Monday, December 11, 2017

Counterparts Clauses and Virtual Signing

The possibility of all parties to a contract being available in the same place at the same time for signing and execution of an agreement is increasingly limited, especially where transactions involve multiple parties. Accordingly, the practice of “virtual signing” has developed in recent years. In light of this, a joint working party of the Law Society Company Law Committee and the Company Law and Financial Law Committees of the City of London Law Society has published a guidance note (the “Guidance”) to overcome some of the practical hurdles of virtual signing.

Virtual signings 

Practically, it may be both: (a) problematic for everyone who is required to sign an agreement to be physically present for signing; and (b) difficult to post an agreement due to time constraints. Accordingly, the practice of “virtual signings” has developed whereby an agreement can be executed without the parties meeting and in which signature pages to a relevant agreement are executed in advance of the final agreement and subsequently transferred to the final form. As English case law has shown, in the case of R (on the Application of Mercury Tax Group Limited and another) v HMRC [2008] EWHC 2721 (“Mercury”), a signature on an incomplete draft deed or contract, as the case may be, cannot be transferred to execute the final form. Following the decision in Mercury, the Guidance provides various options for effectively executing English law-governed agreements at virtual signings. Such options are non-exhaustive, however, and each transaction should be considered according to its own facts. By way of example, some of the options included in the Guidance provide as follows:

1. Where a document is signed in counterparts by each party, the following steps may be taken:

  • parties should make arrangements for signing ahead of finalising the document; 
  • when the documents are finalised, the final execution copies of the documents are emailed (as pdf or Word attachments) to all absent parties; 
  • each absent signatory prints and signs the signature page only; 
  • each absent party then returns a single email attaching (a) the finalised document; and (b) the signed signature page or, in the absence of attaching the final document, the absent party should give authority to attach the signed signature page to the final approved version of the document; and 
  • a final version of the document, together with copies of the executed signature pages, may be circulated to the parties to evidence the execution of the final document. The printed execution version of the document with the attached signed signature pages will constitute an original signed document. 

2. Where the signature pages of a document are pre-signed before the document is finalised, the following steps may be taken:

  • parties should make arrangements for signing ahead of finalising the document; 
  • before signing, the signature pages relating to the document still being negotiated should be circulated to each absent party; 
  • the absent signatories sign the signature page which should be returned and subsequently held until authority is given for it to be attached to the document; 
  • the finalised document should be emailed to each absent party and confirmation should be sought from the party (or its advisors) that the final version is agreed; the pre-signed signature page may be attached to the final document once authorisation has been given by the absent party (or its advisors) and the document may be released and dated. 

The printed final agreed document with the attached pre-signed signature pages will constitute the original signed document.

Counterparts clause 

As referred in option 1 above, it is possible to sign a contract in counterparts. An English law-governed agreement may not be invalidated by the fact that it does not contain a counterparts clause, although a contract that does contain one clarifies that separate copies of an agreement may be executed by different parties and each copy will be considered to be an original. It is considered prudent to include a counterparts clause if there is a possibility that the agreement will be executed by counterparts. Including such a clause will limit a party claiming that an agreement is not binding because there is no one copy of the agreement that is signed by all parties.

Omani legislation 

Omani legislation provides for the legal formalities of the signing and execution of contracts in Oman. In particular, Sultani Decree 48/76 on the Signing Foreign and Domestic Financial Deals in the Sultanate of Oman (as amended), for example, sets out which individuals may sign and execute an agreement concluded in the name of His Majesty the Sultan or on his behalf or in the name of the Government of the Sultanate. However, in the absence of any note from the relevant Omani authorities detailing options for the signing and execution of Omani law-governed contracts in counterparts, it may be worth consulting with the Guidelines.

Conclusion 

Executing an agreement in counterparts involves the various parties to the agreement signing separate (but matching) copies of the same document. Together, the various signed copies will form a single binding agreement, without the need for all the parties to sign the same copy of the agreement. Although not essential, it is usual practice to include a boilerplate clause specifically providing for an agreement to be executed in this way. Further, in order to avoid a similar situation as in the case of Mercury, where agreements are executed by “virtual” signing, it is useful to reflect upon the Guidelines.

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Monday, December 4, 2017

Does State Audit Law or the Law for Safeguarding State Property Apply to You?

The State Audit Law promulgated by Sultani Decree 111/2011 (the “State Audit Law”) is applicable to:

• all companies wholly owned by the Government of the Sultanate of Oman (the “Government”); and

• companies in which the Government holds more than 40% of the share capital.

Each such entity is deemed to be a “Supervised Company.” It should be noted that, pursuant to the law on safeguarding of public property and preventing of conflict of interest promulgated by Sultani Decree 112/2001 (the “Law for Safeguarding State Property”), all employees of companies in which the Government holds more than 40% of the share capital would be considered government officials.

What does being a Supervised Company mean? 

Any entity which falls within the meaning of a Supervised Company should carefully consider the provisions of the State Audit Law. A Supervised Company, for example, has certain obligations including, pursuant to Article 5 of the State Audit Law, to provide State Audit with all draft regulations and systems prepared by it in relation to the Supervised Company’s financial and accounting affairs, taxes and charges.

State Audit also has the right, by virtue of Article 9 of the State Audit Law, to conduct financial and administrative control in all areas including control over investments and all accounts of a Supervised Company. In exercise of this right, under Article 10 of the State Audit Law, State Audit may review without prior notice:

(i) the investments of the Supervised Company;

(ii) any financial irregularities of its employees; and

(iii) any documents or records of the Supervised Company.

A Supervised Company is further under an obligation under Article 21 of the State Audit Law to provide State Audit with the following:

(1) its balance sheets and financial statements;

(2) final accounts and any adjustments or amendments thereto; and

(3) board and auditor reports and management letters approving them.

It should be noted that a Supervised Company has certain reporting obligations including to inform State Audit within one week of any discovery of any financial or administrative irregularity or occurrence of an incident that results in financial loss to the State or any matter than may lead to such loss without prejudice to the other legal procedures that shall be taken.

A Supervised Company should further be aware of the penalties for non-compliance with the State Audit Law. By Article 32 of the State Audit Law, anyone restricting the State Audit from reviewing any of the accounts, papers, documents or other things that State Audit has a right to review or anyone concealing the information, data or documents or submitting incorrect ones shall be penalised by imprisonment for between six to 12 months and/or a fine of between OMR 1,000 and OMR 2,000.

What does being a government official mean? 

A government official has certain responsibilities to prevent misuse of public property (i.e., any property or moveable assets owned by a Supervised Company), as provided by Article 5 of the Law for Safeguarding State Property, and is under a duty to inform State Audit immediately of any violations related to such public property.

Specifically, government officials should be aware that they are prohibited from the following:

(i) using their positions of work to realise a benefit for themselves or others or using their influence to facilitate others obtaining any interest or preferential treatment – this is particularly important when considering the awarding of tenders or contracts;

(ii) using public properties for personal reasons or in ways not intended for such property;

(iii) combining their positions or work and any other work in the private sector which relates to their positions or work; and

(iv) having any share in any company, establishment or profit-generating business directly or indirectly related to their positions or work (this prohibition extends to such government official’s minor children).

Further, government officials should be aware that, pursuant to Articles 12 and 13 of the Law for Safeguarding State Property, if requested by State Audit, they shall be required to disclose to State Audit all moveable monies and properties owned by them and their spouses and minor children and the monetary source of such ownership; and if they become aware of any secrets by virtue of their positions, they undertake not to disclose such secrets, even after the end of the employment relationship with the Supervised Company.

Any failure by a government official to comply with the abovementioned provisions or any other article as may apply under the Law for Safeguarding State Property could result in a government official being imprisoned for up to three years as well as being sacked from his/her position and confiscation of any amounts received in violation of the Law for Safeguarding State Property.

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Monday, November 20, 2017

Decennial Liability for Contractors and Architects in Oman

Many of those familiar with the construction industry in the Middle East region will be familiar with the term “decennial liability.”  In particular, many will be familiar with a requirement that, in relation to works performed under a construction contract:

(a) a contractor and an architect remain legally liable for a period of 10 years after the completion of the works; and

(b) each of the contractor and the architect are required by contract to take out insurance covering the works for that 10-year period.

A number of countries in the Middle East have similar legal provisions in that regard.  Generally, neither a contractor nor an architect can contract out of the liability.  Depending on the circumstances, the liability does not extend to subcontractors, suppliers or subconsultants.  The insurance is readily available in the relevant jurisdictions in the Middle East. 

The liability is a form of strict liability.  There are some differences of opinion among the legal profession as to what extent (if any) a claimant needs to prove fault or causation against a contractor or architect, but it is clear that there is no obligation on a claimant to prove negligence, or a failure to achieve an industry standard, etc.  To put it another way, there is no requirement to demonstrate the contractor or architect was “negligent,” but there are some differing views as to what extent (if any) there is a need to show that some action or inaction by the contractor or architect caused or contributed to the loss and damage.

