Thursday, December 29, 2011

The GCC Railway Network – Opportunities and Challenges

Even in a region where larger-than-life infrastructure projects have become almost commonplace, the proposed pan-GCC Railway network evokes a grandeur that stirs the imagination. Scheduled to be completed in 2019 at a cost of US$ 25 billion, the GCC Railway will connect the six GCC nations of Oman, Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates, helping to forge deeper economic and political ties within the Gulf as it transports people and goods across borders.

This article provides an overview of the GCC Railway scheme, and discusses some key legal issues which are likely to arise thereunder.

Initial Stages

The GCC Railway, will be created by the interconnection of each GCC country’s national rail network. These national railways are still in their early stages. Two countries, Saudi Arabia and the United Arab Emirates, already have a head start. The former operates a rail line between Riyadh and the Persian Gulf port city of Dammam, and has commenced construction on the North-South Rail which will connect Riyadh with the northwestern city of Al Hadeetha. The latter boasts the Dubai metro, and has begun building the Union Railway which will link the seven Emirates.

The other GCC countries, currently in the planning and design phases, are quickly getting up to speed. In the Sultanate of Oman, the current plan calls for the national railway to be designed in three phases. The first phase would be a 230-kilometer rail line from the northern industrial city of Sohar to the capital Muscat. The second phase would be a 560-kilometer line from Muscat to the port city of Duqm, and the third phase would involve extending the Duqm line to Salalah in southern Oman.

The Omani press has reported that the Ministry of Transport and Communications recently floated a tender for a design and project supervision consultancy contract, with the goal of completing the design phase by 2013 and completing construction by 2018.

Inter-Country Coordination – Challenges, Opportunities and Legal Issues

Building the GCC rail network will naturally require an abundance of engineering skill and manual labor – but it will also require more: a common framework that will enable the six national rail networks to integrate and operate together as a single, unified GCC rail system. Such coordination should consider a number of issues, including the following:
• Technical issues – the various GCC national railways will need to have uniform standards for the gauge size of tracks and the locomotives which can run on these tracks, particularly along cross-border rail segments;
• Safety issues – of crucial importance, each railway’s signal and communication systems must be compatible and integrated;
• Commercial issues – for example, agreeing to a common fare structure across the GCC; and
• Legal and regulatory issues – implement a joint customs system to allow a single point of entry into the GCC and a uniform custom tariff for imported goods.

The Need for a Coordinated GCC-Level Regulatory Approach

Moreover, the six member nations would do well to provide a GCC-level regulatory and legal framework under which the respective national authorities could deliberate and agree on technical, safety, commercial and legal issues. Thus, the GCC Railway project will require not just capital and manpower, but also a large measure of political unity and skillful diplomacy over the coming years. But if the region’s successful development of large-scale air and sea transportation in recent years is any indication, the prospect of a pan-GCC Railway network is a goal that should be realized.


Thursday, December 22, 2011

Oman’s Consumer Protection Law

This article provides an introduction to the basic principles of Oman’s Consumer Protection Law, which was promulgated as Royal Decree 81/02 (with executive regulations issued by Ministerial Decision 49/07) (the “Consumer Protection Law”). It is particularly useful for tourists, business travelers and expatriates alike to be aware of the laws available to protect the consumer of goods or services, as it is possible for anyone to find themselves a victim of a rapacious supplier.

What is the Consumer Protection Law?

Fundamentally, the Consumer Protection Law is legislation intended to ensure that suppliers and advertisers abide by the principles of fair dealing and credibility when dealing with consumers. The law does not apply to ‘business-to-business’ commercial dealings between merchants. The Consumer Protection Law requires that every commercial establishment upholds the principle of protecting their consumers’ interests through providing quality services or products. Violations of this law include, but are not restricted to:
• knowingly supplying unsafe products without suitable warning to consumers;
• refusing to accept return of goods (excluding perishable products) that are within the minimum return period of 10 days from the purchase date;
• refusing to uphold an existing maintenance agreement with the consumer;
• intentionally misleading consumers with false advertising;
• refusing to provide compensation for an injury that the consumer sustained from normal use of the product or service;
• charging a higher price than advertised; and
• refusing to provide the consumer with proof of purchase (or a receipt) that at a minimum shows the date and value of the purchase.

