in international business transactions to law enforcement authorities. In addition, appropriate measures should be in place to facilitate the reporting of public officials, in particular those posted abroad. In accordance with Article 8 of this Convention, Members shall provide effective and proportionate civil, administrative or criminal penalties for such omissions in respect of the books, records, accounts and financial statements of such companies.

Therefore, being a member to this Convention and adhering to the articles of the Convention enables companies to avoid financial crimes especially those in relation to bribery. Joining in the Convention does not necessarily mean that the country has been given new regulations. Rather, the Convention reaffirms the regulations that the Sultanate already has in place such as the Code of Corporate Governance for Public Joint Stock Companies, the Law on Anti-Money Laundering issued through Royal Decree 30 of 2016 as well as other laws and regulations which relate to compliance, ethics and avoiding financial crimes.

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Wednesday, September 14, 2016

Islamic Finance - Part 3

This is the third part of a series of articles discussing Shari’ah compliant structures used in project financing  transactions.  In  the  second  part  of  this  series,  we  discussed  two  Sukuk  (i.e.,  Shari’ah compliant capital markets instruments) structures used to finance particular projects. In this article, we will discuss the third structure, namely, the Sukuk al-Musharakah structure and the different ways in which it can be used in project financing transactions.

Sukuk al-Musharakah

The term Musharakah literally means sharing. This term is derived from the Arabic word Shirkah, which means partnership. In Shari’ah, Musharakah means a partnership arrangement formed between two or more partners for some business purpose where each partner makes a contribution (in cash or in kind) to the Musharakah (i.e., the partnership). The profits of the Musharakah are shared amongst the partners according to an agreed ratio whereas the losses are shared according to the ratio of their respective contributions.

Musharakah can be divided into two structures, namely, the Shirkat-ul-Aqd structure and the Shirkat- ul-Milk  structure  for  the  purposes  of  Sukuk  issuance  for  financing  a  particular  project.  We  are discussing below the salient features of the said structures and the key principles involved in their utilization in project financing transactions.

A. Shirkat-ul-Aqd (Partnership by contract)

In this type of Shirkah, Musharakah is created by a mutual contract between the originator and the trustee where the originator and the trustee agree to contribute their efforts and resources towards achieving a common business purpose.

For the purposes of structuring a Sukuk issuance based on the Shirkat-ul-Aqd structure, a special purpose vehicle (“SPV”) is established to hold the Sukuk holders’ interest in the Musharakah. The SPV issues Sukuk certificates representing an undivided ownership interest in the underlying Musharakah and the Sukuk holders contribute towards the capital of the Musharakah by contributing cash to the SPV in exchange for Sukuk certificates.

A trust is declared by the SPV over the proceeds and any asset(s) acquired therefrom.  The SPV acts as a trustee for and on behalf of the Sukuk holders. Subsequently, the trustee enters into a Musharakah agreement with the originator where both the trustee and the originator contribute towards the capital of the Musharakah. In return, both the trustee and the originator receive a proportionate number of units in the Musharakah. Contribution from the trustee comes in the form of proceeds from the Sukuk issuance. The respective contributions of the trustee and the originator are used for the purposes of the Musharakah.

The profits generated from the Musharakah are shared between the originator and the trustee in an agreed proportion. The said proportion may not necessarily be the same as the proportion of their respective contributions to the Musharakah. The trustee’s share of the profits is calculated in such a manner so as to be enough to pay the periodic distribution amounts to the Sukuk holders.

The losses, on the other hand, are shared strictly in proportion to the respective contributions of the trustee and the originator to the Musharakah.

The trustee and the originator also enter into a purchase undertaking pursuant to which the trustee is granted the right to require the originator to purchase the Musharakah asset at an agreed exercise price on the maturity of the Sukuk or upon the occurrence of an event of default; thereby dissolving the Musharakah. The exercise price is equal to the Sukuk holders’ subscription amount plus any accrued but unpaid periodic distribution amounts.