In most parts of the Middle East, where there is a law imposing decennial liability, it only applies where the relevant structure has collapsed or suffers a major structural defect.  The law in Oman is far more extensive.  Article 634 of Royal Decree 29/2013 (the “Civil Code”) reads:

(1)  Both the engineer and the contractor shall be jointly liable for a period of ten years for any total or partial collapse of the buildings or other fixed facilities constructed thereby, and for any defect which threatens the stability or safety of the building, unless the contract specifies a longer period.  The above shall apply unless the contracting parties intend that such installations should remain in place for a period of less than ten years.

(2)  The warranty set forth in the foregoing Article shall include any defects existing in the buildings and facilities, which endanger the safety and endurance of building.

(3)  The period of ten years shall commence as from the time of delivery of the work.

This Article is typical of what might be found in other jurisdictions in the Middle East, in that liability is limited to total or partial collapse, and defects affecting the stability or safety.  However, Article 22 of the Engineering Consultancy Law promulgated by Royal Decree 27/2016 (the “Engineering Consultancy Law”) provides:

The licensee [i.e., the architect/engineer] shall be jointly liable with the contractor for the faults and flaws that may occur in the project designed by or executed under the supervision of his office, even if such faults and flaws are attributed to the land on which the project is constructed or the owner had approved the flawed installations, for (10) ten years from the date of the handing over of such installations.

If the work of the office is limited to making the designs only without being charged with supervision, the office shall only be responsible for the defects that may be attributed to the design process.  Every agreement and condition meant to exempt the designer and/or the supervisor from this liability or to limit such liability shall be null and void.  Also, claims of responsibility on liability filed after the lapse of (3) three years from the date of discovering the fault or flow without instituting an action within the aforesaid period shall not be considered.

When read literally, the words suggest that decennial liability extends to any defect, not just defects leading to collapse or those affecting stability or safety.  This would suggest that the contractor and the engineer remain liable for ten years for even minor defects.  This wording is not new.  It replaced Article 16 of the old Engineering Consultancy Law, promulgated by Royal Decree 120/1994, which contained near-identical terms. 

We do not know of any reported case that has interpreted Article 22 of the Engineering Consultancy Law to include liability for even a minor defect.  We suspect the Omani courts would be likely to approach the matter from a commonsense perspective, to exclude normal wear and tear, and issues that should be addressed as part of the overall maintenance of a structure.  Also, the limitation period of three years commencing from the discovery of the defect does rule out many likely claims for minor defects, and most that may be visible at the time of completion of the works.  Nevertheless, the law as set out does in principle allow for claims for minor defects.

In summary, decennial liability is broader in Oman than elsewhere in the Middle East, and can cover defects that are not structural or safety-related.  It is important that, when drafting contracts, contractors and consultants consider how best to allocate risk and protect themselves from claims.  It is also critical that parties to construction contracts keep good records to protect themselves from such claims, including photographs of works, and any relevant warranties given by manufacturers and suppliers.


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Monday, November 13, 2017

Oman Announces First Anti-Injurious Trade Practices Investigation

The Gulf Cooperation Council (“GCC”) forms a common customs union and free trade area between its member states.  The member states share numerous common pieces of legislation relating to trade and customs, including the GCC Common Law on Anti-Dumping, Countervailing Measures and Safeguards (“GCC Common Law”).  In accordance with the provisions of the Common Law and its implementing regulations, any member state may file a complaint with GCC Bureau of Technical Secretariat for Anti Injurious Practices in International Trade (“GCC Technical Secretariat”).  The GCC Technical Secretariat then evaluates the complaint, which must be supported by evidence, and decides whether to initiate an investigation.  The ministries of economy and foreign affairs in each member state liaise with the GCC Technical Secretariat and provide application and communication support to local companies involved in GCC Common Law investigations.

Omani Royal Decree 20/2015 promulgated the GCC Common Law.  The intent behind this decree and its associated Executive Regulations is to take anti-injurious trade measures such as anti-dumping (AD) and countervailing duties (CVD) where dumped or unfairly subsidized imports have injured the domestic industry in Oman.

If a company exports a product at a price lower than the price it normally charges in its own domestic market, it is said to be “dumping” the product.  This is considered unfair competition, and GCC member states may take action against dumping in order to defend their domestic industries.

AD investigations under the GCC Common Law consist of two major stages.  The first stage involves the determination of whether the product under investigation is indeed being dumped.  Once the GCC Technical Secretariat finds that a product is being dumped, it proceeds to the second phase: injury determination.  The GCC Common Law contains more precise definitions, but generally it empowers member states to take AD measures where there is genuine or “material” injury to the competing domestic industry.  In order to do that, the member state must calculate the extent of dumping (or show how much lower the import price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so within the member state’s home market.

In August 2017, Oman’s Ministry of Commerce and Industry announced that the GCC Technical Secretariat approved the commencement of an investigation against the producers and importers of paper and paperboard from Spain, Italy and Poland.  The complaint which led to the investigation was filed by a local Omani producer invoking the Executive Regulations promulgated by Royal Decree 20/2015.

This is one of the first such official investigations stemming from the Executive Regulations promulgated by Royal Decree 20/2015, and indicates Oman’s interest in protecting and promoting local industry by combatting harmful practices in international trade.  It may also reflect Oman’s reaction to Omani companies having been the target of AD/CVD actions in other countries, resulting in some cases in which additional duties have been imposed on Omani exports.  Under the GCC Common Law, Omani companies may now also seek protection from unfairly priced or subsidized imports.


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Monday, November 6, 2017

Offering and Marketing Foreign Securities in Oman - Key Regulations

The main regulation that governs all forms of marketing and sale of foreign securities in Oman is the Capital Markets Law (Royal Decree 80/98) (the “CMAL”) and the Executive Regulations of the Capital Markets Law Decision No. 1 of 2009 (the “Executive Regulations”).

“Securities” are defined in the CMAL as “shares and bonds issued by joint stock companies and the bonds issued by the Government and its Public Authorities, treasury bonds and bills and other securities negotiable in the Market.”  Despite the apparent restricted scope of this definition, the Capital Markets Authority (the “CMA”) in practice regulates any kind of investment product that is offered or marketed in Oman.

Article 117 of the Executive Regulations contains a general restriction on the offering and marketing of non-Omani securities within Oman without the approval of the CMA, and contains provisions governing the offering and marketing of non-Omani securities in Oman.  In general terms, the Executive Regulations provide:

(i) that the marketing and sale of non-Omani securities in Oman should be undertaken by a locally registered company licenced by the CMA;

(ii) that the licence issued to the local broker should include “marketing of foreign securities” as one of its permitted activities, prior to such broker undertaking the activities; and

(iii) the conditions that need to be observed by companies licenced to market non-Omani securities including, among others:

a. Marketing and advice shall be limited to regulated securities.

b. Information pertaining to the regulated securities shall be provided to investors, including the approved prospectus, any amendments thereto, and a copy of the due diligence report.

c. A statement must be submitted to the CMA every six months within seven days from the end of the term, including the details of the issuer of the security and the number and value of the marketed securities.

d. Companies shall not use fraudulent or deceptive methods, or provide false or incomplete information, or conceal any material information in order to promote the securities that they are distributing.

e. Companies shall not use the media to promote the securities.

f. Marketing shall be limited to investors who are financially solvent, have experience in securities investments, and have indicated the same in the Investor Qualification Form.

g. Investors must provide a statement to the effect that they are acquainted with all the documents relating to the security and that they are aware of the rewards and risks of the security.

h. The initial investment of any investor in any security shall not be less than OMR 5,000.

i. Companies shall keep a detailed register of investors who have subscribed to the security including the documents and statements relating to such investors.

In short, foreign companies wishing to market securities in Oman should appoint a registered local broker to do so on their behalf.


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Tuesday, October 31, 2017

Supply Contract Tenders in Oman: An Overview for Foreign Companies

A wide array of new projects, many of which are being promoted in the context of the Tanfeedh programme, continue to attract foreign companies wishing to do business in Oman.  This article’s primary focus is with respect to tenders for supplies, one of the four main tender categories, together with contracting, consultancy and training.

The possibility of participating in tenders for foreign companies who do not hold a commercial registration in Oman depends on a number of elements, including the type of tender, in addition to various bureaucratic and logistic issues.

Generally, tenders issued in Oman, both by private and public entities, are either restricted to locally registered companies (sometimes referred to as “local tenders”) or are open to foreign companies (sometimes referred to as “international tenders”).  Foreign companies not registered in Oman may participate independently in tenders that are not restricted to local companies, subject to the other requirements set out below.  In addition, whilst a foreign company is generally required to register in Oman within 30 days from the award of a contracting or construction contract, this does not apply to supply contracts, which rarely (if ever) require a permanent local presence.

Many government entities, government-participated entities and large corporations have a “vendors’ list” or a similar registry of approved suppliers, and only companies that have completed the relevant application process and are registered in such a list may participate in tenders issued by the relevant entity.  A number of these entities allow the registration of foreign companies in their vendors’ lists.