It would be easy to believe that the Consumer Protection Law only applies to the purchase of products, i.e., a car or a mobile phone. However, it is important to understand that the law applies to all aspects of the commercial world, including where a commercial establishment provides a service to a consumer – for example, a dentist providing a filling or a mechanic servicing a car. Whenever a service or product is provided to a consumer by a supplier, the customer is protected by the Consumer Protection Law (provided that the consumer has not misused the service or product) and, should the supplier be found guilty of violating this law, the establishment can be fined up to RO 5,000.

Why is there a Consumer Protection Law?

The Consumer Protection Law is intended to promote a level playing field of fairness and equality between the supplier and the consumer, and to protect consumers against monopolistic companies and deceitful business practices. The Consumer Protection Law ensures that consumers are supplied with correct information about the products and services that they buy, prevents the companies from gaining unlawful profit through dishonest practices, and maintains a fertile market for new companies to enter by restricting the scope for dishonest or monopolistic business practices.


Thursday, December 15, 2011

Career Corner: How to Become an Omani Lawyer

With the Sultanate’s rapid economic development proceeding apace, Oman provides an abundance of opportunities for law firms and lawyers. Recognizing this trend, the Omani government has taken steps to increase the ability of young Omanis to participate in the legal field, by providing scholarships for the study of law domestically and abroad, and by tilting the legal system in ways to raise Omani participation in the legal field. For example, the Ministry of Justice took the decision in 2010 to reserve to Omanis the exclusive capacity to appear and present cases before the Primary Court.

However, in order to ensure that new Omani lawyers will have the requisite experience and expertise to carry out their duties, the Omani government has put in place certain restrictions on entry into the legal profession and qualification as an Omani lawyer. This article provides an overview of the process for becoming an Omani lawyer.

The registration process

The starting point for an Omani aspiring to become a lawyer is to obtain a university degree. Once they have their degree in hand, Omanis wishing to qualify as a lawyer in the Sultanate must go through several steps, the first of which is registration as a trainee with the Ministry of Justice. The applicant will need to present evidence that he or she meets the necessary criteria for registration, such as evidence of a University degree in law or a related discipline, as well as evidence of good conduct
from the Royal Omani Police.

Becoming a trainee

Once registered, the next step is to work in a local law firm as a trainee. A university graduate with an undergraduate degree is required to work a minimum of two years as a trainee, while those who hold a masters degree must work at least one year as a trainee. During this training period, the trainee may not open a law firm in his own name.

It is important to note that experience in an international law firm will not suffice to fulfill the Omani government’s training period requirement. As a practical matter, Omanis who work in international firms do essentially the same type of work, and often get exposed to a much broader range of experiences, than their counterparts at local firms. However, the current position of the Omani government is that only work performed at a local firm counts toward fulfilling the requisite two years of training to become an Omani-qualified lawyer.

Professional obligations and restrictions for qualified Omani lawyers

After completing the training period and qualifying as an Omani lawyer, every Omani lawyer must continue to heed the rules set out in the Advocates Law, promulgated by Royal Decree 108/96 (as amended). In particular, Article 6 of the Advocates Law requires that an Omani lawyer may not work as a minister or other government official, and may not start a business of his own or work for a company, bank or any other person or entity while working in the legal profession (subject to certain exceptions, for example that lawyers may serve in the Majlis al Shura or on the boards of directors of joint stock companies).


Wednesday, December 14, 2011

Islamic Insurance Comes to Oman

Several months ago, in a ground breaking development, His Majesty Sultan Qaboos bin Said approved the establishment of Oman’s first Islamic bank. As the government authorities continue to work through the implementation of His Majesty’s instructions, it is becoming clear that changes and new opportunities are in store not only for the banking sector, but also for related financial sectors such as insurance.