In some cases, the originator is granted a call option by the trustee under a sale undertaking pursuant to which the originator can require the trustee to sell the Musharakah asset to the originator prior to the maturity  of  the  Sukuk.  The  sale  price  in  such  cases  is  equal  to  the  Sukuk  holders’  amount  of contribution to the Musharakah plus any accrued but unpaid periodic distribution amounts.

Under a management agreement, the trustee appoints the originator as the managing agent to manage the joint venture according to an agreed business plan. In consideration for its services, the originator is paid a nominal management fee.

B. Shirkat-ul-Milk (Partnership by joint ownership)

Under this structure, Musharakah is created by the joint ownership of the originator and the trustee in a particular asset. This joint ownership can be created in two ways, either by both the originator and the trustee making cash contributions to the Musharakah for jointly acquiring an asset, or by the originator selling its ownership interest in an asset to the trustee.

There are three essential ingredients of this structure. The first is that both the originator and the trustee are the joint owners of the relevant Musharakah asset. Secondly, the originator (in the capacity of a lessee) utilizes the share of the trustee (in the capacity of a lessor) in the Musharakah asset. Lastly, the originator buys back the share of the trustee in the Musharakah asset.

To begin with, the SPV issues Sukuk into the capital markets. The Sukuk holders subscribe to the Sukuk by contributing cash to the SPV in return for Sukuk certificates. The Sukuk certificates represent the proportionate ownership of the Sukuk holders in the underlying Musharakah asset.

The SPV declares trust over the Sukuk issuance proceeds and acts as a trustee for and on behalf of the
Sukuk holders.

The trustee and the originator then enter into a Musharakah agreement pursuant to which they jointly acquire the Musharakah asset or the trustee acquires the ownership interest of the originator in the Musharakah asset (as the case may be). Following such acquisition, the originator and the trustee become co-owners of the Musharakah asset.

Under a rental agreement, the originator (in the capacity of a lessee) uses the trustee’s share in the Musharakah asset against periodic rental payments. Such rental payments are then passed on by the trustee to the Sukuk holders as periodic distribution amounts.

The originator, pursuant to a purchase undertaking, purchases the units or the ownership interest of the trustee in the Musharakah asset on specified dates. Such purchase can be either during the tenor of the Sukuk or at maturity.

Where the Sukuk is structured on a diminishing Musharakah basis, the units are purchased during the term of the Sukuk. With each such purchase, the ownership interest of the trustee in the Musharakah asset decreases with corresponding increase in the originator’s ownership interest.

The originator and the trustee also enter into a management agreement under which the trustee appoints the originator as its agent to manage the Musharakah asset and to carry out the services pertaining to the major maintenance, takaful and payment of ownership-related taxes and expenses in
respect of the Musharakah asset.

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Wednesday, September 7, 2016

Commercial Name Reservations

The Ministry of Commerce and Industry (“MOCI”) has recently issued a Ministerial Decision No. 124 of 2016 on issuing the regulation regulating to Commercial Names (“MD 124/16”).

In order for an investor (i.e., a company or individual) to set up a new company in Oman, the investor shall first identify and seek approval on the proposed name of the new company. Previously, whilst the MOCI permitted investors to include the foreign investor’s name, it has generally prevented the investors from including the word “Oman” in the new company name, unless the minimum capital invested in the company was RO 500,000 or more.   However, under the new MD 124/16 only joint stock companies have the right to include the word “Oman” in the commercial name.  This means that limited liability companies would not be able to include the word “Oman” in the commercial name, regardless of whether the limited liability company has a capital investment of RO 500,000.

The  MOCI  has  recently  taken  the  initiative  in  implementing  rules  and  regulations  relating  to company’s name reservation.  MD 124/16 cancels all provisions or rules that contradict the regulations. Article 4 of MD 124/16 provides that the investor is not permitted to reserve or register the company name unless the name has a meaning or expression in Arabic, and must not include a term or a word that cannot be translated into Arabic.  Such rule however does not apply to foreign branches that are registered in Oman or Omani companies that have joint foreign ownership or foreign companies that have full ownership.

Further, it is not permitted for any branch of a company to hold an independent commercial name different to that of the name of the company.  Any trademark of the establishment or its branches may be registered as per the Intellectual Property Law.

