Thursday, January 15, 2009

Dispute Resolution: What is the best way to resolve a dispute in Oman?

Companies entering into agreements in Oman may wonder what the best mechanism is for resolving disputes. Companies have two options for dispute resolution: they may either resolve the matter in courts or provide for arbitration in their agreement. There are advantages and disadvantages for both options, and the needs and priorities of each company will dictate which option is most attractive.

In some cases, local companies may favor Omani courts as the dispute resolution forum because the Omani company may be more familiar with Omani procedural rules and practice. Similarly, foreign companies doing business in Oman may prefer arbitration because they are not familiar with Omani procedural rules and practice.

If the parties elect to resolve disputes through arbitration in their agreement, this is sufficient to remove the matter from the Omani courts. In the arbitration clause of the agreement, the parties must specify the following:

  1. Location of the arbitration: This can be any location agreed to between the parties, and is usually a matter of convenience. Considerations should include the pro-arbitration attitude of the courts of the place of arbitration since they will have jurisdiction over a possible request for annulment of the award, and the ability of the parties to reach the location and the availability of arbitration facilities.
  2. Language of the arbitration: The parties must be specify the official language of the arbitration. The arbitration will be conducted in this language and the decision of the arbitrators will be issued in this language.
  3. Applicable law: The parties must specify the substantive law that the arbitrator applies in issuing the decision. The applicable law should be well developed in relation to the subject matter of the agreement.
  4. Arbitration rules: The parties must specify the applicable rules that govern the procedures of the arbitration. This should not be confused with the substantive law that will be applied to resolve the dispute. Example rules include the UNCITRAL Model Law on International Commercial Arbitration in the case of ad hoc arbitration, i.e., without the auspices of an institution; and in the case of institutional arbitration, i.e., within the auspices of an institution, the Rules of Conciliation and Arbitration of the International Chamber of Commerce and the DIFC Rules of Arbitration.
  5. Number of Arbitrators: Usually it is either one arbitrator or a panel of three arbitrators. Electing for a single arbitrator can reduce costs.
  6. Finality: Language should be included in the arbitration clause stating that the decision of the arbitrator(s) shall be final and binding upon the parties. This ensures that neither party may try to circumvent or avoid the decision of the arbitrator. It is advisable to use the model clauses proposed by the institution corresponding to the chosen set of arbitration rules, e.g. the ICC model clause for an ICC arbitration, and to seek specialized professional advice for the drafting of arbitration clauses.