Following His Majesty’s broad-based royal directive, many of the details of implementation have been carried out by government authorities such as the Capital Market Authority (CMA) and the Central Bank of Oman (CBO). For example, the local press recently reported that the CMA had issued important guidance in respect of Islamic insurance, or takaful. The CMA stipulated that conventional insurance companies would not be permitted to run takaful operations in the Sultanate alongside their conventional insurance businesses; any company wishing to offer takaful would be required to convert to a dedicated takaful company, or to open a new dedicated takaful entity.

This article provides a brief overview of takaful, as a basic primer on the Islamic insurance sector.

Insurance with Islamic principles

Essentially, takaful is designed to provide the same benefits to subscribers as conventional insurance –coverage against unexpected or catastrophic losses – while scrupulously adhering to the principles of Sharia (i.e., Islamic religious law). In particular, takaful is structured to comply with the core Sharia tenets prohibiting interest or unjust enrichment (riba), discouraging ambiguity in contractual terms (gharar), and minimizing the speculative nature of transactions (maysair).

Application of these principles to ‘takaful’ structures

In practice, there are two main ways that a takaful insurance scheme follows Islamic principles.

First, the takaful structures itself as a mudaraba (i.e., profit-sharing venture). The policy contract between the takaful operator (i.e., the insurance company) and the subscribers would specify how any operating surpluses that the takaful runs (e.g., excess of subscriber contributions received over monies paid out on claims) shall be divided between the operator and the subscribers. For example, the contract may state that any surpluses shall go 70 percent to the subscribers, as the providers of capital, and 30 percent to the operator, as the provider of services. This structure helps the takaful scheme avoid falling afoul of the prohibition on unjust enrichment.

Second, the takaful will seek to avoid prohibited elements of uncertainty by structuring its subscriber contributions as tabarru (from the Arabic “to donate, contribute or give away”). Under this concept, payments that the takaful makes on claims by a subscriber would be considered a partial donation by the other subscribers of the capital that they have contributed to the takaful.


Tuesday, December 13, 2011

Focus on Litigation: Settlements

In the Sultanate of Oman, as in other jurisdictions, not every litigation matter proceeds all the way to a decision by the Court. What happens if the parties to an Omani court case reach a settlement in the middle of the litigation process?

Sadly, this rarely happens in Oman, primarily because the Omani system has no concept of “without prejudice” negotiations. Furthermore, the fact that the losing party does not have to pay the winner’s legal fees is another reason why Omani court cases often go the full distance to a Supreme Court judgment.

However, settlements can and do occur. The settlement is normally recorded in full detail in a settlement agreement which is in Arabic and signed by the parties. The respective lawyers of the litigant parties normally present the settlement agreement to the Court, and ask the latter to adopt the agreement as the terms of a “settlement judgment” between the parties. This means that the Court gives a judgment, stating that the parties have settled the dispute on the terms stated in the settlement agreement.

In this way, the terms of the settlement agreement become part of the actual text of the Court judgment. The result is that, if one party then breaches the settlement agreement, the innocent party can apply to the Enforcement Department to enforce the terms of the settlement agreement.

It also should be noted that the above mechanism requires that the advocates for both sides be in possession of powers of attorney from their respective clients which empower them to settle the dispute. This is necessary in order to make the request to the Court to adopt the agreement as the terms of a “settlement judgment.”


Thursday, December 8, 2011

Transfers by Lenders under Syndicated Loan Agreements

With the recent volatility in European financial markets, the importance of liquidity and flexibility within the banking sector has been the subject of renewed focus. During such times, some lenders may look to restructure their balance sheets by reducing exposure to certain sectors, countries and/or currencies under various existing transactions. The transfer provisions in a syndicated loan agreement provide a simple mechanism by which lenders can buy or sell interests in a syndicated loan agreement.

By way of background, a syndicated loan is one for which the funds are provided by a syndicate, or group, of lenders. A syndicated loan is often a useful way for the lenders to spread risk or to extend a larger loan than they would be able to do individually. In Oman, large syndicated loan agreements are typically governed by English law, or by the laws of another foreign jurisdiction as lenders tend to prefer the predictability of how such an agreement and the offshore security would be enforced in such a jurisdiction.