In this context it is worth mentioning that the oil & gas sector has elected to create a new registration system.  The previous registration with the Ministry of Oil & Gas (the “Ministry”) no longer applies and the Ministry promoted, instead, the creation of a joint supplier registration system (“JSRS”).  The sector companies increasingly restrict their procurement to JSRS suppliers.  Registration is available both for local and international companies, but local companies typically pay lower registration fees.

In supply contracts, local distributors of the products concerned or local providers of the relevant services will visually be registered in all or most vendors’ lists and therefore be able to acquire tender documents and participate in tenders issued by the various tendering entities.  Therefore, if there are serious time constraints and the foreign company is unlikely to be able to complete the registration process on time to tender for the specific contract, the foreign company may always consider participating in a joint venture with a duly registered local company.  Locally registered companies may be favoured in tenders, which take into account In Country Value.  The involvement of a local company may be even more beneficial, from this point of view, if it is a small or medium-sized enterprise.

The relationship between a foreign supplier and its local counterparty often takes the form of a distribution agreement which, under Omani law, may be non-exclusive.  In any event, the Commercial Agencies Law, pursuant to Royal Decree 26/1977 (as amended), now allows the direct sale or distribution of goods by foreign companies and, therefore, ultimately permits that a foreign company sells and distributes goods in Oman without the requirement of using a local agent/distributor.

In summary, and subject to any additional rules that may apply, a foreign company wishing to tender for supply contracts in Oman will need to review the relevant tender documents and verify that (a) the tender is open to foreign companies; (b) it is not restricted to companies registered in a vendors’ list (the foreign company may consider registering in the relevant vendors’ list(s) if foreign companies/producers are allowed to do so in the specific instance); and (c) the delivery of the goods can be performed without the involvement of a local company (which would import the goods with its import licence and deal with customs duties and the relating formalities), e.g., by direct delivery to the tendering entity.


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Monday, October 23, 2017

The Corporate Ownership of Land in the Sultanate of Oman

Real estate in the Sultanate of Oman is regulated by the Land Law (Royal Decree 5/80). The law broadly recognises individual and corporate real estate ownership. This article focuses on the corporate ownership of real estate in Oman. The applicable law has sub-categorised corporate land ownership into Omani, non-Omani GCC and foreign ownership.

Corporate ownership of real estate in Oman is subject to a number of restrictions under Omani law. Only limited liability companies which are wholly Omani or GCC-owned, and joint stock companies with at least 30% Omani shareholding, may own real estate in Oman. Furthermore, corporate ownership of property is limited to holding real estate for use as a warehouse, staff accommodation, administrative offices or as a similar special purpose premise for achieving the company’s objectives. An exception to this rule applies to real estate development companies, which can use land to construct and resell residential and commercial units.

While wholly Omani-owned companies may hold freehold rights, there are varying degrees of restrictions on other GCC and foreign entities with respect to property ownership. For instance, a GCC entity purchasing a vacant plot of land is legally obliged to develop it within four years of date of purchase. In addition, wholly GCC-owned companies may only own real estate for investment purposes.

It is important to note the impact of certain amendments to Omani land law and its usage. Royal Decree 76/2010 enables both public and closed joint stock companies with a minimum of 30% Omani shareholding to develop and own land in the Sultanate. In addition, the amendments to this decree allow these companies to engage in real estate development as a business object.

Usufruct rights 
Companies which are not entitled to own land in Oman may nevertheless be eligible to hold a usufruct right in land. This right continues to be the closest thing in Oman to a freehold right. A usufruct right enables its holder to exploit and use the land for the purposes of the applicable project, in the capacity of an owner. Nevertheless, this right is subject to restrictions in the usufruct contract and the obligation to return the land to its owner upon the termination or expiry of the usufruct agreement. A usufruct right on government land can be held for a maximum period of 50 years, which can be extended for similar additional terms. One of the most important features of the usufruct right is the ability for the usufruct land to be mortgaged and, thus, the mortgagee’s right with respect to the land is protected even where the usufruct right is terminated.

However, in the case of entities that are not entitled to own land in Oman, usufruct rights will only be granted over land for the purpose of carrying out a particular project which contributes to Oman’s economy or social development.

Integrated tourist complexes 
The law of Integrated Tourism Complexes (Royal Decree 12/2006, as amended) was issued to market and promote tourism in Oman. This law allows foreign companies to own land or build units for residential and investment purposes in areas designated by the government as “integrated tourism complexes” (“ITCs”). ITCs are typically required to comprise commercial, residential and tourism components. Foreign companies may purchase residential and non-residential units from a developer and register ownership title with the Ministry of Housing. Ministerial Decision 191/2007 set forth broad rules relating to the obligations and rights of developers and third-party purchasers, such as succession, transfer of freehold title and creation of security interest for financing ITC projects.

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Monday, October 16, 2017

Enforcement of Foreign Judgments in Oman

It is not uncommon for disputes emanating from commercial transactions to have cross-border effect. Quite often parties to a transaction are located in different jurisdictions. It is also not uncommon for commercial agreements to grant jurisdiction to the courts of a place where one or more of the parties are not domiciled or located. This may be for a variety of reasons. It is hence extremely important for a party having a foreign judgment in its favour (“Judgment Creditor”) to fully appreciate its ability to enforce that foreign judgment in another jurisdiction against the judgment debtor.

The enforcement of foreign judgments in Oman is governed under provisions of the Civil and Commercial Procedures Law issued pursuant to Royal Decree 29/2002 (as amended) (the “Civil Procedures Law”). Generally, while foreign arbitral awards can be readily enforced in Oman under the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1954, commonly referred to as the New York Convention, the same is not the case with judicial decisions.

Foreign judgments are, in theory, enforceable in Oman. It is possible to seek ready enforcement of foreign judgments in Oman, in particular under (a) the 1983 Convention on Judicial Co-operation between States of the Arab League (the “Riyadh Convention”), and (b) the 1995 Protocol on the Enforcement of Judgments Letters Rogatory, and Judicial Notices issued by the Courts of the Member States of the Arab Gulf Co-operation Council (the “GCC Protocol”). Both the Riyadh Convention and the GCC Protocol provide that each member state will recognise the judgments of the courts of any other member state, subject to fulfillment of prescribed conditions, that had proper jurisdiction over the case and where the judgment had been finally adjudged.

A judgment issued by a special court of a member state to either the Riyadh Convention or the GCC Protocol, such as the Dubai International Financial Centre Courts in the United Arab Emirates, is treated as a domestic member state judgment. Hence, that judgment would also be enforceable in Oman under the relevant treaty.

The enforcement of foreign judgments of countries that do not have mutual enforcement arrangements with Oman are subject to a judgment to be issued in compliance with the usual procedures followed in suits before the Primary Court. To enforce a foreign judgment in Oman, the Judgment Creditor is required to approach the competent Primary Court. Before enforcing that foreign judgment, the Omani courts will satisfy themselves that the conditions set out in Article 352 of the Civil Procedures Law have been met. Article 352 sets out the requirements for enforcement of foreign judgments, a translation of which is as follows:

(a) that the judgment or the order is issued by a competent judicial body pursuant to the principles of international rules of judicial competence determined by the domestic law of the country in which it was delivered and has become final according to that law and was not delivered on basis of deception;

(b) that the litigant parties to the case in which the foreign judgment was delivered had been rightfully notified and represented;

(c) that the judgment or order does not contain a request which breach an operative law in the Sultanate;

(d) that the judgment or order does not contradict a previous judgment or order delivered by a Court in the Sultanate, and does not contain something against public order or decency; and

(e) that the country in which the foreign judgment was delivered accepts the enforcement of judgments delivered by Oman Courts within its own territories.

At times, a Judgment Creditor seeking to enforce a foreign judgment in Oman may not be able to satisfy all the requirements prescribed by Article 352 of the Civil Procedures Law. However, should a foreign judgment not be enforceable pursuant to the above rules, then it is possible that such a judgment would nevertheless be of evidentiary value and the matter may be litigated de novo in Oman in a full hearing before the competent Omani court.

Arabic is the official language of Oman. In case a foreign judgment that is sought to be enforced in Oman by a Judgment Creditor has been issued in a language other than Arabic, the judgment together with all other documents should be translated into Arabic.

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Monday, October 9, 2017

What's New in the 2017 FIDIC White Book?

In March 2017 the Fédération Internationale des Ingénieurs Conseils (“FIDIC”) issued the Fifth Edition of the White Book, or the Client/Consultant Model Services Agreement to give it its full name. The White Book forms part of the FIDIC suite of documents and is one of the most commonly used professional services agreements in the world.

The Fifth Edition contains some major amendments to the Fourth Edition, which was published in 2006. We consider below some of the more important changes introduced by the latest update.

Form of agreement 
The Fifth Edition introduces an order of precedence to the documents listed as forming and to be construed as part of the agreement, both under the Form of Agreement and in the General Conditions.

By omitting to do so, the Fourth Edition was unclear as to which document’s terms would take precedence in the event that provisions in one document contradicted those in any of the others. 

Standard of care 
The enhanced standard of care set out in clause 3.3.1 now conforms more closely with wording typically found in client-bespoke agreements. The new wording provides that the consultant must exercise the “reasonable skill, care and diligence to be expected from a consultant experienced in the provision of such services for projects of similar size, nature and complexity.”

