Monday, December 19, 2016

Oman's Public Authority for Social Insurance - PASI

What is PASI?

The Social Security Law and its amendments promulgated by Sultani Decree 72/91 came into force on July 1, 1992 (the “Social Security Law”). Article 5 of the Social Security Law provides that a public authority shall be formed under the name of Public Authority for Social Insurance (“PASI”) with administrative and financial independence, and is responsible for the implementation of the Social Security Law.

The Social Security Law aims to provide security against old age, disability, death or occupational injury and disease, thereby ensuring a social stability for the insured and their dependents. The Social Security Law only applies to Omani nationals employed in the Sultanate of Oman.

What are the employer’s contribution and obligations?

Under the Social Security Law, the employer is solely responsible for the payment to PASI in respect of each relevant employee, and the payments must be made on the basis of the actual wage drawn by that employee. Currently, the employer is required to contribute a total of 11.5% to PASI (10.5% of the employee’s gross salary, plus an additional 1% for occupational injuries and disease). The employee is required to contribute an amount equal to 7% of its gross salary.

Each company in Oman has online access to the PASI scheme (which sets out the details of each Omani employee and his or her salary). As a standard practice, in January each year, PASI updates the contribution that the employee and employer are required to make based on the standard minimum 3% increment to the gross salary. However, if the employer grants an increment of more than 3%, it is the employer’s obligation to notify PASI of the new salary by updating the employee’s salary details online. Generally, PASI would require the company to amend and notify PASI of the employee’s salary within a period of one month from implementing the revised salary.

Is it compulsory for companies to comply with the rules under Social Security Law? Or can companies provide their own scheme?

Article 16 of the Social Security Law requires the employer to undertake payment of the full social security subscriptions to PASI, and the employer is solely responsible for payment of these subscriptions, and may deduct the employee’s contribution from the secured employee’s salary.

However, if a company has a workers savings fund scheme by which the Omani employees receive more than the PASI entitlement that the employer is required to contribute (i.e., the contribution made by the employer is equivalent to, or more than, the 10.5% of the gross salary to be contributed by the employer), then such scheme is acceptable and the employer is exempted from making PASI contributions on behalf of its employees. However, if it falls below what is defined under the Social Security Law, then it is important to note that the company may be foreseen as breaching the Omani Labour Law and the Social Security Law.

Article 7 of the Social Security Law provides that an employee has one year from the date of leaving to bring any claim regarding PASI. In such case, the concerned employee will have one year from when he or she leaves to raise a grievance against the company.

What happens if the employer defaults?

Article 17 of the Social Security Law provides that the employer who is subject to the law, but does not pay the contribution according to actual wages of the employees, or does not pay the insurance contribution for all or some of his employees, or does not pay the end of service benefits or refuses or delays the payments of the due contribution at the time, then the employer shall be obliged to pay to PASI an additional amount estimated at 13.5% of the contribution which the employer failed to pay, or of the amounts which are due for end of service benefits, unless there are unavoidable reasons, to be evaluated by the Board of Directors of the PASI.

In addition to the penalty imposed under Article 17, PASI also sets out an additional penalty under Article 74 of the Social Security Law, whereby if the employer violates any of the provisions of the Social Security Law, the employer shall be punished with a fine of not less than OMR 100 and not more than OMR 500, and the limits of the punishment will be double in case of repetition of the violation, and the fine multiplies according to the number of the employees with respect to whom the employer commits one or more violations.

Therefore, it is important for a company to comply with PASI rules. If the company has revised the employee’s salary, it is the responsibility of the company to notify PASI of the new salary and undertake to pay the full subscription to PASI accordingly.


Monday, December 12, 2016

Protecting Intellectual Property in Oman

General overview of intellectual property in Oman

Intellectual property (“IP”) protection is considered crucial for every business. Businesses now operate in an increasingly competitive marketplace, thus protecting and securing its IP is essential for a business’s future success. By having knowledge about IP, businesses can shield themselves from infringing others’ IP rights and avoid cost and legal action. Moreover, IP provides individuals with a sense of protection and encourages them to engage in more creative ventures.

The World Intellectual Property Organisation (“WIPO”) defines IP as “creations of the mind, such as inventions, designs, literacy and artistic works, names and images used in commerce.”

While it’s argued that the Omani courts may struggle with IP cases, the Omani government has initiated various steps towards IP protection, from the implementation of domestic laws to the participation in conventions and international treaties. The Sultanate of Oman is a member to several international treaties, conventions and protocols including: The Gulf Cooperation Council, The World Trade Organisation, The World Intellectual Property Organisation, the Berne Convention, the Paris Convention, the Madrid Protocol and the Patent Cooperation Treaty.

