Monday, October 4, 2010

Judges' Verdict

The following article by Curtis partner James Harbridge appeared in the October 3, 2010 Muscat Daily newspaper.

Judges' Verdict

The issue of interest on late payments often causes problems in Oman.

An interesting judgment on this topic was made by the Omani Supreme Court on 29 March 2006.

The facts of the dispute related to a 2002 rock blasting contract. The Claimant performed the services and the Defendant failed to pay. The contract between the parties was absolutely silent on the subject of interest on late payments.

The Claimant filed a court case in March 2003, and requested the principal sum owing - plus interest at 10% per annum.

The Primary Court ordered the Defendant to pay the principal sum, but rejected the claim for interest.

The Claimant appealed to the Appeal Court, as he wanted to obtain the interest he had claimed.

But the Appeal Court ruled against him, and upheld the validity of the Primary Court's ruling.

The matter moved to the Supreme Court. The Claimant argued that, as a matter of public policy, interest should always be applied to late payments. However, the Defendant said no interest should be payable, as the parties' contract did not grant any right to claim interest.

The Claimant also relied on:

Ministerial Decision 151/2002 which stated that the interest on commercial loans - other than for loans granted by CBO-licensed entities - would be 10% per annum, unless a lower rate had been agreed; and

Article 80 of Oman's Commercial Code, which states that a creditor is entitled to levy interest on a commercial debt.

The Supreme Court ruled that the Claimant was entitled to interest at 10% per annum, and that interest was definitely applicable even in the absence of an agreement on the point.

This judgment is an important one, as it shows that a claim for interest cannot be denied on the grounds that a contract is silent on the subject.