This article considers three ways in which a lender may sell all or part of its interests in a syndicated loan agreement, namely through novation, assignment or sub-participation.


Novation is the most effective way of transferring rights and obligations under a syndicated loan agreement from an original lender to a new lender. The existing agreement (including all outstanding commitments) between the original lender and the borrower is dissolved and replaced by a new agreement between the new lender and the borrower.

The new lender enters into a direct relationship with the borrower and other parties to the syndicated loan agreement. The loan agreement should include the form of transfer certificate used to effect the novation and a provision stating the borrower has no objections to the original lender selling his interest in the loan agreement to a new lender. Novation is typically used for revolving credit facilities in which the original lender still has outstanding obligations such as the obligation to make future loans.

The drawback of this method is that, if the loan is secured, the security is discharged and needs to be renewed each time a novation is executed and the priority of the security may be affected adversely. This, however, can be resolved by appointing a security trustee to hold the security granted under the loan for the benefit of all the lenders.


Unlike novation, assignment involves the transfer of rights, but not obligations. For a legal assignment under English law, the assignment must be:
• absolute (i.e., the whole of the debt outstanding to the existing lender);
• in writing and signed by the existing lender; and
• notified in writing to the borrower.

A legal assignment will transfer all of the original lender's rights under the loan agreement, but none of the obligations. New security is not required on each assignment as the original lender retains his obligations under the loan agreement.

An assignment is not an appropriate option if there are outstanding lending obligations, since the original lender’s obligations are not transferred.


The distinguishing feature of a sub-participation arrangement is that the original lender remains the "lender of record" to the borrower, and there is no direct contractual relationship between the sub-participant and the borrower. No borrower consent is required, so this process can be confidential.

A funded sub-participation creates new contractual rights between the existing lender and the sub-participant on the same terms as the contract between the existing lender and borrower. The existing lender becomes an intermediary between the borrower and the sub-participant. The sub-participant puts up funds which the existing lender loans to the borrower. The sub-participant is only repaid by the existing lender when the borrower repays the existing lender. Unlike novation, there is no transfer of existing rights and the borrower is often unaware of the contract between the existing lender and the sub-participant.


Wednesday, December 7, 2011

Oman’s Law of Engineering Consultancies – Part I

With Oman’s rapid pace of economic expansion and multitude of large-scale construction projects, engineering consultancies play a key role in the Sultanate’s development plans. This article provides an overview of what engineering consultants do and the Omani legal framework that regulates their profession. In forthcoming posts, we shall discuss key aspects of Oman’s Law of Engineering Consultancies which apply in particular to foreign engineering consultancies.

Engineering Consultants: Technical Experts and Project Managers

The work of engineering consultants broadly encompasses the planning, designing, managing, and supervising of engineering projects. As project managers, the engineering consultants are responsible for ensuring that a project is completed on time and within the specified budget.

The tasks assigned to engineering consultancies typically include:
• undertaking technical and feasibility studies and site investigations, including assessing the potential risks of the project;
• developing detailed designs, and resolving design and development issues;
• supervising the tendering process for selecting a contracting engineer, and coordinating amongst the contractors, the subcontractors and the client;
• managing and scheduling the purchase and delivery of project resources, as well as any variations to the project contract;
• reviewing and approving project reports and drawings; and
• ensuring health, safety and environment (HSE) regulatory compliance.

Oman’s Engineering Consultancy Law

Clearly, the technical complexity and high level of responsibility associated with engineering consultancy work calls for rigorous standards to ensure the quality of firms and individuals working in the field. In Oman, the Law Regulating the Work of Engineering Consultancies issued by Royal Decree 120/94, as amended (the “Engineering Consultancy Law”), provides such a regulatory framework.

The Engineering Consultancy Law sets forth general requirements for all engineering consultants, such as a ten-year liability on the engineering consultant and the contracting engineer for defects in construction. However, some of the most interesting aspects of the Engineering Consultancy Law relate to the requirements for foreign engineering consultants.