In addition to the international treaties and conventions listed above, the Sultanate of Oman has enacted several domestic laws protecting IP rights.

The applicable laws in Oman

The Industrial Property Rights Law (“IPRL”) promulgated by Sultani Decree 67/2008 governs the protection and use of patents, trade marks, trade secrets, utility models, industrial drawings, geographical indicators, topography of integrated circuits and protection against unlawful competition in the Sultanate. Ministerial Decision 105/2008 sets out the Executive Regulations for the IPRL.

Law on trade marks

Article 36(1) of the IPRL provides that the exclusive right to a mark is acquired by registration. Article 36(2) sets out circumstances when a mark cannot be validly registered, which includes inter alia:

  1. if the mark is identical or similar to an extent that creates confusion or is like the translation of a mark or a well-known title in Oman in relation to identical or similar goods or services of another enterprise or if it is known and registered in Oman as regards the goods or services not identical or similar to those for which the registration of the mark is being sought, provided that the use of the mark as regard the goods or services, in the latter case, gives the impression of the presence of a link between these goods or services and the owner of the well-known mark and that such use undermines the interest of the owner of the well-known mark; and

  2.  if the mark is identical with or similar to a mark of another owner already registered or if there is an application that precedes the registration of the concerned mark in respect of the date of deposit or date of priority as regard the same goods or services, or goods or services closely linked therewith or if they are similar to an extent that is misleading and confusing.
Law on patents

Just like trade marks, patents are also governed by the IPRL. WIPO defines a patent as an “exclusive right granted for an invention, a product or process that provides a new way of doing something, or that offers a new technical solution to a problem.” Under the IPRL, an invention is patentable in Oman if it is new, involves an inventive step and is susceptible of industrial application. Moreover, it should not be preceded by any previous industrial technology declared to the public in any part of the world by publication in a tangible form or by verbal communication or by use or any other method prior to the date of the deposit of the application or date of precedence of claim of the right to the invention. In order to protect the patent, the inventor or his agent must submit the patent application to the Ministry of Commerce and Industry’s Department of Agencies and Intellectual Property.

Remedies available under IPRL


The IPRL grants a right to any interested person to request the court/registrar to invalidate/remove a trade mark from the register. A trade mark registration may be invalidated if it is proved that the requirements of the IPRL were not fulfilled. A trade mark may be removed from the register in respect of any of the goods or services in respect of which it is registered, on the ground that up to one month prior to the date of the deposit of the application for the removal, the mark was not used by the owner of the trade mark or the licensee during a continuous period of three years or more, unless it is proved that special circumstances existed that were beyond the control of the owner or the licensee that prevented the use of the mark during the aforementioned period and that the owner has no intention not to use or abandon the mark in respect of those commodities or services.

Civil action

  1. The IPRL provides that civil action for infringement may be initiated within five years from the date the right holder knew or had reason to know of the infringing act. However, there is no time limit to bring a suit in case of infringing use of distinctive signs in bad faith or for unfair competition purposes.

  2. The IPRL sets out the remedies that the court may offer to a party whose rights have been infringed. Article 75 states that the court shall include an appropriate compensation to the possessor of the right for the infringement of his IP property right. The court may, in case of infringement of a trade mark, pass a judgement on the value of the compensation claimed or one specified by it and, while estimating the compensation value, take into account the profits made by the offender. The compensation shall, in all cases, be sufficient to undo the damage caused to the possessor of the trade mark right on account of the infringement. The Court shall, while fixing the compensation for damage for the infringement of the rights prescribed under this Law, keep in view the value of the commodity or service subjected to infringement measured against the proposed retail price or any other legal measure for the value submitted by the possessor of the right.

  3. The court may pass a judgement obliging the offender to pay compensation for damages related to the acts of infringement committed on or after the date on which the decision on the acceptance of the registration application, if any, was issued by publication in the Official Gazette or the date on which the registration applicant notified the offender of the contents of the application or one on which the offender came to know of the contents of the application.

  4. The IPRL provides that the court shall order the destruction of goods involved in infringement except in exceptional circumstances without decreeing any kind of compensation. The court shall order the destruction of substances or equipment the majority which were used in manufacturing the commodities involved in infringement or in exceptional circumstances and their disposal outside the trade channels in a manner that brings the infringement risks to the lowest level without decreeing any kind of compensation.

