Curtis Welcomes Linna Al Kendi

Linna Al Kendi is a recent addition to Curtis’ Muscat office. Ms. Al Kendi is an associate in the Corporate International department and advises clients on general corporate and commercial matters.

 

Before joining Curtis, Ms. Al Kendi worked in private legal practice and most recently was Board Secretary and Legal Counsel at an Omani publicly listed company. She has extensive experience in commercial company law, corporate governance and Omani legal procedure. Ms. Al Kendi also has experience in commercial litigation, having advised clients in commercial, civil and labor matters.

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Social Protection Law 52/2023

Social Protection Law 52/2023 (the “SPL”) is heralded as a groundbreaking new law which will reshape the social protection framework within the Sultanate of Oman. 

One of the notable provisions of the law is the establishment of a unified social protection system that integrates various existing programs and services under one umbrella, ensuring better coordination and efficiency. It introduces a comprehensive framework for social protection, covering areas such as income security, healthcare, workplace injury and disability, education, and housing. Importantly, it includes many protections that apply for both Omani citizens and expatriate residents alike. 

For many businesses, and expatriate employees, Articles 138 and 139 of the new law will be of particular interest. These provisions will eventually amend the existing End of Service Benefit (“EOSB”) system provided for in the Labour Law. The SPL introduces a savings fund, into which 9% of an employee’s monthly salary is to be paid. Full details of how the fund will be implemented will be announced in due course. It is expected that the new EOSB system will be implemented over the next three years. Until that time, the current EOSB system will continue to be in place. These provisions are intended to bring greater certainty to employees in regard to EOSB payments, and streamline the process for employers. 

Curtis will provide updates as further details on the implementation of the SPL are announced.

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Introduction to the Key Changes in the New Oman Labour Law Rd 53/2023

On 24 July 2023, Oman issued Royal Decree 53/2023 The Labour Law (the “New Labour Law”) introducing a raft of changes intended to modernize the existing law, encourage productivity and enhance and balance rights and duties in the work environment.  The New Labour Law replaces the existing law that has been in place since 2003 and includes significant changes for business operating in Oman.  The new law came into effect following publication in the Gazette on 30 July 2023, and regulations pursuant to the new law are expected to be issued in the coming months. 

Importantly, employers in Oman must ensure compliance with the New Labour Law within six months, i.e., by 30 January 2024.  Businesses should begin to review their employment contracts and manuals for compliance now, and discuss with employees how the New Labour Law will affect them. 

Curtis sets out below a summary of the key changes that will be of interest to both employers and employees:

Sick Leave/ Paid Leave /Special Leave:

• Sick leave:  The new law increases maximum paid sick leave from 10 weeks to 182 days per year.  Payment of salary while on sick leave is per a tier graduated throughout the 182-day period.  The period of 100% paid sick leave is extended from two weeks to three weeks.

• Special leave: 
• Increases the leave in the event of death of a spouse, son or daughter from three days to 10 days.
• Introduces 14 days’ leave for non-Muslim women in the event of the death of a husband. 
• Increases maternity leave to 98 days, in addition to a maximum of one year of unpaid leave for childcare at the discretion of the employee.  In a welcome change, introduces seven days of paternity leave.
• Introduces special leave of 15 days to accompany a patient with material relationship or up to the second degree when seeking health care. 
• Removes emergency leave, and introduces unpaid special leave at the discretion of the employer without pay/PASI contributions.
• Provides that up to 30 days’ annual leave may be carried over to the next year. 

Working Hours: 

• Maximum reduced from 45 hours a week to 40 hours a week (i.e., from nine hours per day to eight hours per day).  Increases minimum daily break timing from 30 minutes to one hour.
• One-hour break per day for nursing mothers for a period of one year from the end of the maternity leave. 
• Ramadan working hours are not changed and remain at six hours per day/30 hours per week for Muslim employees.

Overtime:

• Introduces a regime to govern circumstances in which an employee may be entitled to overtime or time in lieu. 

