Wednesday, May 26, 2010

Judge’s Verdict: In Case of a Dispute

This article was written by Curtis partner James Harbridge of the firm’s Muscat office. It originally appeared in the Muscat Daily and is republished here with permission.

When an Omani entity signs a contract with an overseas entity, both sides are looking forward to a mutually beneficial relationship. At the time the contract is signed, neither party can imagine the possibility of being in a dispute in due course.

But the reality is that it is best to be prepared for trouble further down the line. Naturally, Omani companies will want to have their disputes heard locally in Oman’s courts. But is that always the best option?

Certainly, if the contractual courter-party is incorporated in a fellow GCC state, an Omani final court judgment is automatically enforceable against the counter-party by the courts. In such circumstances, the Omani entity may have a large monetary judgment in its favour, but how can it actually get the money if the English defendant refuses to pay up in accordance with the Omani courts’ final decision? The problem arises because Omani court judgments are not automatically enforceable in England.

First, the lawyer for the Omani company will apply to the Primary Court’s enforcement department if he or she knows that the defendant has assets in Oman or is owed any money by parties located in Oman. The enforcement department can then freeze such assets so that the Omani company can obtain the value of the judgment.

But often an overseas company will have no assets in Oman. Accordingly, the Omani company may have to file a fresh court case in England, where the final Omani court judgment may only have evidential value. In other words, the scenario can become a protracted and uncertain one.

To avoid complex, time-consuming and costly situations like this, the Omani party may, before signing the contract, look ahead and seek legal advice as to how best to ensure that there will be no enforcement issues.

One solution, in some circumstances, is for the contract to state that any dispute will be settled by the arbitration taking place in, say, Muscat. Both England and Oman are signatories to the New York Convention on arbitral awards, meaning that an arbitral award rendered in Oman should be automatically enforceable in England.

Before singing a contract, it always pays to think carefully about whether it should be governed by Omani law or a foreign law. Equally, the question of courts versus arbitration is a vital factor, as no one wants to get a court judgment which cannot be enforced. A short, pre-contract meeting with a lawyer can make all the difference as to whether you obtain an enforceable or non-enforceable decision on your dispute.