Further, the consultant must “perform the services with a view to satisfying any function and purpose that may be described in Appendix 1 (Scope of services).” The above wording stops short of introducing a “fit for purpose” clause, though in Oman the absence of such wording will not affect the consultant’s statutory decennial liability for the collapse of a building.

The Fifth Edition makes clear that the standard of reasonable skill, care and diligence only applies to the performance of the services. Under the Fourth Edition, the consultant had “no other responsibility than to exercise reasonable skill, care and diligence” in the performance of all its obligations in the agreement, including commencement, completion dates, procurement and maintenance of insurance, and any reporting. In the Fifth Edition these are now treated as absolute obligations.

Intellectual property rights 
The new edition distinguishes between background intellectual property (intellectual property owned by either party prior to the commencement of the services) and foreground intellectual property (intellectual property created by the consultant during the performance of the services). Foreground intellectual property remains the property of the consultant, but the client will have a licence to use it for any purpose connected to the project. The licence is broad, however, and would allow the client to use the foreground intellectual property in any future extensions of the project.

Dispute resolution 
The dispute resolution provisions now include adjudication as part of a multitiered dispute resolution process. If a dispute cannot be resolved amicably, it must first be referred to adjudication before any arbitration proceedings can be commenced.

In Oman, it is likely that these provisions will be amended so as to refer any dispute straight to arbitration.

Good faith 
The Fifth Edition introduces a broad good faith obligation (applying to “all dealings”) which has the potential to be at issue in almost any dispute. The governing law and jurisdiction of the contract will have a significant bearing on the extent of this “good faith” obligation.

Good faith under Omani contract law can be interpreted as a requirement to act reasonably and moderately, not to use the terms of a contract to abuse the rights of the other contracting party, and not to cause unjustified damage to the other party.

In Omani law an act of bad faith by one party may constitute a cause of action for the other party to the contract. Accordingly, the duty of good faith is overarching, in contrast with the position at English law. Under English law the extent of the obligation depends on the context and how explicitly it is defined. However, it is clear that the English courts are reluctant to construe a good faith obligation as imposing a positive obligation on a party to act against its commercial interest, or to give precedence to such an obligation over an express contractual right.

Liabilities 
In the new edition, default must be not only “deliberate,” as was the case in the Fourth Edition, but also “manifest and reckless” in order for the exclusion of the cap on liability to apply.

The Fifth Edition also provides for the mutual exclusion of liability for a number of heads of loss or claim. This is favourable for the consultant, as in many jurisdictions, without express wording excluding liability for loss of profit, etc.; the consultant would be liable insofar as these constituted “direct losses.”

Programmes 
The Fifth Edition sets out more detailed requirements as to what programmes should contain. There are also more detailed provisions obligating the consultant to provide a programme within 14 days of the commencement date; specifying which information the programmes should include; and obligating the consultant to revise the programme if the client does not reasonably believe the project will be completed on time.

Variations 
The new edition expands on: the circumstances which could constitute a variation; the procedure for initiating variations and agreeing on their impact on the programme; and the consultant’s remuneration.

Termination 
The Fifth Edition now explicitly provides that the client is not entitled to terminate for convenience in order to carry out the services itself or through a third party. In the Fourth Edition, this was not expressly stated.

The Fifth Edition now allows for immediate termination where there is corruption or insolvency. It also permits the client, with 28 days’ notice, to suspend the services for convenience.

There are more extensive rights of suspension, including an express right for the consultant to suspend if the client fails to demonstrate that it has made satisfactory arrangements to meet its payment obligations.

Summary 
The allocation of risk between the parties under the new edition of the White Book appears to remain broadly similar to that set out in the previous Fourth Edition. However, the Fifth Edition has gone a long way to remedying many of the shortcomings of the Fourth Edition.

 As a result of the changes, the parties should now be better able to understand and manage their risk allocation.

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Monday, October 2, 2017

Oman Becomes Fourth GCC Member State to Implement the Unified GCC Trademarks Law

Oman has recently become the fourth Gulf Cooperation Council (“GCC”) state to implement the Law of Trademarks for the GCC States (“GCC Trademarks Law”). Royal Decree 33/2017 was issued in Oman on 25 July 2017 with immediate effect. However, the nuances of how this new law will be implemented in Oman remain to be seen, as the implementing regulations have yet to be published.

The GCC Trademarks Law was approved by the GCC Trade Cooperation Committee in 1987, with further amendments made in 2006 and 2013. However, the Trademark Law only came into force upon the issuance of the Implementing Regulations in December 2015. Since then, Saudi Arabia, Bahrain, Kuwait and now Oman have fully adopted the GCC Trademarks Law to replace their respective national trademark laws.

Although Oman has not yet published the implementing regulations, the GCC Trademarks Law itself provides an instructive preview of the main features of the law.

Under the GCC Trademarks Law, once a party submits an application for a trademark the examination much be completed within ninety days of filing. Any requests for further information from the relevant Trademarks Office must be met with a response also within ninety days. The GCC Trademarks Law provides a period of sixty days for parties to oppose published trademark applications; note that currently the opposition period in Oman is ninety days. Applicants must respond to oppositions within sixty days of notification, or risk their applications being considered abandoned.

Following the applicant’s response is a hearing session, after which the Trademarks Office issues its decision within ninety days. Appeals to the Trademarks Office’s decision rejecting an application shall be filed within sixty days to the Objections Committee. The decisions of the Objections Committee are also subject to appeal to the competent court within sixty days. This is a shift from the previous Omani law, which provides that decisions in opposition were appealable to a Trademarks Office within the relevant Ministry, with a further opportunity to appeal to the competent court afterwards.

In the determination of well-known trademarks, the GCC Trademarks Law provides criteria similar to those provided by the World Intellectual Property Organization (“WIPO”). For a mark to be declared as well-known, the GCC Trademarks Law requires that the mark be widely recognisable by consumers due to the marketing efforts of the trademark owner; that the mark be registered and used widely across countries; and/or that the mark be widely valued or useful in promoting the products or services to which it is applied.

Along with an increase in application fees, an increase in penalties for trademark infringement will be seen in Oman. According to the GCC Trademarks Law, the penalties that apply “where a person counterfeits a registered trademark in a manner which misleads the public [or] in bad faith uses a counterfeit trademark and who affixes this mark to its products” include a fine between OMR 500 (USD 1,300) and OMR 100,000 (USD 260,000) and/or imprisonment for up to three years. Where a person “knowingly sells goods which contain a counterfeit or unlawfully affixed trademark,” a fine of between OMR 100 (USD 260) and OMR 10,000 (USD 26,000) and/or imprisonment for up to one year are applicable.

Although Oman has yet to publish the implementing regulations of the GCC Trademarks Law, it is clear that the adoption of a unified trademarks law is a beneficial development. Rights holders will take comfort in claiming similar levels of protection throughout the GCC, and new applicants and businesses will be attracted by the ease of a single set of provisions for the registration and enforcement of their trademark rights.

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Monday, September 25, 2017

Capital Increases for Joint Stock Companies in Oman

Joint stock companies in Oman seeking to increase their issued share capital have the option by way of a rights issue, or through private placement. The board of directors may, in accordance with the Commercial Companies Law of Oman (“CCL”), approve the rights issue through a board resolution within the limits of the authorised share capital of the company, provided that five years have not elapsed from the date on which the shareholders approved the increase in the authorised share capital. In the event that five years have lapsed from the date on which the increase of the authorised capital of the company was approved, the rights issue will require the approval of the shareholders of the company through an extraordinary general meeting.
In relation to a capital increase through a rights issue, Article 82 of the CCL provides that each shareholder has a preferential right to subscribe for the new shares in proportion to the number of shares currently owned by such shareholder. Accordingly, the additional new shares will be offered to all the shareholders of the joint stock company on a pro rata basis.
Once the approval of the shareholders or board of directors has been obtained and in order for a shareholder to exercise their right and proportionately subscribe for the new shares, a written notice must be sent to each shareholder at their address registered in the shareholders’ register informing them of such preferential right.  For shareholders of a public joint stock company, the notice must be accompanied by a copy of the prospectus duly approved by the Capital Market Authority (“CMA”) and the notice must be published in two daily newspapers for two consecutive days after being certified by the Department of Company Affairs. The said notice must, inter alia, indicate the specified period during which the preferential right may be exercised, provided such period shall not be less than 15 days from the date of publication.
The prospectus should include satisfactory information about the company’s past business performance and the financial position including the certified balance sheet and profit and loss account for the previous financial years or the period that begins from the date of the establishment of the company, if such date goes back less than three years.
With respect to subscription and allotment of shares post a rights issue, Article 83 of the CCL provides that new shares which are not subscribed for by the present shareholders of the company within the offer period may be offered for public subscription or, alternatively, the board may reduce the issued share capital of the company to the extent of shares that are not subscribed for. However, it may be noted that offering the unsubscribed shares to the public is possible only for public joint stock companies.
Notwithstanding the above, a further issue arising out of Article 83 of the CCL is with regard to the shareholders of a public joint stock company being entitled to waive or assign or transfer to a third party their preferential right in respect of the rights issue in accordance with the provisions of the Rules for Waiver of Rights Issue, issued by Ministerial Decision 156/2002 (“MD 156/02”). MD 156/2002 provides that the shareholders’ preferential rights may be assigned/transferred within the period specified for exercising the pre-emption right.
Finally, public joint stock companies need to fulfil an additional requirement of disclosing any material information in respect of the rights issue to the public. Accordingly, Article 3 of the Capital Market Authority Law issued through Royal Decree 80/1998 provides that no securities of any joint stock company may be offered for public or private subscription except in accordance with the prospectus approved by the CMA. A summary of the approved prospectus should be published in two daily newspapers, one of which must be in Arabic. The prospectus must be made in accordance with the form specified by the CMA. Any omission or avoidance of any material information or the inclusion of incorrect statements or information shall be the responsibility of the entity preparing the prospectus.