Omanisation, Productivity, Redundancy and Termination:

• In order for companies to meet Omanisation requirements, employers are permitted to terminate non-Omani employees.  The replacement of the terminated expatriate worker must be an Omani citizen. 
• Employers are permitted to terminate an employee for poor performance if an employee fails to perform, and failed to improve its performance after notice, over a period of six months.  There are strict conditions that must be complied with and, in practice, such procedure will need to be carefully managed and documented.  If an Omani employee is terminated for poor performance, any replacement employee must be an Omani citizen.
• Redundancy, or termination for economic reasons, is now recognized by law.  However, in order for redundancy to be considered lawful, an employer must follow a strict procedure, which includes obtaining prior approval from a Ministry of Labour committee.  The committee will consider the request for redundancy and take into consideration alternative measures such as reduction in working hours and salaries.  It should be noted that non-profitability or failure to be successful in the market do not automatically qualify as evidence of financial loss and the ability to invoke redundancy. 
• Time limits for notifying the Ministry of Labour of an employee’s termination for actions that resulted in significant financial loss to the employer have been extended from three days to 30 days. 

Compensation for Unjustified Termination:

• In cases of unjustified termination, any court-ordered compensation is now capped at 12 months of gross salary.  The previous Labour Law provided a minimum of three months’ compensation for unjustified termination, but did not set a maximum cap. 

Project-specific and Fixed-term Contracts: 

• Fixed-term contracts no longer automatically become permanent or unlimited after the passing of two years’ continuous employment.  However, they may do so after five years of continuous employment.  This is also the case with project-specific contracts.

Restrictive Covenants: 

• Parties may agree to non-compete clauses in certain prescribed circumstances.
• Such restriction is limited to an agreed period of not more than two years, and is to be limited to the geographic area of the business.
• As previously, it is unlikely that a two-year restriction could be justified in most circumstances. 

End of Service Benefit (“EOSB”):

• The new law increases the expat gratuity payment, from 15 days per year for the first three years of service and 30 days after the third year, to 30 days for each year served from the first year of service in the new law.  There are also new provisions governing when and how EOSB is to be paid.  
• Importantly, EOSB under the New Labour Law will eventually be impacted by the new Social Protection Law (RD 52/2023) that has also been issued in the past month.  The Social Protection Law provides for the mandatory creation of a “savings fund” for expatriate workers.  Details as to the commencement date for the fund will be released by way of a Ministerial Decision to be enacted within three years of August 2023.  Once this fund is in place, we expect that it will replace the EOSB provisions currently prescribed in the New Labour Law.

Discriminatory Practices:

• Termination based on discrimination regarding gender, race, disability, or labour union affiliation is expressly prohibited by the New Labour Law. 

Non-payment of Salary/Constructive Dismissal:

• Should an employer fail to pay an employee’s salary for two consecutive months, the employee has the right to terminate the employment contract without the need to serve the contractual notice period.  This is akin to constructive dismissal laws in other jurisdictions. 

Strikes and Collective Action:

• The New Labour Law brings in a range of new provisions governing the settlement of collective labour disputes, strikes, and lockouts.

Essential Steps

As noted, all companies operating within Oman must comply with the new mandatory provisions of the New Labour Law by 30 January 2024.  Now is a good time to review existing contracts, standard form employment contracts and company manuals to ensure compliance. 

It is likely that existing employment contracts will need to be amended to take account of changes around emergency leave, sick leave, individual performance requirements, maternity and paternity policies, EOSB, and policies to account for new provisions regarding bullying, harassment and non-discrimination.  

Please feel free to contact the Curtis team for assistance or to seek further details and clarification of the new law.

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Omani Renewable Energy and Clean Hydrogen Law

In a first of its kind, Oman has recently issued a royal decree (RD 10/2023: Allocating Some Lands for the Purposes of Renewable Energy and Clean Hydrogen Projects) in response to the fast-growing hydrogen power sector and the nation’s desire to become a global hydrogen export powerhouse. 

