Tuesday, January 3, 2012

Oman’s Law of Engineering Consultancies – Part II

In a previous post, we provided an overview of the role that engineering consultancies play in Oman’s many large-scale construction projects, as well as the Omani statute which governs the profession, the Law Regulating the Work of Engineering Consultancies (Royal Decree 120/94, as amended) (the “Engineering Consultancy Law”). This month, we discuss special requirements under the Engineering Consultancy Law that apply to foreign engineering consultancies.

While the Engineering Consultancy Law exempts foreign engineering consultancies from certain provisions of the Foreign Capital Investment Law, it stipulates several onerous conditions for foreign engineering consultancies.

Experience Requirements for Foreign Engineering Consultants

Foreign consultancy companies seeking to form an engineering consultancy in Oman are required to have at least ten years of experience in engineering consulting projects. This condition can pose difficulties for newer engineering consultancy companies, particularly those in cutting-edge sub-fields of engineering where length or experience is unavailable and expertise is in any case more crucial. As a practical matter, this condition can potentially restrict a newer foreign engineering consultancy’s ability to work for private-sector clients in Oman.

Setting up an Engineering Consultancy

The registration and licensing process for foreign engineering consultancy companies in Oman is often lengthy. Pursuant to the Engineering Consultancy Law, such registration and licensing must be approved by a committee headed by the Director-General of Commerce and comprised of representatives from nine distinct government departments. While this committee structure may provide the benefit of bringing together a broad base of expertise to decide on license applications, it often comes at the logistical cost that the time required to constitute the committee can lengthen the period necessary to establish the branch.

Although it theoretically may be possible for foreign entities with government or quasi-government contracts to bypass all or part of the above-described registration process based on protections implied in the Foreign Capital Investment Law, our recent experience suggests that a foreign engineering consultancy which has contracted with the government is also required to go through the licensing process in order to form a branch.

Omani Shareholding Requirement

Finally, we note that, for foreign engineering consultancies formed as companies (e.g., limited liability company or joint-stock company, as opposed to branches), at least 35% of the shares must be held by an Omani national authorized to carry on a similar type of engineering consultancy. Also, an Omani national cannot partner with more than one foreign consultant partner to form a local consultancy.