Friday, April 30, 2010

Sultanate Approves Amendment to Arab Agreement for Combating Terrorism

The Sultanate recently issued a Royal Decree approving an amendment to the Arab Agreement for Combating Terrorism. The amendment, which was previously approved by the Council of Arab Ministers of Justice and by the Council of Arab Ministers of Interior, sets forth the definition of “Terrorist Crime.”

Pursuant to this amendment, the Arab Agreement for Combating Terrorism now defines a “Terrorist Crime” as “any crime committed or attempted for terrorist purposes in any country which is party to the Agreement and punishable by that country’s internal law.” Furthermore, the dissemination of materials encouraging or provoking a Terrorist Crime itself shall be considered a Terrorist Crime.

Finally, the amendment incorporates the definitions of terrorist crime used in several international treaties, but only to the extent that such definitions do not conflict with the internal laws of the signatory countries to the Arab Agreement for Combating Terrorism.


Tuesday, April 27, 2010

Criminal Complaints Process in Oman

Everyone wishes to avoid having a criminal complaint filed against them. In Oman, however, such complaints can be hard to avoid. It may be that a customer of yours has issued a cheque that bounces. Or it could be that someone has lodged a criminal complaint against you or one of your employees. Indeed, expatriates are sometimes surprised how easy it is to become embroiled in a criminal complaint. People have been the subject of a criminal complaint in Oman when they have sworn at a co-worker, or chided a fellow motorist - this is because the Oman statute book includes a crime of "affronting one's dignity." Criminal complaints typically follow a common process. First, a criminal complaint is filed with the Royal Oman Police ("ROP"). The police then investigate the crime. Normally, within a few days, they will call the accused in for questioning, at which point it is advisable for the accused to have a lawyer. Often the passports of expatriates are confiscated at this point and fingerprints are taken. On the other hand, even when the alleged crime is quite serious (e.g., negligent driving leading to a death), those accused are known to have retained their passport right up to the final judgment in the Criminal Court. Needless to say, this arbitrariness can be avoided by guidelines to authorities on confiscation of a defendant’s passport. If the police conclude that there is a case to answer, they file a report with the Public Prosecutor. Meetings with the Public Prosecutor may follow. If the Public Prosecutor decides the accused should be put on trial, the case moves to the Criminal Court. Time frames depend on the nature of the alleged crime, but proceedings can move very fast. We have seen cases move from complaint to final criminal court judgment within six months. One cannot ignore the fact that sometimes spurious criminal complaints are lodged against expatriate employees to exert commercial pressure on foreign entities. This typically is seen in a foreign principal-Omani agent scenario, in which the principal has seconded an employee to work with the agent. At a later date, the principal desires to terminate the agent. This leaves the principal's employee, who is in Oman under the sponsorship of the Omani agent, vulnerable to a potential criminal complaint of some nature. This may take the form of the agent saying that the employee is not keeping confidential such documentation which traditionally the employee had always shared with his "head office" (i.e., with the principal's overseas headquarters). In short, we recommend you always seek legal advice in any matters pertaining to alleged crimes.


Thursday, April 22, 2010

Historical Development of Oman’s Labor Union Laws

Labor Unions in Oman – Part I

On February 15, 2010, Muscat hosted the founding conference of the Sultanate’s General Labor Union, the national federation of Oman’s labor unions. The conference, attended by high-level officials from the Sultanate, international labor organizations, and Oman’s labor and business communities, marked an important milestone in the growth of labor unions in Oman. This two-part series explores the law of Labor Unions in Oman. Part I below charts the historical development of the Omani law in this area. Part II, which will be posted next month, will discuss important features of the current Omani law governing laboring unions. Foundations: the Labor Law of 2003 In 2003, the Sultanate of Oman enacted a comprehensive labor law by Royal Decree, which remains the basis for all labor-related laws in Oman. The Labor Law did not explicitly provide for labor unions. However, it did endorse the concept of labor organization by providing that workers could form representative committees among themselves for the “protection of their interests and for defending their legally prescribed rights, and for representing them in all matters that relate to their affairs.” These representative committees were further permitted to form a principal committee to represent them in local, regional and international meetings. By thus granting workers the right to organize to protect their interests, the Labor Law laid the foundation for the emergence of conventional labor unions in Oman in the years to come. Further Developments: Aligning Omani Law with International Standards Throughout this past decade, the Sultanate has moved to further integrate into the global economy, and in connection with this initiative has moved to bring Omani law into closer alignment with international standards. In 2006, as part of the Free Trade Agreement that Oman entered into with the United States, the Sultanate pledged to strive to ensure that its laws provide for labor standards consistent with internationally recognized labor rights, including the right of association and the right to organize and bargain collectively. To this end, the Sultanate issued two Royal Decrees in 2006 that strengthened the legal framework for labor unions in Oman. The Royal Decrees explicitly recognized labor unions and provided for collective bargaining and peaceful strike processes. The 2006 Royal Decrees also called for the formation of a Sultanate’s General Labor Union to serve as a confederation of Oman’s labor unions. The founding conference of the General Labor Union held this month has made that pledge a reality, and shows the Sultanate’s commitment to labor unions as a forum to promote harmonious and productive employer-employee relations in Oman.