The Royal Decree follows from the establishment of the state-backed hydrogen energy company in early 2022, Hydrogen Oman Company (Hydrom), and the directives from His Majesty Sultan Haitham bin Tarik, which called for effective institutional and regulatory foundations to be laid to support the growth of a future green hydrogen economy in Oman. Oman is targeting the production of around 1 million tonnes per annum of green hydrogen by 2030. 

The Decree comes less than two months before Hydrom is set to award the first two land blocks at the end of the maiden round of a competitive auction process over land allocations for mega green energy projects. Final offers for a pair of land blocks currently being auctioned by Hydrom are due middle of March 2023, with an award likely by end of April 2023. The successful bidders in the auction process will secure a block each of 320 sq km in Duqm to develop all phases of their green hydrogen projects. 

The Decree with its eight articles identifies those lands, by way of masterplan attached to the Decree, that will be allocated for the purposes of renewable energy and clean hydrogen projects. The Decree also sets out the responsibilities and duties of Hydrom in the allocation and division of the lands, which include the grant of usufruct of the lands to Hydrom (Article III) and the responsibility and duty of Hydrom to contract with others to use the divided lands for the purposes of renewable energy and clean hydrogen projects by way of an auction (Article IV). 

Such provisions are in confirmation and governance of the auction process that is currently underway. Supporting guidelines to the Decree in the form of Executive Regulations from the Ministry of Energy and Minerals are expected to follow. 

With a leading and well-renowned Green Hydrogen legal team, both nationally and internationally, Curtis is well placed to provide any required legal support in the fast-paced and ever-evolving green hydrogen economy sector. 

Curtis offers free seminars to interested clients on all aspects of the industry, and can tailor a seminar based on individual requirements. Please contact Curtis if this should be of interest.

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Regulatory Framework for Virtual Assets

 As Oman’s financial market regulator, the Capital Market Authority (CMA) plays an important role in ensuring the stability of the country’s financial system. With the rise in popularity of virtual assets such as cryptocurrencies, the CMA has indicated its intention to establish a regulatory framework to address the unique risks and challenges presented by these new types of assets. 

Establishing a regulatory framework for the virtual asset industry in Oman will likely provide greater clarity and certainty for investors and businesses operating in this space, and help prevent any fraudulent or illicit activities. The CMA’s efforts to regulate this industry will also likely attract more investment and promote innovation in the virtual asset sector. 

Under the proposed framework, virtual asset service providers will be required to: 

• obtain a license from the Central Bank of Oman, 
• comply with anti-money laundering and counter-terrorism regulations, 
• implement robust security measures, and 
• maintain adequate levels of capital and insurance. 

The proposed regulatory framework also includes provisions for investor protection, market integrity, and transparency, such as requirements for disclosure of information, fair treatment of investors, and measures to prevent market manipulation. 

Overall, the establishment of a regulatory framework for virtual assets in Oman is a positive development. The framework will be welcomed by both investors and the sector if it strikes a balance between protecting investors, and ensuring the continued growth and development of this important and rapidly evolving industry, while also protecting the integrity of the financial system.

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In the Pipeline: New Labour Law Moving Closer to Enactment

The eagerly anticipated replacement for the current Labour Law, RD 35/2003 (enacted in 2003), is progressing closer to enactment. In early March 2023, the Majlis A’Shura completed its review of the law and submitted proposed amendments and additions to some articles of the draft law. The draft Labour Law is now with the State Council to be further considered and progressed. Curtis will keep its clients updated and provide a full summary and analysis of the new law once it comes into force.

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Arbitration Time Limits

Some well-known standard construction contracts used in Oman contain strict time limits on the process of taking a dispute to arbitration.  In addition, there are time limits prescribed by Omani law regarding the commencement and duration of an arbitration.  This article sets out issues regarding these additional time limits.