Criminal action

Deliberate infringement at a commercial level of an industrial property right shall be punishable by imprisonment for a minimum period of three months and a maximum of three years and/or a minimum fine of OMR 2,000 and a maximum of OMR 10,000. The minimum and the maximum penalty shall be doubled in case of repeated infringement.


Monday, December 5, 2016

Employment of Juveniles in the Sultanate of Oman

The law of juvenile employment is one which is developing in Oman, and as such this article will first look at the international conventions which Oman has signed up to, before analysing the available domestic legislation and its enforcement which is significant in ensuring the application of available protections and securing the rule of law.

The International Labour Organisation standard

Although there is no universally agreed definition for the term “exploitative child labour,” under the International Labour Organisation (“ILO”) Convention 138 of 1973, the minimum age of employment or work in any occupation is “not to be less than the age of completion of compulsory schooling and in any case should not be less than the age of 15.” This convention, however, gave the freedom to states with insufficiently developed economies and educational facilities to specify a minimum legal working age of 14. Additionally, Convention 138 specified that national regulations may permit the employment of persons 13 to 15 years of age on light work. Such light work may include work in a family business, on a family farm, after school, and in legitimate apprenticeship opportunities. The government of Oman ratified ILO Convention 138 on July 21, 2005 to ensure the minimum protection of juvenile workers.

Omani law

The Oman Labour Law promulgated through Royal Decree 11/2003 (the “Labour Law”) supplemented these existing provisions. The Labour Law establishes, by virtue of Article 75, that the minimum age for employment is 15 years, while minors between the ages 15 to 18 years are not permitted to work between the hours of 6 p.m. and 6 a.m. Minors are also prohibited from working overtime or in certain hazardous occupations. The list of jobs that juvenile workers are permitted to do is attached to Ministerial Decision 217/2016, and broadly includes salesman roles. However, there are no specific descriptions of the tasks that can be undertaken by juveniles in these occupations. Further, employers are prohibited from requiring minors to work on official days of rest or official holidays or for more than six hours per day according to Article 76 of the Labour Law. Workplaces that employ minors are required to post certain items for display, including: a copy of the rules regulating the employment of children; an updated log with the names of minors employed in the workplace with their ages and dates of employment; and a work schedule showing work hours, rest periods, and weekly holidays.

As an addition to the Labour Law, Ministerial Decision 217/2016, Article 1 provides that employers must obtain written approval from the person responsible for the juvenile’s care and upbringing. Furthermore, because juveniles compared to adults are developing physically and those children seeking employment might more commonly be from poorer backgrounds, Article 3 importantly provides that at the sole expense of the employer, they must provide a medical check before, during and until six months after the termination of service.

Perhaps in the context of juvenile employment, what is most important is that the occupation undertaken does not hinder the juvenile’s educational development. In this context, within the Labour Law there is no requirement for juveniles to have completed their compulsory education before undertaking employment, nor is there a requirement for the occupation not to affect the child’s attendance at school. Moreover, for juveniles who complete only primary education, there is no apprenticeship regime, whereby they can learn a trade and obtain a certified license through learning on the job (i.e., there is no provision which stipulates that schooling is compulsory).


The worst forms of child labour such as activities which are hazardous, arduous or corrupt morals of children may be an offence under the Penal Code promulgated by Royal Decree 7/1974 (the “Penal Code”) and prosecuted. Forced or compulsory labour by juveniles, or otherwise, is prohibited by Article 12 of Royal Decree 101/1996 promulgating the Basic Statute of the State as amended by Royal Decree 99/2011. Under Article 259 of the Penal Code, anyone who enslaves a person or puts him in quasi-slavery commits a crime that is punishable by a sentence of five to 15 years in prison. Under Article 220 of the Penal Code, the enticement of a minor into an act of prostitution is a crime punishable by not less than five years’ imprisonment.

The Labour Care Directorate of the Ministry of Manpower is responsible for the enforcement of juvenile labour laws. While restrictions on the employment of youth are generally followed, enforcement does not always extend to agriculture, fishing and rural areas where adherence to legislation is irregular. The Labour Law does not apply to workers working for family members on whom they are dependent by virtue of Article 2.2 of the Labour Law. Without further guidance, this might provide a loophole for juvenile exploitation. In practice, most employers will ask prospective employees for a certificate indicating that he or she has completed basic education, although this is not mandated.

Employers who violate the child labour provisions of the Oman Labour Law are subject to a fine of OMR 500 under Article 118 of the Labour Law. A second violation within one year can result in one month of imprisonment in addition to the fine.