MD 124/16 provides that any names that fall under the following categories are not permitted to be registered:


  • plural of a tribe name, which includes the two letters (AL);
  • a name that is identical to a commercial name of an establishment which has a local and an international reputation;
  • a name which may indicate or include a religious, political, military meaning or content;
  • a demonstrative pronoun, an honorary sign or a special character in any of the regional, Arab or international organizations or one of its institutions;
  • a name that resembles a name of an authority or organisation, a social institution, local charities or international institutions;
  • a name that resembles a registered trademark or its name, or contains one of its components;
  • a  name  that  carries  a  synonymous  meaning  to  the  commercial  name  of  an  establishment  or pluralizes or singularizes the name of a registered establishment;
  • a name that carries the word “Oman” or “Omani” or one of its derivatives or implications, except for the joint stock companies; and
  • a name that indicates an incorrect geographical division of the Sultanate.


Article 8 of MD 124/16 grants the MOCI the power to cancel, or request an applicant to change or amend  the  commercial  name  of  the  establishment  if  it  does  not  comply  with  these  rules  and regulations.   The applicant will bear its costs and expenses associated in amending or changing the name.

An applicant may appeal the MOCI’s decision to cancel the registration or its request to amend the name by submitting a written request to the undersecretary of the MOCI within sixty (60) days from the date of notification of its decision.  The MOCI shall decide on the appeal within thirty (30) days from the date of submission. If no decision is made within thirty (30) days, the decision shall be deemed to have been rejected.

Therefore, in light of the new MD 124/16, it is important for an investor to understand the rules relating to name reservation.  The investor must ensure that they comply with MD 124/16 prior to forming a company in Oman, as it will clearly mitigate any additional expenses (and time) that may be incurred by the investor if it is required to amend or change its proposed name.

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Wednesday, August 31, 2016

The Competition Protection and Monopoly Prevention Law

Few people are aware of the Competition Protection and Monopoly Prevention Law, RD 67 of 2014 (“CPMPL”).   Yet its scope of operation is very broad, and the consequences of being in breach are severe.  It is particularly important that any chairman, CEO, director or authorised senior manager of any major company be aware of the CPMPL and its potential consequences.

The CPMCL applies to all activities of production, trade, services, intellectual property rights and other economic activities that may have a damaging effect on competition.

What is unlawful?

The CPMCL sets out a new merger control regime and prohibits restrictive agreements and abuse of market dominance. Private sector businesses with a position of dominance in the market are prohibited from engaging in practices that would undermine, lessen or prevent competition.

The new law does not apply to wholly owned government entities.   However, it otherwise has significant implications for private sector businesses that have a dominant market share. In broad terms, any of the following behaviour is likely to be prohibited:


  • entering into an agreement to create a monopoly in the importation, production, distribution, sale or purchase of any commodity (Art 8);
  • engaging in monopolistic behaviour (Art 8);
  • entering into an agreement concluded with the intent to prevent, limit or weaken competition (Art 9); and
  • any act to reduce or limit competition by a person or company that is in a “dominant position” (Art10).


Each of these activities is separately defined as a criminal offence, although there is considerable potential overlap between them.   For the purposes of the CPMPL, a person or company is in a “dominant position” if it has control, or has an influence over, the relevant market, including the acquisition of the market volume by more than 35%.

Articles 9 and 10 of the CPMPL give a series of examples of what may constitute limiting, weakening competition or reducing competition.  The examples are very broad, and include things such as:

  • predatory pricing;
  • refusing to deal with specific people to prevent market entry;
  • creating artificial shortages by reducing quantities;
  • suddenly increasing the quantities of products available;
  • fixing prices or conditions of resale;
  • colluding in tenders;
  • making it a condition that a purchaser also purchase another commodity or service; and
  • forcing a manufacturer to not deal with a competitor.


The effect is that the CPMPL could have an operation in relation to a whole range of businesses, from selling basic goods, providing transport, providing labour, construction, pharmaceuticals, quoting for services or even consultancy services.