An English translation of Article 45 of the Law attached to Royal Decree 47/1997 (often referred to as the Oman Arbitration Law) provides:

1. The arbitration board shall have to pass the final award in respect of the dispute within the time period agreed upon by the parties.  In the absence of any agreement, the award shall be required to be passed within 12 months effective from the date of commencement of the arbitration proceedings.  In all circumstances, the arbitration board may decide to extend the period of the proceedings for a further period.  However such extension shall not exceed six months, unless the parties agree to a period beyond six months.
2. In the event, the arbitration award has not been passed within the period referred to in the preceding paragraph, either party to the arbitration may request the President of the Commercial Court to pass orders prescribing an additional period or have the arbitration proceedings brought to an end.  In such a case, either party may file his claims before the competent Court.

Note that:

1. Unless the period is extended in some way, the arbitral tribunal has only 12 months to issue an award;
2. The tribunal itself may grant itself an extension of six months (i.e., extending the 12 months to 18 months);
3. The parties may agree to any further extension; and
4. The President of the Commercial Court may grant a further extension, on the application of one party.

It is also worthwhile to note that potentially the Commercial Court may extend the time for arbitration, even after the time has expired.  So, all is not necessarily lost if the tribunal fails to issue an award in time but, if you are in such a situation, you should urgently seek legal advice. 

12 months, or even 18 months, is a short period for any arbitration of any complexity, so often parties agree to an extension, remind the tribunal to extend, or are ready to go to Court to get the extension if need be.  Past experience suggests that the Court will tend to give an extension of six months, but naturally this depends on the case, the reasons for the delay, and so forth.

Of particular note for those unfamiliar with arbitration in Oman is Article 27.  Article 27 (English translation) of the Oman Arbitration Law provides:

The arbitration proceedings shall commence on the day on which the defendant receives from the plaintiff the application for arbitration unless both the parties agree upon some other date.

Usually, the defendant is notified when they receive a document typically titled “Request for Arbitration” or “Notice of Arbitration.”  Bear in mind that at this stage the tribunal members have usually not been selected.  The appointment of the tribunal often takes months, and this will eat into the 12-month period.  For this reason, in Oman, it is often agreed in writing between the parties that the commencement date for the arbitration is a later date (such as the date of the first hearing or meeting with the tribunal).  Alternatively, a longer extension for the issuance of an award is agreed to compensate.

These procedural issues are all manageable, providing you receive advice from those experienced in handling them.  However, they cannot be ignored, and you should be aware of the need to quickly and diligently proceed with any arbitration.

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Dispute Resolution Provisions and Staged Processes – Issues to Consider

When agreeing to the terms of a contract at the outset of a relationship, parties sometimes include explicit contractual provisions setting out steps that must be complied with should a dispute arise.  Parties may choose to adopt a staged approach such as including service of a notice of dispute, an initial meeting of the parties or directors of those entities to engage in negotiations, formal mediation between the parties, and a period that should be allowed before a dispute can be referred to either the court or arbitration.  Contractual provisions of that nature are known as dispute escalation clauses and are commonly seen in long-term agreements such as construction contracts.  A failure by one party to comply with the exact process prescribed may give rise to arguments that the court or tribunal lacks jurisdiction to hear the dispute.

At the time of drafting such a clause, it is, therefore, important to consider the impact a dispute escalation clause may have later in the relationship should a dispute arise, and whether the contractual provisions accurately reflect the intention of the parties.

When enforcing a dispute escalation clause such factors to consider include whether the clause makes clear what steps must be taken by the parties, and that those steps are mandatory.  When drafting this type of clause, it is therefore crucial to ensure that each step is clearly defined and there is no ambiguity as to the time period for completion of each step.  To avoid potential deadlocks, it is essential to specify clear deadlines if parties are required to complete each step before moving on to the next, e.g., 30 days for a meeting of directors, 30 days for negotiation to take place thereafter, and 60 days for a mediation to take place.  Regarding mediation in Oman-related disputes, it is important as well to consider whether to include any such provisions requiring parties to enter into a mediation, given the absence in Oman of the concept of “without prejudice” negotiations in a mediation. 

