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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Monday, April 4, 2016

Legal Updates

Capital Market Authority Decision No. 2016/2 – Amending the Regulation of Capital Market Authority Law

This decision was issued on 25 February 2016. It amends the Regulation of the Capital Market Authority Law by formalising the requirement for a listed company to disclose the initial quarterly unaudited financial results in addition to the annual, as opposed to just the initial annual unaudited financial results as set out in the original legislation. It also reduces the period of time allowed to disclose the results from thirty days to fifteen days.

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Monday, March 28, 2016

Enforceability of Omani Court Judgments in Foreign Jurisdictions

Pursuant to the Omani Civil Procedure Law (promulgated by Royal Decree 29/2002 as amended), it is stated that the Omani Courts will enforce a final and binding non-appealable foreign court judgment only if there is a bilateral agreement between Oman and a foreign nation whereby the countries have agreed to reciprocally enforce each other’s judgments. Stated differently, the Omani Courts will recognize and enforce a final, non-appealable foreign court judgment only if the courts of that very same country recognize and enforce final, non-appealable Omani Court judgments.

The members of the Gulf Cooperation Council (“GCC”) signed a bilateral treaty in 1996, titled the “Treaty for the Enforcement of Judgments, Judicial Delegation and Court Summons,” wherein the GCC member states agreed to reciprocally enforce all GCC-rendered final and binding civil and commercial court judgments without a review of the merits. Accordingly, any final, non-appealable civil and commercial court judgment rendered in any country within the GCC is per se enforceable (without review of the merits) within any other jurisdiction in the GCC.

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Monday, March 21, 2016

Sale and Purchase of Founders' Shares in Oman Independent Power and/or Water Project - Matters for the Selling Founder and the Purchaser to be Aware of

Introduction

Founder shareholders of an Oman independent power and water project company often seek to divest themselves of a portion of their project company shares after the project company’s successful conversion to an SAOG in accordance with the Founders’ contractual obligations with respect to the project, and the expiry of any period in which the Founders’ right to dispose of their shares is contractually restricted.

This type of share sale transaction, being the sale of Founders’ shares in an electricity and water sector SAOG, may be subject to particular statutory approvals (e.g., under the Sector Law), and specific approvals and conditions precedent under the project and finance agreements, to which an ordinary SAOG share sale would not be subject.

Identifying Requisite Approvals and Conditions Precedent at the Outset

At the outset of the proposed share sale, the selling founder should comprehensively identify the legal and regulatory approvals required in relation to the transaction under the Sector Law, the project company’s licence and the Capital Market Law. In addition the project and finance agreements should be reviewed to identify any approvals required from either the project agreement counterparties or the project lenders, and the conditions to be satisfied to obtain such approvals. All such approvals should be identified and sought at the earliest possibility to ensure that the share sale can proceed in accordance with the law and will not be delayed. Notification to the potential buyer or bidders information memorandum and instructions to bidders in the event of a competitive bidding process) as to the applicable regulatory regime and required approvals before the share sale can be effected is also advisable.

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Monday, March 14, 2016

Registration Fee for Lease Contracts and Sale of Real Estate Units

Under the Tenancy Law (Royal Decree 6/1998), a tenant is entitled to utilize a leasehold property in accordance with the terms of the lease agreement. Corporate bodies and individuals may lease property from the government or individual landlords for specific purposes. Such lease can only be transferred if the prior written consent of the landlord has been obtained.

It is mandatory for the landlord to register the lease agreement, unless the landlord and tenant agree that the registration will be carried out by the tenant. In order to avail the rights and privileges provided to the landlord and tenant, it is necessary to register the lease agreement as required under the Tenancy Law. In the event the landlord fails to register the lease agreement within a period of one month from the date of signing the lease agreement, the tenant may do so within the specified period.

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