Criminal Penalties

Penalties for breach of Articles 8, 9 or 10 include:


  • imprisonment for between 3 months and 3 years;
  • a fine equivalent to the profits on the sales of the relevant products;  and
  • fines of between 5% and 10% of total annual sales.


Where a corporation is involved, the Chairman, members of the Board of Directors, the Chief Executive Officer and authorized managers can all be potentially penalized if they are aware of the breach.

In any of these violations a court may also require the company or individual to rectify the violation, dispose of shares or assets or make the payment of OMR 100 – 1,000 until the violation has been stopped.

In the case of a second offence, the above penalties may be doubled, and the business may be closed for up to 30 days.  The CPMPL includes other penalties relating to procedural issues as well.

Authorisation

If a person or corporation wishes to carry out any step or enter into any agreement that may potentially be in breach of the CPMPL, there is a procedure available under the CPMPL to apply to the Public Authority for Consumer Protection for permission to do so under Article 11.  The Authority must issue a decision within 90 days.  The Authority can not permit any procedure that would result in an acquisition of more than 50% of a relevant market.

Conclusion

The primary rationale for laws of this type is to protect the consumer from unfair market practices that exist in many countries.  For example, Federal Law 4 of 2012 (also known as the “UAE Competition Law”) performs a similar function in the United Arab Emirates.  The CPMPL is broader than the laws in some countries, as it protects other businesses, not just consumers. We are not aware of any prosecutions so far, under the CPMPL, but we are aware of one case where an Omani Court held that an agreement was void as it breached the CPMPL.

The most important point to note is that if your business is proposing to enter into any agreement or carry out any act which may lessen competition, you should seek legal advice and consider applying to the Public Authority for Consumer Protection for permission.



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Monday, August 22, 2016

Health and Safety in Oman

What is the main legislation governing health and safety in Oman?
Generally, the laws concerning health and safety in Oman are contained in:
(i) Royal Decree 35/2003 promulgating the Oman Labour Law; and

(ii) Ministerial Decision 286/2008 – the Regulation of Occupational Safety and Health for the Establishments.
Are there any material differences between health and safety legislation in Oman and other major jurisdictions?
There are no material differences. Oman’s health and safety regime is similar to other jurisdictions.
What are the main bodies responsible for health and safety monitoring, regulation and prosecution in Oman?
What are their key powers?
The main body responsible for health and safety monitoring in Oman is the Ministry of Manpower, and its various departments including the Department of Vocational Safety and Health (the “Department”).
The Ministry of Manpower has a number of powers with regard to health and safety, including the power to:
  • investigate any breach;
  • impose penalties on entities in breach of the Law;
  • take necessary measures for the closure of the place of work, fully or partially, or the suspension of the use of equipment until it is satisfied that the causes of the risk have disappeared; and
  • refer violations to the Royal Oman Police.
Following an accident or a fatality - what reporting is required? What investigations may follow?
The owner of an enterprise must notify the Directorate General of Labour Welfare at the Department in writing within 24 hours of any major incident taking place and of every industrial accident or vocational disease that has been established. The owner must also notify the Public Authority for Social Insurance of any industrial accident involving workers with relevant insurance cover.
What are the core health and safety records that companies must keep?
The core health and safety records that a company is required to keep will depend upon the nature of the work it is undertaking, for example:
(i) if a company uses scaffolding for the purpose of building, the scaffolding must be installed by a competent person who shall test them at least once every week and the test must be recorded in a special register maintained for such purpose;
(ii) regarding the use of boilers and steam and air stores, the boilers must be tested every 12 months and the steam and air stores every 24 months by a competent technician and a special register shall be maintained to record the date of the test and the technician’s name and remarks;
(iii) regarding the use of chemical substances, a special register shall be opened for hazardous chemical substances to immediately record information related to the safety of their circulation and use and the movement of such substances;
(iv) where relevant, equipment for measuring chemical agents in the work environment shall be provided according to the nature of the business conducted; necessary periodical measurements must be taken, recorded in a special register and compared periodically to ascertain that they are within the secure limits fixed by the competent authorities; and
(v) fire devices must also be tested at least once every six months by a specialist and recorded in a special register.
What are the obligations of an employer to report health and safety breaches?
The owner of an enterprise employing 50 or more workers must provide the Department with periodical statistics on major incidents, industrial accidents and vocational diseases that have occurred. The statistics must be submitted in the months of January and July of each year.
Additionally, the owner of an enterprise must notify the Department or the section in writing within 24 hours of every major incident taking place in the enterprise, every industrial accident or vocational disease that has been established. He must notify the Public Authority for Social Insurance of an industrial accident involving workers carrying insurance cover.
Are there any specific rules governing working time?
Workers must not work on construction sites or open uncovered areas of high temperatures between the hours of 12.30 pm to 3.30 pm throughout the months of June, July and August, subject to certain exemptions to those establishments providing essential public services.
What are the potential penalties an employer may face for breach?
With regard to any breach or alleged breach of any law regarding health and safety, inspectors have authority to take the following measures:
(i) issue the necessary orders for rectification within a specified period of time; and
(ii) immediately suspend work fully or partly, or require discontinuation of the operation of one or more machines in cases of an imminent danger, including seeking the assistance of the Royal Oman Police, if required.
The law also provides for penalties for violation of industrial security. In the event of a violation relating to industrial security, without prejudice to a harsher punishment stipulated in Oman Labour Law or any other law, an employer or his representative shall be penalized by a minimum fine of OMR 100 and a maximum of OMR 500 and/or imprisonment for a period not exceeding one month. The penalty can be doubled for repeat offences.
Are there any specific rules regarding health and safety in different work areas?
Further to the above, there are specific rules regarding health and safety in relation to the following:
  • working in extreme temperatures;
  • working at heights;
  • working in confined spaces;
  • working with dangerous substances, radiation and chemicals;
  • manual handling of heavy goods;
  • noise, vibration and lighting;
  • equipment and machinery; and
  • transportation of dangerous goods and substances.