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Monday, September 18, 2017

Anti-Monopoly and Competition Law in Oman

Introduction

This article provides a brief overview of the legal framework of the Anti-Monopoly/Competition Law in Oman, its implementation, and consequences of businesses in violation of its provisions.

The Competition Protection and Monopoly Prevention Law (the “Competition Law”) was promulgated by Royal Decree 67/2014 in order to establish a control regime and prohibit agreements that would result in abuse of market dominance. The provisions of the law are applicable to all production, trading, or services activities, including any economic or commercial activities that are practiced inside or outside Oman and have an influence on the Omani market.

Under the Competition Law, the concept of the relevant market is defined as a market that is based on two elements: i) the relevant products, and ii) the geographical scope. The relevant products are the those regarded as interchangeable or substitutable from the point of view of the recipient of the service or commodity. This includes products that are provided by competitors in other markets that are accessible by the consumer. The geographical scope refers to the geographical area in which the conditions of competition are homogeneous, with both sellers and purchasers contributing towards the setting of prices. Interestingly, the geographical scope is not limited to Oman, as the Competition Law applies to any economic or commercial activity that has effects inside Oman.

Impact of the Competition Law on businesses

While the Competition Law does not apply to wholly owned government entities, it has significant implications for private-sector businesses that have a dominant market share.

Under the Competition Law, private-sector businesses with dominance in the market are prohibited from engaging in practices that would undermine, lessen, or prevent competition. A juristic or legal person is considered in a “dominant position” if it has control of, or has an influence over, more than 35% of the relevant market, including the acquisition of a market share. This market share is the sole determinant of a business’ dominant position; the Competition Law does not include any references to local turnover or other financial indicators.

If a business is considering taking acts that might result in market dominance, whether directly or indirectly, to avoid sanctions under the Competition Law it must submit a written application before undertaking these acts (see below).

The Competition Law also prohibits businesses or individuals from entering into agreements or contracts, whether inside or outside Oman, for the purpose of monopolising the import, production, distribution, sale, or purchase of any commodity.

Enforcement of the Competition Law  
The Public Authority for Consumer Protection (the “PACP”) implements the Competition Law. When a business applies for approval of an act, it must provide PCAP the information relevant to the specific situation. The PACP then has a period of time to consider the application; interestingly, if the period expires without a response, this is considered an approval of the act. However, the PACP may withdraw an approval after its issue in case it discovers that the information submitted by the applicant is incorrect or deceptive. In any case, any act that will result in a market share of more than 50% is prohibited and no such approval may be granted.

The PACP is rather strict in enforcing the Competition Law provisions and the consequences are wide- ranging as explained above. By virtue of Article 17 of the Competition Law, any person may submit a complaint to the PACP, including competitors and the general public. The PACP receives a large number of complaints and investigates them thoroughly. We are aware of a number of such proceedings and therefore we do not advise any entity to take such a risk, especially considering the severity of the penalties.

Consequences of violating the Competition Law  
A business’ failure to apply to the PACP for approval, followed by acts resulting in market dominance, may result in sanctions under the Competition Law. These range from imprisonment to administrative fines depending on the violation committed. Under the Competition Law, the PACP may also choose to refer a case to the Public Prosecution. The chairman and members of the board of directors, the chief executive officer, and the authorised managers of the violating business may face penalties depending on their awareness of the violation of the Competition Law. Finally, the Omani courts may force businesses to take measures in compliance with the Competition Law.

Unfortunately, the PACP current policy in respect to this issue is not to disclose details of the filings received and this, coupled with the fact that the Executive Regulations of the Competition Law have not been issued yet, contributes to the general uncertainty on the actual application of the Competition Law.


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Monday, September 11, 2017

Promotional Offers in Oman: Key Considerations

A commercial establishment looking to conduct a promotional offer in Oman must be aware of and comply with the provisions and terms set out in Ministerial Decision 239/2013 (the “Regulations”), the key aspects of which are set out herein.

Do you need a licence to conduct a promotional offer? 

By Article 3 of the Regulations, a commercial establishment must obtain a licence from the Ministry of Commerce and Industry (the “MOCI”) prior to undertaking or advertising any promotional offer. It is important to note that a licence shall only be granted to an Omani entity or a registered agent or distributor in Oman. Further, a licence application must be submitted to the MOCI at least fifteen days prior to the start of the promotional offer and must be supplemented with the following details:

  • type of offer and way of running the promotion; 
  • periods and places in which the promotion will be run; 
  • a list detailing the number and type of prizes and gifts to be given to the winners; and 
  • date and place for raffle and mechanism of selection of the winner. 

The MOCI is the responsible authority for review and approval of any such licence application. On the basis that approval is granted, the period of the promotional offer shall be a maximum of two months. However, it is within the MOCI’s discretion to grant one licence which runs for two concurrent periods, equating to four months. As Article 6 of the Regulations limits the amount of times any given promotional offer may run to four times a year, and the period for each promotional offer is two months, the maximum time in which the promotion can run is eight months per annum. If the MOCI grants a licence for an initial period of four months (i.e., two concurrent periods), the licence may be renewed for a further two months and then a further two months period after that. 

Requirements on the licencee: how to effectively conduct a promotional offer? 

To comply with the Regulations, a promotional offer must be displayed in a conspicuous location within the shop(s) in which the offer is being conducted, whereas only a copy of the licence needs to be displayed in each of the locations for the period of the promotional offer.

It is a requirement on the licencee to notify the MOCI of the names and addresses of the winners of any promotional offer in Oman. Additionally, the names of the winners should also be published in two daily newspapers, one of which must be in Arabic. A winner of a promotion has a period of three months from the date of newspaper publication to claim their prize, and any Oman-based winner seeking to claim their prize after the date in which three months has elapsed shall forfeit their rights to the prize. Any unclaimed prizes of Oman-based winners should be reallocated to charitable associations under the supervision of the MOCI.

In an effort to protect the interests of consumers, in addition to the Regulations, the Consumer Protection Law promulgated by Royal Decree 66/2014 (the “CPL”) and its implementing regulations by Ministerial Decision 77/2017 (the “Implementing Regulations”) (collectively the “Relevant Legislation”) provide for strict rules on commercial enterprises. By way of example, under the CPL suppliers must provide their customers with correct and true information. Suppliers are also not permitted to engage in false or misleading advertising activities by virtue of Article 20 of the CPL. When making a promotional offer, other key requirements for a commercial establishment to be aware of and comply with include as follows:

  • coordinating with the Public Authority for Consumer Protection in addition to the MOCI; 
  • providing a statement setting out the manner of running the promotional offer; and 
  • providing a description of prizes, gifts and other benefits of any given promotional offer. 

When conducting promotional offers in Oman it is recommended to consider all provisions and terms of the Relevant Legislation. Non-compliance with the provisions of the Regulations may see a violator prohibited from conducting promotional offers for up to one year and, more serious still, under the CPL a supplier which fails to provide its customers with correct and true information could face imprisonment of between ten days to one year and/or a fine. Any supplier which engages in false or misleading advertising activities could face imprisonment of between three months to three years and/or a fine as stipulated by the CPL.

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Tuesday, September 5, 2017

Third-Party Funding in International Arbitration

While third-party funding (“3PF”) is not new, it is playing an increasingly prevalent role in big ticket commercial arbitration and in investment treaty cases. 3PF involves the financing of arbitrations or claims in exchange for a portion of the proceeds in the event of success. Funders commonly include insurance companies, hedge funds, private equity funds, investment banks and law firms. The funder may earn an agreed percentage of any award or a success fee or both. In the event of an unfavourable award, the funder will lose its investment and will not be entitled to any payment.

In Europe and East Asia (principally Hong Kong and Singapore), 3PF is burgeoning. Professional funders have realised that the potential of multimillion- and multibillion-dollar cases are the norm in the current environment, and are also attracted by the absence of regulation of 3PF in key jurisdictions. Meanwhile, 3PF offers claimants the ability to pursue claims that they would have otherwise abandoned or settled. Though some countries have drafted voluntary codes of conduct (for example, the French bar association has declared 3PF to be consistent with French law), 3PF remains unregulated in many places and there is currently no formal regulation of its use in the context of international arbitration.

