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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