Tuesday, April 13, 2010

Bid Bonds

As part of the tendering process in Oman, bidding contractors will often arrange for a third party guarantor (usually a bank or insurance company) to issue a bid bond on their behalf to the project owner, as a guarantee that the winning bidder will perform its contract in accordance with the terms of its bid. The bid bond is subject to full or partial forfeiture if the winning bidder fails to either execute the contract or replace the bid bond with the requisite performance bond.

Bid bonds typically range in value from one to three percent of the tender contract price. Under Omani law, a bid bond must be for at least one percent of the contract price or project value, and the bid bond must have a minimum duration of ninety days (which is extendable). A bidder seeking to withdraw its bid after the bid opening will lose the bid security. Unsuccessful bidders are reimbursed for the bid bond upon losing the tender.

Pursuant to the new Tender Law issued by Royal Decree 36/08, non-submission of the requisite bid bond with the bid can be grounds for disqualification of the bid. The winning bidder must replace the bid bond with a performance bond for five percent of the contract price within ten days (for foreign bidders, twenty days) of being notified of the acceptance of the tender. Failure to provide the performance bond within the stipulated number of days can result in the full amount of the bond becoming payable to the owner of the project as compensation for the default and, additionally, could lead to cancellation of the award.

Consultancies, being specialist “knowledge industries” without adequate assets for issuing bid bonds/guarantees, can be required to submit professional indemnity insurance (in lieu of a performance bond) that provides cover from claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services. However, in competitive bids, the clients may require bid bonds from consultants to discourage and eliminate non-serious bidders.

The new Tender Law has a much wider scope than its predecessor and seeks to encompass all units of the government apparatus, including quasi-government entities such as state-owned enterprises, regulatory bodies and public establishments. The Tender Law delineates five different types of procurement processes for works and services. These include procurement by public tender, direct award and restricted tender. The Tender Law provides that a bid bond is not required for works or services accepted pursuant to awarding a contract directly. The law also specifies the circumstances for direct award of a contract based on necessity, contract value, best commercial terms and winning entry of a competition for designs or studies.


Thursday, April 8, 2010

Nuclear Energy Development Series (Part 1)

Safety and Liability Measures

Oman’s plans to develop a peaceful nuclear energy program are an exciting prospect and hold great potential for the Sultanate’s future. In order to help make its nuclear energy program a reality, Oman would be well advised to consider establishing a supportive legal and regulatory framework. Having the proper legal and regulatory framework in place would help the Sultanate gain access to the technological support from other nations that it will need to develop its nuclear program. As discussed in our March 1 post, the first important step that aspiring nuclear countries usually take is to become a party to the Treaty on the Non-Proliferation of Nuclear Weapons. This article discusses two related steps: developing nuclear safety and liability measures. Although the Sultanate has already acceded to some nuclear safety conventions, it will likely need to implement further measures as it proceeds in developing a peaceful, international-law compliant nuclear energy program. Nations in a phase of nuclear development similar to Oman’s often focus on building a supportive legal and regulatory framework by becoming party to the International Atomic Energy Agency’s (IAEA) major conventions on nuclear safety and putting in place legislation that effects compliance with these conventions. Broadly speaking, building a supportive legal and regulatory framework tends to involve developing and implementing a rigorous safety program that meets IAEA standards and international environmental standards relating to nuclear activity, as well as establishing a competent, independent regulator to oversee adherence to these standards. Two of the most important of these safety programs relate to spent fuel management and to radioactive waste management. These programs normally include management procedures, facilities specifications and emergency plans. Closely linked to nuclear safety is the issue of the liabilities that may arise when safety mechanisms fail. For example, currently Omani law is not equipped to handle potential nuclear liability claims, because Omani compensation law does not cover the unique kinds of damages that can be caused by nuclear-related incidents. Aspiring nuclear countries typically adopt a nuclear liability regime that complies with all relevant major international agreements dealing with nuclear liability. In particular, key features of nuclear liability laws usually include:
  • strict liability for the operator of the nuclear facility for damages arising from any nuclear-related incident;
  • exclusive jurisdiction for the nation’s courts over claims arising from any nuclear-related incident that occurs within the nation’s territory;
  • limits on the amount of compensation to be paid for any proven liability, as well as limits on the time frame during which a claim can be brought, arising from any nuclear-related incident; and
  • indiscriminate application of the damage compensation mechanism without regard to nationality, domicile or residence.