3PF in the GCC region 
In the GCC, 3PF has not been widely used and currently little, if any, regulation addresses 3PF. One of the few bodies in the region to address 3PF is the Dubai International Financial Centre (DIFC), which after public consultation formally adopted a Practice Direction on third-party funding in March 2017. The DIFC guidance requires disclosure to the other party of the existence of 3PF; such notice must include the name of the funder, but no further details of the funding arrangement. The guidance may have been a response to the funded case of Al Khorafi v Bank Sarasin in which the DIFC Court ordered damages in excess of US$50 million. This case and others reflect growing confidence in enforceability of judgments in the region, further encouraged by the establishment of the English common law Abu Dhabi Global Markets (ADGM) Court in 2016.

We are not aware of any cases in Oman using 3PF to date, but we see no bar to the use of 3PF in arbitration claims in Oman. It is reasonable to expect institutions that typically fund arbitrations to look at the caseload of ad hoc and institutional arbitrations currently underway in the Sultanate. The current restricted liquidity in many sectors across the GCC may also heighten interest in seeking 3PF.

Why engage in 3PF?

The sudden increase of 3PF in international arbitrations has raised concerns of increased frivolous claims, while proponents of 3PF argue that the careful screening of claims by funders protects against unmeritorious claims. In reality, 3PF of international arbitration offers the potential to bring together funders seeking a return on their investment with clients in need of finance to support their claims. 3PF is also being used by claimants to take the costs of conducting an arbitration ‘off-balance sheet.’ Any claimant company would prefer to outsource these costs rather than be required to carry them as a contingent liability in its accounts.

What are the risks of 3PF? 
3PF is no longer completely unregulated, but in the absence of regulation some of the risks and concerns that need to be considered in any 3PF include (i) potential conflicts of interest arising out of the involvement of an investor; (ii) whether reliance on 3PF is grounds for ordering security for costs; and (iii) whether and to what extent a party relying on 3PF should disclosure the 3PF arrangement.

Incentives to funders/investors 
Investors in international arbitration are attracted by high quantum claims and the enforcement benefits of the New York Convention on the Recognition of Foreign Arbitral Awards. Other key drivers that attract funders are:

(i) a strong case on the merits;
(ii) the size of the estimated damages, usually a minimum of US$10 million;
(iii) the funder’s share of the award;
(iv) the amount of costs that the funder has agreed to bear;
(v) the prospects of success;
(vi) where the assets are situated;
(vii) a solvent respondent and its ability to meet the damages awarded and costs;
(viii) the jurisdiction in which the arbitration takes place; (ix) the ease of enforcement of the award; and
(x) the time it will take to bring the case to a settlement or award.

The percentages earned by funders in 3PF arrangements vary between 20-50 per cent of the quantum awarded in a case and can be a multiple of the amounted invested by the funder. A funder is usually looking for a minimum return on investment of three, as in any project finance or private equity transaction.

Funders have also been encouraged by the recent case of Essar Oilfield Services Ltd v Norscot Rig Management Pvt Ltd in which the English High Court upheld an arbitrator’s decision to award a funding premium as part of the claimant’s claim for costs. This funding premium reimbursed the claimant for its costs of seeking 3PF for the case. While the effect of this case remains to be seen in other jurisdictions, claimants using 3PF now have a framework for making similar requests for costs.

An increase of arbitral decisions, commentaries, and efforts to codify applicable rules represent the first step towards self-regulation. One can expect more regulation if the voluntary codes of conduct currently in operation in many jurisdictions prove ineffective or if funders cannot meet their commitments. Where 3PF is legal, it is safe to say statutory regulation is likely to increase.

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Monday, August 21, 2017

Waqf in Oman

The ancient Islamic concept of waqf (plural ‘awqaf,’ meaning religious endowment) recently made headlines in Oman when, in April this year, Meethaq Islamic Banking announced that it would be collaborating with the Ministry of Awqaf and Religious Affairs (MARA) in support of the Organisation of Waqf, which was launched by MARA to encourage innovative uses of awqaf in the Sultanate.

A waqf is a charitable endowment that allows a person to donate property for the public good in the name of Allah. Typically, this is achieved by building mosques, schools or hospitals for the benefit of local communities in perpetuity. The Qur’an does not mention waqf explicitly, though it advocates charitable donations more broadly. The conceptual framework was set out in more detail later in the Hadith.

Waqf is frequently compared with the English charitable trust, with many speculating that the former inspired the latter by way of Crusaders who, during the 12th century, might have been exposed to the concept of waqf in Muslim territories and seen it as flexible device that could be used by both religious and state interests to fulfil a number of purposes.

A waqf is a contract, and it follows that the founder (called al-waqif or al-muhabbis in Arabic) must have the capacity to enter into a contract. A waqf is usually established by a written document, accompanied by a verbal declaration.

Waqf is a special form of disposal of property allowing its owner to freeze the property from subsequent transfer and transmission to others. This power of the owner is inalienable and cannot be rescinded by anyone, except in accordance with the conditions expressly provided for by the owner in the document creating the waqf.

There are several conditions that a waqf must satisfy, the most important of which is that the waqf is perpetual in nature. The subject matter of the waqf can be either movable or immovable, but its corpus must be preserved and remain inalienable.

The property used to establish a waqf must be the subject of a valid contract and should not already be in the public domain. Public property, therefore, cannot be used to form a waqf. Furthermore, the property should be free from any encumbrance.

As explained above, the main characteristic of a waqf is that it should be perpetual. In order to comply with this requirement, the waqf must be maintained at all times. Accordingly, part of the income of the waqf is necessarily spent on its maintenance, renewal and development.

Both natural and legal persons can be beneficiaries of a waqf. However, a waqf cannot be created for the benefit of the founder himself, or for an immoral or sinful purpose. The beneficiaries of the waqf can be specified by the founder.

Waqf institutions earn returns by depositing the income generated from the waqf with Islamic financial institutions. Any further returns so generated are then spent on charitable purposes.
Mazin bin Ghadouba, one of the followers of the prophet Muhammad, is credited with having built the Al-Midmar Mosque - the first mosque in Oman - in approximately 627 A.D. At the time, waqf was limited to building and renovating mosques. Later, Omanis extended the ambit of waqf to helping the poor, and for other charitable purposes.

Now there are over thirteen types of waqf in Oman, including those for mosques, education, Qur’an schools, and the maintenance of graves. Until relatively recently, awqaf were managed by imams. In 1950, the father of the present Sultan, Sultan Said Bin Taimur, established an institution dedicated to the management of awqaf, which in 1997 evolved into the present-day Ministry of Awqaf and Religious Affairs.

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Monday, August 14, 2017

Recent Improvements in the Public Transport Sector in Oman

The Sultanate of Oman has recently seen a shift in public transport methods towards more convenient and accessible means of short-distance travel. Previously, the main forms of public transport available to individuals were the conventional orange and white (or “street”) taxis used for short to medium distances, and Oman National Transport Company (“ONTC”) buses for long-distance journeys.

While the ONTC buses were adequate for long-distance travel, the options for short-distance transport seemed relatively outdated when compared to neighboring countries. Taxis were not required to use a meter unless operating from the airport (as required by Ministerial Decision 34/1998), and commuters were subject to varying and unpredictable pricing. However, in the past year, the ONTC has been rebranded and restructured as Mwasalat, and Marhaba Taxi has begun operations in Oman. These developments have improved and modernized the transport system, and have resulted in an uptick in consumer use.

The rebranding of ONTC to Mwasalat has been hailed as major development, as the company introduced new buses with modern features and operational protocols. Mwasalat has also been granted a licence by Ministry of Transport and Communications (the “MOTC”) to start operating taxis from airports and malls which, in turn, will provide tourists and citizens alike with comfort, ease of mind and modern means of transport.

The commencement of the operations of Marhaba Taxi in Oman has also led to better public transport services, as individuals may now use their smart phones to book taxis in a convenient and safe manner. Marhaba Taxi has also been provided with a licence to operate from Sultan Qaboos Port and hotels, which should lead to better services in general to and from the main hubs used by residents and tourists alike.

It is important to note that the licences given to Mwasalat and Marhaba Taxi have been granted to manage the services in those specific areas, and not to completely replace the current street taxis operating in those areas. In turn, street taxis will not be permitted to offer their services in the specific areas assigned to the two companies, unless they are working under the relevant licensed company. MOTC has urged all taxi owners operating near these specific area to join either Marhaba Taxi or Mwasalat accordingly in order to be permitted to operate therein. Street taxis not operating in these designated locations remain subject to their current regulatory scheme, though the MOTC is expected to issue revised regulations in the near future.

With the implementation of these regulations and the issuance of the above-mentioned licences, MOTC has contributed significantly to the development of the public transport sector in Oman, establishing new services while retaining the services of the conventional orange and white taxi drivers. Moreover, MOTC has been able to provide much-needed security, efficiency and technology in this area as requested and required by the general public. MOTC has also recently provided official and approved tariffs for transport, which could lead the way to implementing a metering system for street taxis as well. MOTC has also sought to provide better training of taxi drivers, particularly with regard to safety and security protocols.