Another issue to consider is whether such dispute contains all issues as currently between the parties.  For example, if new issues and disputes arise between the parties during the course of the dispute resolution process, consideration should be given whether the new disputes form part of the current dispute or are separate, and whether a party needs to revert to the beginning of the dispute resolution process in order to comply with the dispute escalation provisions as agreed between the parties. 

Failure to comply with the requirements

So, what is the effect of failing to meet the established pre-arbitral requirements?  Failure to comply with dispute escalation provisions could result in a party facing a preliminary issue or jurisdiction challenges in an arbitration.  Although a number of International Institutional Arbitration Center Rules (LCIA Rules 2020, DIAC Rules 2022, ICC Rules 2021) give a tribunal the power to rule on its own jurisdiction, a tribunal may nonetheless be reluctant to accept jurisdiction on the basis that the pre-arbitral stages in a dispute resolution procedure have not been complied with. 

The New York Convention is important in the context of enforcement.  Articles II.1 and II.3 provide that where there is an agreement in writing to submit a dispute to arbitration, and unless that agreement is null and void, inoperable or incapable of being performed, the court of a Contracting State shall recognise an arbitration agreement between the parties and, at the request of a party, refer the dispute to arbitration.  Parties should therefore be mindful not to render the agreement “inoperable” on the basis that pre-arbitral stages in a dispute resolution procedure have not been complied with.

In summary, when agreeing to the terms of a contract at the outset of a relationship, parties should be mindful of the requirements and dispute escalation provisions as agreed in a dispute resolution clause in a contract.  If a dispute arises between the parties, a party should also be mindful of accurately and fully complying with the escalation provisions as set out in the dispute resolution clause so as to avoid any potential issues and challenges to jurisdiction arising in any subsequent arbitration.

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Curtis Delivers More Firsts for the Government of Oman in its Defence Against U.S. Trade Measures

On 16 August 2022, the U.S. Department of Commerce issued its final determination in its countervailing duty (“CVD”) investigation of steel nails from the Sultanate of Oman. A Curtis team led by partner Matt McCullough helped secure a favourable final result for the Government of the Sultanate of Oman (“GSO”), including a first-ever finding by the Commerce Department in an Oman CVD case that the provision of electricity conferred no subsidy benefit on the company respondent.

Relying on a team drawn from Washington, D.C., Paris and Geneva, and on the ground in its Muscat office, Curtis delivered a victory for the GSO, with the final CVD margin for the lone Omani company respondent, Oman Fasteners, set at just 2.49%. The low margin will help Oman to retain its competitive edge. This result follows two earlier Curtis wins for the GSO. A year ago, the same Curtis team secured a huge victory for the GSO in a case involving aluminum foil, in which the GSO successfully beat back allegations of government-directed lending to the respondent in that case. In 2016, another Curtis team also led by partner Matt McCullough delivered a de minimis CVD outcome, resulting in no CVD order on exports of PET resin from Oman.

“We are proud of what we have achieved for the GSO,” said partner Matt McCullough. “These are complex cases and the U.S. Department of Commerce investigation process requires careful attention under incredibly tight deadlines. I firmly believe that no other firm can deliver both the expertise and the commitment that Curtis brings to the table in Oman and elsewhere.” McCullough was recently identified in Legal 500 USA as regarded by many to be “the top countervailing duty lawyer in DC.”

The result “reflects Curtis’ position as market-leading counsel to sovereign clients in complex disputes,” said Muscat Managing Partner Simon Ward. “Our platform delivers high-level substantive experience, a deep understanding of the GCC region, and a committed team of experienced lawyers that can be called upon across our numerous global offices,” Ward added.

Mr. McCullough’s team included Geneva and Paris associates Arthad Kurlekar and Amrane Medjani, as well as Muscat associate Budoor Al Zadjali. Muscat partners Simon Ward and Mehdi Al Lawati were also instrumental in the defence.

