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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Wednesday, July 5, 2017

Drafting, Enforcing and Terminating Power of Attorney in Oman: Key Considerations

Definition of Power of Attorney under Omani law

While there is no specific law in Oman governing the granting and use of a power of attorney (“POA”), POAs are described and regulated through various Sultani Decrees and other laws. According to Article 44 of the Property Registry Act, promulgated by Sultani Decree 2 of 1998 (“SD 2/98”), each POA shall refer to the specific contract which allows a person (the “attorney”) to undertake certain business for the sake of the principal. The attorney shall not be permitted to enter into an agreement with himself, unless the POA clearly refers to such an arrangement.

Article 45 of SD 2/98 requires that a POA be specific and explicit. A POA in relation to sales, mortgages, donations, distributions, or waivers must state the specific transaction that needs to be effected. In contrast, a POA that contains general expressions only authorises the attorney to undertake administrative works.

With respect to lawyers, the Advocacy Law promulgated by Sultani Decree 108 of 1996 (“SD 108/96”) does not permit lawyers to represent clients in a dispute unless a POA specific to this purpose is issued and certified. According to Article 43 of SD 108/96, this POA should be granted with specific reference to the lawyer, who may only act within the limits assigned to him by the client in accordance with the claim. Unless specifically prohibited by the POA, a lawyer may delegate acts permitted by the POA to other lawyers associated with his office. In practice, Omani judges generally request lawyers to provide a copy of their POA during the first court hearing in order to verify their powers and obligations in representing their clients.

Enforceability of POAs

In order for a POA to be valid and enforceable, it must be executed and signed before a notary public in Oman. Alternatively, if the POA is executed outside Oman, it must be: (i) signed before the notary public in that country; (ii) stamped by the Ministry of Foreign Affairs in that country; and (iii) stamped by the Omani Embassy in the country where the POA is issued.

The notary public in Oman only certifies POAs that are issued in Arabic. If a POA is in another language, before taking it for signature before the notary public, applicants must ensure that the POA is translated into Arabic, stamped and attested by an official translator (who is certified and registered as a translator by the Ministry of Justice), and attested by the Oman Chamber of Commerce and Industry.

It is important to note that the notary public in Oman takes an active approach when certifying a POA. According to Article 42 of SD 2/98, prior to undertaking the authentication, the certifier (i.e., the notary public) shall verify the identity of the contracted parties and their eligibility, as well as the relationship of the representative and the scope of his authorisation. Article 43 of SD 2/98 requires that prior to the concerned parties signing the POA, the notary shall read the POA in its entirety and explain its legal effect to the parties.

In order for the notary public to comply with these obligations, the notary public generally requests the applicant to provide a valid passport copy (if the applicant is a foreign national) or a copy of the Omani identity card (if the applicant is Omani). If a POA is executed on behalf of a company, the notary public will require the company’s valid commercial registration document to verify the powers of the authorised signatories signing on behalf of the company.

Key considerations when drafting a POA

Omani law does not provide a comprehensive list of what needs to be included in a POA, but in practice the notary public tends to review POAs in detail to ensure that the following items are included:

1. the duration of the POA;
2. the obligations of the attorney;
3. the limitations on the authority of the attorney;
4. if applicable, the party signing on behalf of the company (i.e., whether he is authorised to act on behalf of the company); and
5. the governing law of the POA.

Validity period of POAs


POAs executed in Oman must be issued for a defined period of time, and cannot be indefinite. The Ministry of Justice has recently announced that the validity period of all POAs executed in Oman must be two years or less from the date of issuance. Prior to this, all POAs issued in Oman were valid for a period of five years. It is now necessary to renew POAs every two years, and it may also be advisable in certain cases to include an undertaking to renew within the POA itself.

Termination or revocation of POAs

Generally, a POA will automatically terminate upon the death or the insolvency of the principal, or after two years from the date of execution of the POA. Omani law does not allow for a POA to be irrevocable, and principals are entitled to revoke a POA prior to the lapse of the two-year validity period. In order to revoke a POA, the principal must sign a revocation deed before the notary public. If the principal is a company, the notary public requires that the revocation deed be signed by the authorised representative(s) of the company holding unlimited powers to act on behalf of the company. The principal must also ensure that the original POA is attached to the revocation deed, along with a valid commercial registration document in the case of a company.

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