The revamped transport sector in Oman is expected to contribute greatly towards the development of various other sectors, including tourism, whilst also spurring job creation. It is important to keep in mind that taxi drivers must be Omani citizens, thereby contributing to Omanisation and in-country value.

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Monday, August 7, 2017

Protecting Personal Data and Individual Employee Privacy in Oman

While there are no specific Omani laws that explicitly protect the privacy and personal data of employees, there are general laws that govern an employer’s conduct with respect to an employee’s privacy. A summary of the laws that govern privacy and personal data protection of individuals is set out below.

The Basic Law, issued by Royal Decree 101/1996, provides for the individual’s right to privacy in communication.  Article 30 of the Basic Law prohibits any interference with or monitoring of an individual’s telephone calls or written correspondence and guarantees the confidentiality of their contents, except in certain circumstances. It is therefore generally not permitted for an employer at the workplace to impinge upon an employee’s privacy by making a recording without permission, confiscating an employee’s details or revealing confidential information about the employee to a third party. 

Individual privacy is also protected in the Penal Procedure Law promulgated by Royal Decree 97/1999, as amended (“CPL”). Article 90 of the CPL provides that correspondence and cables may not be confiscated or perused; newspapers, publications and parcels may not be confiscated; conversations taking place in private may not be recorded; telephone conversations may not be tapped; and dialogue may not be recorded without the permission of the Public Prosecutor of Oman. The permission specified in Article 90 of the CPL may only be issued by the Public Prosecutor, who would only permit audio or video recording of an individual if there is sufficient evidence of a an offence or misdemeanor punishable by imprisonment for a period exceeding three months. Once granted, the permission is valid for a renewable period not exceeding 30 days, during which the audio or video evidence must be obtained.

In general, the courts of Oman are very protective of employees’ interests.  In practice, therefore, the employer would need to have a compelling reason to obtain permission from the Public Prosecutor and violate an employee’s privacy using one of the methods described above.

Exceptions to the presumption of privacy
Royal Decree 69/2008, enacting the Law of Electronic Transactions (the “ETL”), applies to parties who have agreed to perform their transactions electronically and safeguards the confidentiality of information or data contained in such transactions.

The ETL allows for exceptional circumstances in which personal data may be disclosed (i.e., allowing access to electronic communications and the disclosure of their contents to third parties). According to Article 43 of the ETL, obtaining, disclosing, providing or processing of personal particulars or data shall be lawful in the following cases:

• If such information is necessary for preventing a crime or detecting a crime pursuant to an official request by the enquiring authority;

• If such particulars were required or authorised by any law, or if the collection of such particulars occurred pursuant to a court order;

• If such particulars were necessary for the assessment of any tax or fees; and

• If the processing of such particulars was necessary for the safeguarding of vital interests of the person about whom such particulars were being collected.

Penalties for breaching an employee’s privacy
The CPL sets out penalties for those who violate an individual’s privacy. Article 276 of the CPL provides that any person who illegally observes or collects information or data, violates another’s privacy or their right to protect their secrets, or reuses collected information and data shall be punished by imprisonment for a period of not less than three months and not more than two years, by a fine of OMR 100-500, or both.
The Cyber Crime Law, promulgated by the Royal Decree 12/2011, also sets out certain penalties for breaching an individual’s privacy, which include:

(a) Imprisonment for a period of not less than one month and not exceeding one year and/or a fine of not less than OMR 500 and not exceeding OMR 2,000 is applied to any person who uses information technology tools to obstruct or intercept the flow of data or electronic information transmitted by way of information technology.

(b) Imprisonment for a period not less than one year and not exceeding three years and/or a fine of not less than OMR 1,000 and not exceeding OMR 5,000 is applied to any person who uses information technology tools (such as camera phones) to photograph or record individuals without their permission; who disseminates such information, even if it is true; or who uses such information towards slander and defamation.

Conclusion
Taken as a whole, Omani law protects individual privacy, especially that of employees. Employers are prohibited from monitoring or recording their employees, and may only obtain permission to do so from the Public Prosecutor under stringent circumstances.  Employees and private individuals have a reasonable expectation that, if they are photographed or recorded without permission, they will have recourse in the law.

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Tuesday, August 1, 2017

2017: The Year of IPOs for Insurance Companies in Oman

In the Sultanate of Oman, the insurance sector is supervised by the Capital Market Authority and primarily regulated by the Insurance Companies Law promulgated by Royal Decree 12/1979 as amended. The Insurance Companies Law was extensively amended by Royal Decree 39/2014 (the “Royal Decree”), which introduced a new regulatory framework for insurance companies in Oman. We reported on the main features introduced by the Royal Decree in a previous article published in October 2014.

The first two amendments to the Insurance Companies Law set out in the Royal Decree read as follows:

Article (2/1/A)
It shall be a public joint stock company established in accordance with the Commercial Companies Law to conduct insurance business.

Article (3/2/B)
The applicant has to prove that the paid up capital is not less than RO 10,000,000 (Rial Omani ten million).

The most important requirement introduced by the Royal Decree is that, with the exception of foreign insurance companies continuing to operate in Oman as branches, all insurance companies must be incorporated as public joint stock companies.

Under the Royal Decree, these requirements applied immediately to the establishment of new insurance companies, meaning that any new insurance company wishing to set up in Oman following the Royal Decree was required to be incorporated as a public joint stock company with a paid-up share capital of no less than OMR 10 million. However, insurance companies already existing at the time of issue of the Royal Decree were granted a period of three years to meet the new requirements by (a) converting to public joint stock companies by way of an initial public offering (“IPO”); and/or (b) increasing their share capital to OMR 10 million.

This grace period expires in August 2017, and the majority of the eleven locally incorporated insurance companies are now in the process of complying with the new regulations. A number of IPOs are either already open for subscription or envisaged to be within the next few weeks.


With respect to the divestment required, the standard rule for IPOs as set out in the Commercial Companies Law is that the founders must divest and offer to the public at least a 40% stake. However, with reference to the public offerings statutorily imposed upon insurance companies by the Royal Decree, a different tendency emerged.

As regulator of the joint stock companies registered in Oman, the Capital Market Authority has the power to grant exceptions to the rule relating to the statutory minimum divestment required in connection with an IPO. It appears that several insurance companies, while planning their respective IPOs to comply with the Royal Decree, approached the regulator to request such an exemption. Consequently, the Capital Market Authority made a public announcement stating that, in principle, it will grant an exemption to all insurance companies that make a request and that such exemption will specifically allow the divestment of a stake of only 25%. From a review of the actual terms of the now current public offerings, it appears that most companies requested this exemption and are divesting a 25% stake as opposed to the standard 40%.

With respect to capital requirements for insurance companies, the Royal Decree raised the minimum capital from OMR 5 million ($13 million) to OMR 10 million ($26 million). This increase was in addition to 2011 legislation that increased the minimum capital tenfold from OMR 500,000 ($1.3 million) to OMR 5 million ($13 million).

At the time the Royal Decree was issued, the aim of the regulator was to encourage consolidation through mergers in a relatively crowded market and to guarantee adequate capitalisation of insurance companies. Some mergers have indeed been finalised, and the number of small players in the market was marginally reduced as recently reported by Sheikh Abdullah bin Salim Al Salmi, Executive President of the Capital Market Authority. At the same time, the IPOs currently open for subscription are reporting satisfactory results.  

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Monday, July 24, 2017

Oman Introduces Witholding Tax for Foreign Investors

The recent amendments to the Omani Income Tax Law that were announced under Sultani Decree 9 of 2017 (“SD 9/2017”) – issued on 19 February 2017 and published in the Official Gazette on 26 February 2017 – made significant changes to the previous law; among these was a change to the former withholding tax structure by expanding the scope of withholding tax to include dividends.

SD 9/2017 introduced a withholding tax of 10% on dividends and interest on shares paid to foreign shareholders in Omani entities. This amount (10%) will be withheld by the Omani entity and shall be remitted to the tax authorities. A Capital Market Authority Circular – CMA Circular 3 of 2017 – was issued shortly after SD 9/2017 and specified the type of Omani entity which will be subject to the 10% dividend and interest withholding tax; the Circular stated that “the entity to which the withholding tax on dividends and interest will be applied to will be Omani joint-stock companies.” Thus, 10% of dividends and interest paid out to foreign shareholders of Omani joint-stock companies will be withheld for remittance to the Omani tax authorities. The CMA Circular further noted that the dividend withholding tax applies to foreign shareholders in both their natural and legal capacities -meaning that foreign business entities that are shareholders in Omani joint stock companies will be subject to the dividend withholding tax, too.