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Restarting Suspended Construction Projects – A Quick Guide to Preventing Disputes

It is common for employers and contractors to fall into dispute over suspended projects and their recommencement, particularly in regards to time and costs, changes in design and scope of works. With many projects that were stalled during the Covid pandemic, and the period of lower oil prices, now being restarted, Curtis provides an overview of the key issues to consider together with the main causes of disputes and how to successfully navigate restarting suspended projects.

Pre-Suspension Losses

Contractors should consider what losses they may have incurred prior to a project being suspended. It is very common that, prior to receiving an instruction to suspend works, the employer will have slowed the contractor down in their works which will have caused a loss in productivity. A contractor should consider whether a claim for prolongation or disruption exists prior to suspension.

To establish disruption, a contractor would be required to undertake a review of its productivity in carrying out the works over the schedule in order to determine when lower productivity occurred and what work activities were impacted. It is likely expert analysis will be required to determine the loss of productivity arising out of the disruption events, and the resulting financial loss. As always, good records are essential. 

Suspension

• Costs incurred protecting the works against any deterioration, loss or damage. 
• Downtime/standing time of plant/equipment and labour. 
• Depreciation of equipment. 
• Prolongation costs – staff, insurance, bonds, extended warranties, accommodation, storage facilities. 
• Making good unavoidable deterioration of the works. 
• Loss of revenue. 
• Interest. 
• Other general damages suffered.

Extension of Time

A contractor should be careful to document the employer’s suspension of the works, and carefully maintain project documentation/evidence in order to support any claim for extension of time. It is almost certain that any claim for extension of time will need to be supported by a delay analysis, and therefore a contractor should collect and preserve evidence of progress and instructions to suspend work. This evidence will be critical to support a delay analysis. A contractor should ensure that the following are carefully maintained during execution of the works, and carefully stored and controlled during suspension: 

• Minutes of meetings. 
• Site inspection records. 
• Daily, weekly and monthly reports. 
• Schedules/programs. 
• Design documents. 
• Equipment logs. 
• Photographs of progress and key milestones.

Such documentation will be essential to undertake a helpful analysis examining the status of the works and the critical path prior to any slow down or disruption prior to suspension.

Project Restart – Practical Considerations and Costs

Key issues that a contractor should examine and consider prior to restarting suspended project works:

• Is there an agreed and documented procedure for restarting? 
• Is the design still correct and/or viable? 
• Is the existing project execution plan still workable? 
• What project documentation/records are still in place? 
• Is it possible to jointly agree a condition survey with the employer? 
• Can variations be agreed prior to recommencement? 
• How are the project restart works priced? 
• Is timing, sequence and quantity agreed? 
• What is the basis of pricing the restart works? 

Some cost considerations to be considered before restarting the project:

• What is the impact of suspension/restart on the project’s material costs? 
• Has there been any impact by inflation, escalation, commodity prices, availability of material? 
• Have suppliers changed during the suspension period and, if so, does this impact time or cost? 
• Is it necessary to revisit BOQs and rates/prices? 
• Will there be a need to replace already installed material? There have been significant increases in prices during 2020-2022 of concrete, steel, cabling, timber. This should be factored in and agreed before restarting works.

Impact on Personnel and Rate of Progress

A review should be undertaken to consider what, if any, changes in personnel have occurred. Changes in personnel can result in a decrease of rates of progress and efficiency, due to loss of project and site knowledge. Any such losses should be taken into account and provided for. Some issues to consider:

• Have there been any regulatory or procedural changes during the period of suspension that have increased costs during remobilization? 
• Any changes in regulation also may impact pricing if specified materials have changed or are no longer available due to supply chain restrictions, sanctions, or availability of materials produced overseas. 
• Are subcontractors still available? 
• Has the introduction of VAT had any impact on costs? 

Key Takeaways

Prior to restarting a suspended project, both parties should give serious thought to the issues above, and be realistic and aligned: the original project schedule will unlikely still be suitable for the project. At a minimum, the parties need to undertake a review of the schedule, consider prolongation costs, and reconfirm the scope of works. The parties need to work together if restarting a suspended project is going to move successfully towards completion without disputes arising. 

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