Thursday, August 28, 2014

Legal Updates - August 28, 2014

Royal Decree 34 of 2014: Amending some provisions of the Commercial Agencies Law

The Commercial Agencies Law promulgated by Royal Decree 26 of 1977 (as amended) deals with the relationship between a manufacturer or supplier (the “Principal”) with no legal existence in Oman and a company or merchant in Oman (the “Agent”) who enter into an agreement. The agreement would permit the Agent to sell, promote or distribute the goods, products or services of the Principal. The latest set of amendments to the Commercial Agencies Law is Royal Decree 34 of 2014 (the “RD”) effective from July 21, 2014.

The latter part of Article 5 which gave the Ministry of Commerce and Industry the authority to ban the import of goods if the Principal cancelled the agency agreement without acceptable grounds has been removed. Article 7 has been deleted in its entirety. This article had prohibited a Principal from selling or distributing his products, goods or services himself or by an intermediary in Oman other than through the appointed agent. This article had also included an exception to such prohibition for contracts for the purchase of weapons, ammunition or military equipment concluded with the military or security authorities. In addition, the examples provided by Article 10 for abuses of a right for which compensation for the other party is available have also been deleted. In addition to deletion of certain articles, the RD has also replaced Article 14 which dealt with limiting the number of agencies allowed for every agent. Article 14 now provides that, if the Council of Ministers decides it is appropriate, in situations where there is a monopoly of commodities and services that negatively affect supply and demand and causes an unjustified rise in prices, it can determine how many agents are permitted to sell, distribute or promote goods and services.

Next month we will provide a detailed analysis of the potential impact of such amendments and, in particular, what effect this will have on the concept of exclusive agency agreements.

Ministerial Decisions determining the calculation of basic salary and allowances

The Public Authority for Social Insurance has issued Ministerial Decisions No. 8 of 2014 and No. 9 of 2014 both of which are concerned with social security provisions. In regard to Ministerial Decision No. 8 of 2014, it replaces Article 3 of Ministerial Decision No. 126 of 1992 in its entirety by specifying that social security contributions are to be calculated based upon an employee’s basic salary and due allowances. Moreover, the employer must also pay the full contribution due from him and due from the employee to the authority as well as providing detailed statements of any changes to the value of an employee’s salary on which a contribution is to be made. The contribution must be made within the first ten days of the month following the month in which the contributions are due, which is in accordance with the Social Security Law promulgated by Royal Decree 72 of 1991 (as amended).

Ministerial Decision No. 9 of 2014 provides that an employee’s allowance must be calculated on the salary which the contribution is made on as long as it is paid with the basic salary either monthly or regularly (at least four times a year). Both Ministerial Decisions discussed above came into effect on July 1, 2014.

Ministerial Decision temporarily ceasing recruitment of non-Omanis in certain professions

The Ministry of Manpower has issued Ministerial Decision No. 122 of 2014 which temporarily ceases recruitment of non-Omanis in the private sector. This decision which was effective from July 1, 2014 will last for six months within which period non-Omanis will not be issued visas to work in the following professions: carpentry, aluminum and blacksmithing workshops as well as brick kiln factories. The decision however is not applicable to certain establishments which include those:

  1. registered under the excellent, international and consultancy grade;
  2. implementing government projects; and
  3. owned by full-time employers registered with the Public Authority for the Development of SMEs and with the Public Authority for Social Insurance.

Amendments to the draft Competition Protection and Prevention of Monopoly Law

Following a report from the Council’s Economic and Financial Committee, the Shura Council of the Sultanate of Oman has amended and approved the draft Competition Protection and Prevention of Monopoly Law (the “Proposed Competition Law”). Prior to this Proposed Competition Law, other than a brief reference in the Consumer Protection Law, there were no specific anti-monopoly or anti-competition laws in place in Oman. The Proposed Competition Law is evidence of Oman’s eagerness to thwart anti-competitive market behaviour and monopolistic practices, as well as maintaining competitive and acceptable prices for the consumer. Once the Proposed Competition Law has been published in the official gazette, we will provide further information as to the scope and impact of this proposed law.