Monday, April 5, 2010

Concession Agreements - Legal Issues

Concession agreements are commonly used to implement public-private partnership projects in the infrastructure sector and are commonly used in Oman. For example, concession agreements are often used for the following types of projects:

  • airports and sea ports;
  • toll roads, highways and bridges;
  • railroads;
  • power and water production projects; and
  • waste water and sewage projects.
Concession agreements provide a mechanism for making public infrastructure projects more competitive and effective without privatizing the projects. In contrast to a management agreement, under which the government pays the operator a fixed fee to operate the project, a concession agreement allows the operator to keep the profits it generates by building and managing the project, in exchange for paying concession fees to the government. This compensation structure incentivizes the concession holder to develop, operate and maintain the project efficiently.

This article provides an overview of some of the key legal issues relating to concession agreements.

Grant of Rights
In the concession agreement, the government transfers to the private concession holder certain rights relating to the project for a defined period of time, for example the right to operate an airport for a period of thirty years. The government, however, will retain ownership of the project. Customarily, governmental authorities will provide administrative support to the concession holder, for example in helping to file applications and secure required licenses. The right to use the land on which the project is located is generally provided to the concession holder via a separate arrangement, such as a lease or a license. In Oman, the concession holder would be given a usufruct for fifty years which is renewable for a like period.

Financing and Duration
Since the typical project developed using a concession agreement requires a high level of investment, financing the project is an important issue. A transaction structure that is clear and takes into account potential lenders’ interests will help promote the availability of the necessary financing for the project. For example, the concession agreement should allow for the assignment of the concession agreement as security under financing arrangements.

The term of the concession is also very important from a financing perspective, as the concession holder must be able to operate the project long enough to recover the funds invested in the project. For this reason, concession agreements for major infrastructure projects usually last for a term of at least fifteen years or more.

Finally, it is important for the concession holder to work with the government to provide financial backing for the project. Governments often will enter into financial support agreements directly with the lenders.

Profits and Development
Under concession agreements, the concession holder is allowed to keep the profits it generates from the use and operation of the concession project. In the case of an airport, for example, such profits include passenger fees, landing fees, security fees and various other fees. In addition to operating the concession project, the concession holder usually also is required to maintain and further develop the project. The concession holder will typically subcontract some or all of its design and construction responsibilities to third parties under separate engineering, procurement and construction agreements.

Concession Fees
As consideration for the right to retain the profits it generates from the operation of the project, the concession holder pays a concession fee to the government. Concession fee arrangements usually take into account the need for the concession holder’s profits to be guaranteed in some form by the government, as the concession holder will require a reliable future income stream in order to undertake the long-term operational and financial risks associated with concession projects. The concession agreement should set forth in detail the concession fees to be paid by the concession holder to the government.

Force Majeure
Concession agreements should always include force majeure provisions, since concession projects are often vulnerable to events such as earthquakes, floods or terrorist attacks. The agreement should provide detail on how to handle force majeure events, including a possible early termination following such an event.

Exclusivity and Competition
The concession holder also should be sure the concession agreement includes appropriate exclusivity or non-competition clauses to protect its investment. For example, a concession holder operating a civil airport typically would be interested in ensuring that neither the government nor any other party operates another civil airport within a clearly defined radius. Otherwise, the concession holder would be in danger of suffering a loss of profit and a reduction of the value of its investment.

Quality Control and Standards
The concession holder and the government will agree on quality standards applicable to the concession project as well as the corresponding monitoring and control mechanisms, and they will jointly develop an appropriate action plan to be followed in case of non-conformities or quality complaints.

Concession agreements often address liabilities for environmental damages (particularly when the concession project is a major infrastructure project) and insurance. Insurance usually is obtained and maintained by the concession holder on his own account. The concession agreement should specify any uninsurable risks separately.

Finally, the concession agreement should include arbitration provisions. The types of major infrastructure projects usually covered in concession agreements are complex matters involving many expert parties and a large amount of interdisciplinary work. Consequently, the disputes that arise under concession agreements are often complex and involve substantial amounts of money.

For these reasons, the parties to the concession agreements usually provide for arbitration so that disputes will be decided by arbitrators experienced in the relevant technical matters, rather than by the courts of a particular country. The concession should specify the jurisdiction and the rules of arbitration to be applied. Oman is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means that Omani courts would decline jurisdiction over a concession agreement that provides for dispute resolution through arbitration.