Tuesday, October 27, 2009

Agents and Defense Contracts

In April 2001, the Omani Ministry of Defense ("MOD") issued a circular to overseas defense manufacturers, stating that the Ministry would not allow such entities to have an Omani agent, except in exceptional circumstances approved by the Ministry.

However, in 2003, both Oman's Appeal and Supreme Courts ruled that the MOD letter had no legal effect, as it was not a promulgated Omani statute. These Courts stated that Oman's Law of Commercial Agencies still applied.

Then, in 2005, the Law of Commercial Agencies was amended by Royal Decree. The wording of the amendment stated that contracts for the purchase of weapons or ammunition or all types of military equipment could be entered into directly between the MOD and the overseas defense manufacturer.

However, the amendment to the law did not prohibit an overseas defense manufacturer from having an Omani agent. The true construction of the relevant sentence shows that the law is simply saying that an agent is no longer mandatory for defense contracts.

Nonetheless, regardless of the law, the practical truth is that, unless the MOD agrees in advance, it prefers agents not be involved in such transactions.