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Monday, August 15, 2016

The MOCI Invest Easy System


Seen as integral in promoting investments and improving the future of the economy, the Invest Easy service is the culmination of a decade-long plan to create an innovative, open, and reliable business environment.
The early 2000s saw a rethink, by the MOCI, of the commercial registration process. The passing of Executive Regulation 121/86 on the Commercial Register Law sparked the first wave of integration in a One-Stop Shop system (the “OSS”). The OSS allows those requiring access to various governmental departments to come to one place for the majority of their dealings. Moreover, 2003 saw an initiative to incorporate technology into this process and a system streamlining certain business aspects was rolled out in 2006. Despite being limited in accessibility and in substance, it resulted in an increase in the number of commercial registrations. Following further regulation and planning, the beginning of 2014 marked the introduction of the Invest Easy portal, allowing a number of essential business tasks to be completed online 24/7.
In order to improve and simplify the user experience, the MOCI keeps a constant dialogue with entrepreneurs, law firms, and companies and, term by term, the user has seen an expansion in the capabilities of the system as well as the streamlining of the administrative processes. Recent improvements are a result of this dialogue and have included the possibility for law firms and other registered users to pay for transactions online without a point of sale system, and to access commercial registration information and certificates for free.
Fundamentally, the online portal allows investors to quickly and securely register a new business in the Commercial Register. Upon establishment, businesses can complete a number of tasks including but not limited to: updating company information (name, share capital, shareholders, etc.), accessing information about other commercial entities, submitting license applications and including in their registrations over 210 different unlicensed commercial activities. Moreover, the portal also provides clear and simplified information on numerous procedures, and enables users to update all their new data online. New additions relating to the registration and management of commercial agencies are expected by the end of July 2016.
Following the general intention to simplify the management of businesses in Oman, the MOCI has taken the decision to consolidate the Certificate of Incorporation and the Commercial Registration Information of all registered companies in a new document, the Commercial Registration Certificate, and has abolished, effective 1 June 2016, the authorised signatories form, i.e., the form setting out the specimen signatures of the persons authorised to act on behalf of the company. The details of the authorised signatories are now set out in the Commercial Registration Certificate, which now is a Digitally Signed Form, signed and certified using a Digital Signature Certificate as per the Electronic Transactions Law (Royal Decree 69/2008).
Currently, the portal is working in cooperation with Ministry of Manpower, Royal Oman Police, Ministry of Environment and Climate Affairs, Muscat Municipality, Oman Chamber of Commerce and Industry and many other government entities.
Nortal, the software architects of the portal, have noted that in the first six months of the new commercial registration service implemented in Oman, of the over twelve thousand new companies which were registered, 1,000 were registered using the portal, with that proportion increasing month by month. In September of 2015, 16.7% of the total company registrations came through Invest Easy.
If diversification is to come into the economy, systems such as Invest Easy are instrumental in attracting new investment into Oman. Despite its long teething problems, the system is a drastic improvement from having to attend various ministerial departments costing time and money to investors and firms.