In addition, the CMA Circular addressed the issue of whether non-Omani GCC nationals would be treated as foreigners or as Omanis with respect to the recent amendments to the income tax law. The Circular cites Chapter II (Article 3) of the Economic Agreement between the GCC States – which was adopted by the GCC Supreme Council on 31 December 2001 in Muscat – which declared that, “GCC natural and legal citizens shall be accorded, in any Member State, the same treatment accorded to its own citizens, without differentiation or discrimination, in all economic activities, especially the following: movement and residence, work in private and government jobs, pension and social security, engagement in all professions and crafts, engagement in all economic, investment and service activities, real estate ownership, capital movement, tax treatment, stock ownership, formation of corporations, education, health and social services.” Therefore, non-Omani GCC nationals – whether they are natural or legal persons – will be treated as Omanis for tax purposes, and thus will not be subject to the foreign dividend withholding tax.

Investors and companies operating in Oman should carefully consider these amendments to the Omani Income Tax Law under SD 9/2017 along with their other obligations to the tax authorities, as the restructuring of the withholding tax to include dividends and interest may apply to them differently than it did in the past.

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Monday, July 17, 2017

Navigating Oman's Alcohol Policies and Permits

General overview of alcohol usage in Oman:

Oman is a Muslim country.  Pursuant to the Basic Law of Oman promulgated by the Sultani Decree 101 of 1996, Islam is the official religion and Shariah (Islamic law) principles form the underlying basis for the nation’s laws.  Therefore, in keeping with Islam’s prohibitions against alcohol, the purchase and consumption (and marketing) of alcoholic beverages are generally forbidden in Oman. 

However, the Omani authorities have made certain exceptions to this general prohibition in order to accommodate the tourism sector and expatriates residing in Oman.  Alcoholic products (beer, wine and spirits) are allowed to be sold at (i) liquor shops, (ii) airport duty-free shops, and (iii) certain hotels and restaurants which hold liquor licences issued by the Royal Oman Police (ROP), the Government authority that regulates alcohol-related matters in Oman.  There is little publicly available information with respect to the rules around obtaining alcohol permits in Oman.  Alcohol licences are not governed by published Royal Decrees or Ministerial Decisions, but rather by the ROP acting pursuant to its internal regulations and, to a great extent, pursuant to its ongoing discretion.  In practice, we note that the ROP would only permit restaurant owners, hotels, alcohol suppliers or airport duty-free shops (Applicant) to supply/sell alcohol to the end users.

Process of obtaining an alcohol permit in Oman

In order to obtain an alcohol licence, the Applicant will need to comply with the following requirements or the following circumstances will be taken into consideration:
  1. The Applicant must submit a written request together with certain supporting documents for the liquor licence to the ROP. The ROP will review and evaluate the Applicant’s request and issue a decision on a case-by-case basis.
  2. The Applicant must ensure that the premises are not located within a one-kilometer radius of a mosque.
  3. Proximity of the Applicant’s premises to residential areas.
  4. Religious sensitivities such as restrictions from serving alcohol in areas which are publicly visible.
  5. Suitable classification of the establishment in accordance with the applicable rating described in Ministerial Decision 39 of 2016 of the Ministry of Tourism (MOT) to be submitted along with the written request.
In order to obtain a liquor licence, the Applicant (i.e., restaurant owner) should be classified as a first-grade category entity. This classification is issued by the MOT. The MOT would evaluate each application for the classification on a case-by-case basis and assess the restaurant on the basis of the restaurant’s degree of service and hospitality.

Further, Article 49 of Ministerial Decision 39 of 2016 provides that a restaurant licenced by the Municipality may apply to obtain classifications from the MOT in accordance with the following requirements: (i) the restaurant shall have operated for at least one year prior to the application; and (ii) the restaurant shall satisfy the requirements and standards of the approved classification system for restaurants set out by the MOT.

Marketing of alcoholic beverages in Oman

The Government’s stance on marketing of alcoholic beverages is that it is strictly prohibited.  In practice, however, modest forms of marketing, such as signage for branded alcoholic beverages, can be found in many of the venues where alcohol is allowed to be sold (e.g., liquor shops and hotel pubs).
 
It is prudent to bear the following general principles in mind:
  • ROP regulates all matters related to alcohol including marketing alcoholic beverages. 
  • Alcohol sales are allowed – and branded alcohol marketing can frequently be seen – in liquor shops, airport duty-free shops, and licenced hotels and restaurants.  However, alcohol sales are – and likewise alcoholic products marketing would be – strictly prohibited outside of these venues. 
  • In the above-mentioned venues where alcohol is allowed, the alcohol marketing materials that can be seen tend to be modest in nature – for example, branded signage and furniture.  A more aggressive form of alcohol products marketing (e.g., promotional models, contests, or sampling) could likely attract a penalty from the ROP.
Consequences (including sanctions and penalties) for failing to comply with the relevant laws and regulations 

It is difficult to give definitive guidance on the consequences for failing to comply with alcohol rules, as there is no publicly available written guidance on the rules for marketing alcoholic products in Oman or the penalties for any violation in this area.  The Omani Penal Code, Sultani Decree 7 of 1974, in Article 228 addresses only a few alcohol-related matters, such as penalties for (i) appearing in public in an inebriated state or disturbing the peace while intoxicated (10 days in jail and/or fine of OMR 200 and (ii) selling alcohol without a licence (6 months to 3 years in jail plus a fine of OMR 300).

The general approach of the ROP to alcohol-related offences by selling establishments is as follows:
  • For first offence, fine of OMR 1000 (US$2600). 
  • For second offence, fine of OMR 2000 (US$5200). 
  • For third offence, 3-month suspension of liquor licence. 
  • For fourth offence, cancellation of liquor licence.
Therefore, it is possible that the ROP could at any time, in its discretion, choose to characterise the display of any alcohol product marketing materials as an alcohol-related offence and thus levy penalties in accordance with the schedule above. Such penalties would most likely fall upon the venue displaying the marketing materials, but it is conceivable that the ROP could also levy penalties against the party that supplied the marketing materials to the venue.

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Monday, July 10, 2017

Understanding Construction Contracts in Oman: An Employer's Perspective

The scope of work represents a key constituent of a construction contract as it is a key factor in a decision of an employer to choose a contractor and the structure of the contract. Accordingly, the scope of work can be summarised as the tasks promised to be accomplished by the contractor and expected by the employer. 

Determining the contractor’s liabilities, the scope of work and its implementation are generally at the source of a significant amount of litigation; therefore, it is key for any business to make sure that the scope is drafted with no ambiguities in the purpose of the smooth running of its project.

The scope of work, specifically in construction contracts, is frequently subject to change (variation); consequently, the parties should be aware that the foreseeability of such variations can be instrumental to ensure the continuity of the progress of work.

We published an earlier article (19 December 2013) which addressed “Variations to Construction Contracts” under the Standard Documents for Building and Civil Engineering Works (Fourth Edition – September 1999); today, Decree 29 of 2013 enacting the Civil Code (“SD 29/13”) provides a regulatory framework on this matter. 

Article 640 of Decree 29/2013 enacting the Civil Code states the following:

1. If a contract is made under an itemized list on the basis of unit prices and it appears during the course of the work that it is necessary for the execution of the plan agreed substantially to exceed the quantities on the itemized list, the contractor must immediately notify the employer thereof, setting out the increased price expected, and if he does not do so he shall lose his right to recover the excess cost over and above the value of the itemized list.

2. If the excess required to be performed in carrying out the design is substantial, the employer may withdraw from the contract and suspend the execution, but he must do so without delay and must pay the contractor the value of the work he has carried out, assessed in accordance with the conditions of the contract.

Article 641 of the same Decree states as follows:

1. If a contract is made on the basis of an agreed plan in consideration of a lump sum payment, the contractor may not demand any increase over the lump sum as may arise out of the execution of such design.

2. If any variation of addition is made to the design with the consent of the employer, the existing agreement with the contractor must be observed in connection with such variation or addition.

With the two above-mentioned articles, it is clear that the Civil Code adopts a clear segregation between contracts based on the type of pricing and subjects each to a specific regime with regard to the effect of the variation in the scope: 
  • The first type of contract is the one in which the pricing is set based on a “unit price”; in this case the legislator subjects the possibility of increasing the price to two conditions:
    • Discovery during the work for the necessity of substantially exceeding the scope of work; and
    • The immediate notification to be made by the contractor to the employer of the excess.
  •  
    The lack of an immediate notification would lead directly to the loss by the contractor of its right to recover the excess.
     
    In this first type, Article 640 offers to the employer the possibility, in case of a substantial increase, to withdraw from the contract and resort to remedies, such as the suspension of the contract.
    • The second type of contract is the one in which the pricing is set based on a “lump sum payment” where the contract, in principle, may not demand an increase over the lump sum for the execution of the design agreed on earlier; any change to this design should be made with the consent of the employer.
In practice, for this second type of contract, a recent court ruling has shown that the Omani Court of Appeal is adopting a broad approach towards the interpretation of the “consent of the employer” where, in some cases, remote factual indications, presumptions or clues, such as providing the contractor with the paperwork or administrative support to obtain necessary licences for the execution of the design resorting to a more expensive implementation mean, is deemed an acceptance of the increase.

Facing this broader interpretation of the employer’s consent, it is in the interest of the employer to properly document, in explicit terms, its position in relation to matters in connection with the scope of work in a construction contract.

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