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Monday, August 8, 2016

The Establishment of US Companies and Branches Under the Oman/United States Free Trade Agreement


The Free Trade Agreement (the “FTA”) between the Sultanate of Oman and the United States (the “US”) and entered into force on 1 January 2009 governs, inter alia, the establishment of legal entities in Oman by entities incorporated in the United States and vice versa.
In a previous article, we discussed the early stages of implementation of the FTA. The first meeting of the FTA Joint Committee, chaired jointly by the MOCI and the Office of US Trade Representative, took place in February 2010. Since then, officials of the two governments have been meeting on a regular basis within that framework to discuss various issues arising pursuant to the implementation of the FTA.
Below is an outline of three key issues that have been addressed concerning the establishment of companies and branches of companies in Oman.
Establishment
Under the FTA, only 100% US-owned entities are permitted to establish a company in Oman without the need for an Omani partner. However, the strict interpretation of this rule affected large US corporations, including the ones listed on the stock market, which, having a wide shareholder base that includes some non-US citizens, would not qualify. Accordingly, the MOCI has taken the view that, provided that the company which is seeking registration in Oman is a qualitatively “American” entity, there should be no problems registering it under the US FTA in Oman. The MOCI reviews whether a company should be considered as qualitatively “American” on case-by-case basis, looking at a variety of factors such as the activities and history of the company. In some cases, the MOCI will not delve into the nationalities of its shareholders.
The minimum capital requirement for a 100% US-owned entity to become established in Oman is OMR 20,000 as opposed to other foreign-owned companies, where the minimum share capital requirement is OMR 150,000. The registration process for a US-owned entity in Oman is straightforward and has been streamlined.
Equal treatment
One of the benefits for US companies under the FTA rule is that US companies shall be granted the same treatment in Oman as a wholly owned Omani company. However, there is an important exception to this rule. That is, an established US company is not permitted to act as the “local partner” of another foreign company wishing to set up a presence in Oman, i.e., a US company cannot be used to satisfy the minimum 30% local ownership requirement for a foreign company looking to establish in Oman. This requirement can only be satisfied by an Omani national or a 100% Omani-owned company.
Registration of a branch
As a general rule, a foreign company can only establish a branch office in Oman for the purpose of performing a contract with the Omani Government (including contracts with companies partly owned by the Omani Government).
However, a US company may register a branch office in Oman pursuant to Ministerial Decision 102/2008 and in accordance with the FTA prior to obtaining or entering into any contract with the Omani Government (including contracts with companies partly owned by the Omani government).
Benefits for US FTA companies operating in Oman
Further to the above, US companies established in Oman under the FTA have a number of other significant benefits for example, benefits regarding tariffs for importing and exporting, and in the way that US companies established in Oman are granted non-discriminatory rights to bid on contracts to supply Omani Government entities and Omani Government purchasers.

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Monday, August 1, 2016

Knowledge Oasis Muscat


Introduction
Knowledge Oasis Muscat (“KOM”) is a 20,000-square-metre technology park situated near Muscat International Airport, whose objective is to support technology-oriented businesses. In addition to the advantages available in other industrial estates, it also provides technical support and services for businesses established at KOM.
KOM is managed by the Public Establishment for Industrial Estates (the “PEIE”).
Incentives
KOM offers various advantages to foreign investors:
  1. KOM companies may have 100% foreign ownership.
  2.  Another major advantage is that KOM companies, even those with 100% foreign ownership, are only required to have a minimum share capital of OMR 20,000.
  3. The Omanization target in KOM currently starts at 10% for the first year, with 5% incremental annual increases up to a maximum of 25% within five years. (This compares with a figure of 35% outside KOM.)
  4. KOM companies may be registered with the Tender Board regardless of their share capital and classification and are not required to fulfil the minimum capital requirements for such registration.
  5. No personal income tax is payable, and there are no foreign exchange controls.
  6. The cluster of information technology-related companies in KOM is in itself an incentive for other technology-oriented companies to establish their presence in the estate.

Tenant selection procedure
Tenants must meet at least one of the following four criteria:
  1. They must operate within a technology or knowledge-based enterprise sector, and must commit to the research, development or commercial exploitation of information and communications technologies (“ICT”) in any genuine technology field.
  2. They must specialize in the design or development of products or processes in areas such as telecoms, IT, the internet, new media, etc.
  3. The workforce must comprise a high proportion of “knowledge workers”. A minimum of 25% of the workforce must be qualified technologists, scientists or engineers.
  4. Finally, there is a further category of secondary tenants whose business is to provide services to primary tenants. Permissible activities include financial services and other convenience and professional services.

Application process
  1. The application process involves the submission of a duly completed application form with supporting documents followed by an invitation for an interview/presentation before the selection committee of KOM.
  2. If the application is approved, an offer letter is sent detailing the terms and conditions.
  3. The main condition is the payment of advance rent for one year (minimum OMR 5, 400 for a space of 50 square metres).
  4. Once the rent has been paid, the company can then be registered as a KOM company with the Ministry of Commerce & Industry (the “MOCI”).

A memorandum of understanding (“MOU”) will then be entered into between KOM and the company leading to the commencement of the company’s operation.

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Wednesday, July 20, 2016

Airline Carrier Liability for Flight Delays

In recent years, there have been numerous commercial claims brought by airline passengers who seek compensation  for  alleged  damages  arising  from  flight  delays.     This  article  will  discuss  the circumstances under which a passenger may be entitled to compensation for a flight delay, in scenarios involving both domestic and international travel.

It is important to note that Omani domestic law will apply to all domestic journeys.  Conversely, and as discussed below, the provisions of the Convention for the Unification of Certain Rules for International Carriage by Air (the “Montreal Convention”) will apply to all international journeys.

Remedies for flight delays for domestic flights

Passengers who pursue claims for flight delays for domestic flights frequently cite Articles 183 and 204 of the Sultani Decree 55 1990 (the “Law of Commerce”) when attempting to establish an airlines’ purported legal liability:

  1. Article 183 requires airline carriers “to carry the passenger…to the place of arrival at the time agreed, or as stated in the schedules of carriage.”
  2. Article 204 states that airline carriers are liable for any “detriment resulting from delay in the arrival of the passenger.”

However, whilst Articles 183 and 204 establish certain travel obligations upon airline carriers, Article
205 of the Law of Commerce sets out the mitigating factors which will absolve an airline carrier from any legal liability for purported damages arising from a passenger delay.

Article 205 of the Law of Commerce provides that an airline will be “absolved from liability” if it can prove that it had taken “all measures necessary to avert the detriment, or that it was impossible” for it to have prevented the delay.

Furthermore, the amount of compensation to which a passenger may be entitled will depend on whether the airline is considered to be responsible for having caused the delay by virtue of some “unreasonable” act.  Therefore, it is of critical importance to understand what occurrences, or types of causes for delays, may be attributed to the airlines.

Delays arising from and caused by extenuating circumstances, such as inclement weather or air traffic, cannot be reasonably attributed to the carrier.  Therefore, in these scenarios, because it is “impossible” for the airline to have mitigated the causes for the delay, the airline would not ordinarily be held legally responsible in these circumstances.

Remedies for flight delays for international flights, as set out by the Montreal Convention

The Montreal Convention is a multinational treaty, which establishes certain international norms and guidelines regarding international travel.  The Montreal Convention has been incorporated into Omani law by way of Article 3 of the Civil Aviation Law (promulgated by Sultani Decree 93 2004).

As set out in Article 1.1 of the Montreal Convention, the Montreal Convention will apply to “all international carriage of persons.”  Furthermore, as set out in Article 1.2 of the Montreal Convention:

“international carriage means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a break in the carriage…are situated within the territories of two States Parties.”

Therefore, the Montreal Convention will apply to every individual flight of a passenger’s voyage whenever the original departure and the final destination are two different States.  For example, if a passenger travels from Salalah to London, with a stopover in Muscat, as part of a continuous voyage, the Montreal Convention will likewise apply to the Salalah-Muscat flight.

Article 19 of the Montreal Convention provides that airline carriers may be liable for “damages” occasioned by a flight delay only if the carrier has failed to take all measures that were “reasonably required  to  avoid  the damage  or  that  it was impossible  for  it,  or  them,  to  take  such  measures.” Therefore, as is the case under Omani domestic law, airline carriers will only be liable for damages occasioned if an “unreasonable” act by the carrier caused the delay.

Further, under international law, it is likewise understood that an airline cannot be considered to have acted unreasonably if the cause of a delay results from an overriding event, such as inclement weather, airport traffic, security threats, or even a mechanical delay.  Therefore, in such cases, the airline cannot be held liable for any resulting excess “damages” incurred.




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Wednesday, July 13, 2016

Ramadan Timing and Calculation of Overtime During Ramadan

The Ministry of Manpower has formulated certain regulations to be followed during the holy month of Ramadan.  The Omani Labour Law, promulgated by Sultani Decree 35 2003 and its amendments, specifies in Article 68 that the working hours for Muslims during the Holy Month of Ramadan shall be six hours per day, or a maximum of thirty hours per week.

Article 70 of the Omani Labour Law further provides that an employee may be required to work for more hours than prescribed by Article 68, if the nature of work necessitates working more hours. However, under no circumstances may the total working hours exceed the prescribed working hours. Further, as part of the employee’s entitlement, the employer must grant the employee not less than two consecutive days of rest per week after five continuous working days.

When it comes to overtime work undertaken by workers, the employer is required to pay the worker an extra payment equal to his/her basic salary against the extra work hours plus 25% at least for daytime  working  hours,  and  50%  for  nighttime  working  hours.    Additionally,  if  such  work  is performed during the weekly day of rest or during the official holidays, the employee shall, unless compensated with another day, be entitled to double of his/her gross salary for such a day.  The Ministry  of  Manpower  has,  by  way  of  Ministerial  Decision  1  1976,  provided  that  such overtime payment provisions will not apply to senior private sector employees, such as professionals including “doctors,  engineers  and  those  of  similar  standard”  or  those  persons  who  undertake  dual  roles involving “administrative and supervisory work.”

Notwithstanding the above, the Omani Labour Law also provides that those employers engaged in works carried out at ports and airports or on board ships, vessels, or aircraft may agree to pay employees an allowance in lieu of overtime, subject to the approval of the Ministry of Manpower.  It may be possible for companies in this instance to seek the approval of the Ministry of Manpower to provide an allowance to the employees in lieu of overtime.

During the month of Ramadan, the employer must ensure, with regard to employees’ extra working hours, that any arrangement that the employer and the employee agree upon can be adopted, as long as it does not violate the provisions of the Omani Labour Law.  A Muslim worker must therefore work for a maximum of six hours per day or thirty hours per week, irrespective of whether the work is undertaken during the night or during the day.  Though the maximum working hours for Muslim employees during Ramadan is six hours per day, Article 70 of the Oman Labour Law grants an exemption and permits the employee and employer to agree in advance any additional working hours and the consideration in lieu for the same.  Accordingly, any additional hours that a Muslim employee will be required to work will be construed as overtime work.  The employer will therefore be legally required to compensate the extra hours worked by the Muslim employees during Ramadan in accordance with Article 73 of the Oman Labour Law.

Further, it is also recommended that the employer communicates the Ramadan work timings to the Muslim workers and that the overtime calculation system is explained to them in order to avoid misunderstandings and potential disputes.



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