Monday, November 21, 2016

Insurance Coverage Obligations

Oman Labour Law

Chapter 3 of the Oman Labour Law issued by Royal Decree 35 of 2003, as amended, (“OLL”) deals with the management of employees. Article 33 of the OLL provides that an employer is required to provide its employees with access to medical facilities in the establishment. Additionally, if the number of employees in one place exceeds one hundred, the employer shall employ a qualified nurse for providing medical aid and shall assign a doctor to visit and treat the employees at a designated place prepared for such purpose. The employer must also provide the employees with the medical treatment free of charge.

If the number of the employees is more than five hundred, the employer shall, in addition to the above, provide the employees with all other means of treatment, including the assistance of specialist doctors or surgical operations or provide the required medicine, free of any charge to employees. However, the employer is not required to pay the costs for dental, ophthalmic and maternity treatment. If the employee is treated in a government hospital or a private clinic, the employer must pay the costs of treatment, medicine and inpatient care, in accordance with the regulations and financial rules applied by the hospitals, subject to the provisions of the laws on social security insurance.

Accordingly, Article 33 of the OLL creates the legal obligation on the part of the employer to bear the expenses of the employee at a government or private hospital, including the expenses of treatment, medicine and stay in the hospital, subject to the laws in respect of social security.

Medical Insurance for Expatriate Employees

An employer is required to provide medical insurance for its expatriate employees. The employer may satisfy this legal obligation in relation to the payment of medical treatment for expatriate employees by providing medical insurance for its employees with a third party insurer, which insurer would pay the government or private hospital directly when the employee receives medical treatment at these health institutions. The employer may also opt for establishing an arrangement with particular designated medical institutions to provide medical services to its employees and the employer would then settle the dues directly with the relevant medical institution.

Medical Insurance for Omani Employees

In the ordinary course, an employer is not obligated to provide medical insurance to an Omani employee, as Omani nationals are entitled to free medical treatment at all government hospitals. Additionally, all Omani employees are covered under social insurance provided by the Public Authority for Social Insurance (“PASI”).

The Social Security Insurance Law, issued by Royal Decree 72 of 1991, as amended, (“SSIL”) provides the social security system applicable to Omani employees on permanent contracts of employment under the age of retirement. The SSIL deals with two types of security:

1.          security against old age, disability and death; and

2.          security against occupational injuries and diseases.

In instances of occupational injury, under the SSIL, PASI is required to directly provide the Omani employee with medical care. The employer is required to contribute towards the security against occupational injuries and diseases by paying a monthly subscription to PASI at the rate of 1% of the monthly wages of each Omani employee. Only the employer (and not the employee) shall pay such subscription to PASI.

Is it mandatory, according to the OLL, for the employer to provide immediate health coverage to the employee’s dependent(s)?

There is no mandatory requirement under the OLL which requires the employer to ensure health coverage for the employee’s dependents (i.e., spouse and children). Article 33 of the OLL only requires the employer to provide all medical facilities to its employees with the exception of the costs relating to dental, ophthalmic, and maternity treatment.

However, if the employer has been sponsoring the employee’s dependents, the employer is not permitted under the OLL to discontinue such benefit. Article 6 of the OLL provides that an employer may establish a scheme by which its employees acquire benefits more generous than those granted by the OLL, or may provide the employee with other benefits, or may enter into agreements with them, the conditions of which are more generous than those provided for in the OLL. Article 6 further provides that if a condition in the OLL contradicts with any of the condition in such schemes or agreements, the condition that is more generous to the employee shall apply. Therefore, the discontinuation of the dependent’s coverage will be construed as ceasing a benefit that has been previously granted to the employee and thus a violation of the OLL.


Monday, November 14, 2016

Payment of Allowances – An Overview of Financial Publication No.5 of 2016

As part of a cost cutting initiative, earlier this year, the Government of Oman, through the Ministry of Finance (“MOF”), made efforts to reduce various benefits provided to employees of companies with more than 50% government ownership (the “Affected Entities”). In other words, the Government of Oman sought to curtail a wide array of benefits currently enjoyed by employees of Affected Entities, in addition to their salaries, in order to make them more uniform and performance dependent.

Financial Publication No. 5 of 2016 (the “MOF Publication”) on the rationalisation of expenditure of Affected Entities, was issued by the MOF on 21 February 2016. The MOF Publication urges all Affected Entities to curb expenses on the basis of a non-exhaustive list which includes bonuses, insurance policies, loans, financial rewards, education allowances and financial reimbursements of any kind (the “Allowances”). Annual salary increments are not included in this list and performance related bonuses are also explicitly excluded.

The stated aim of the MOF Publication is to reduce the disparity between the number and nature of Allowances given to employees in the Affected Entities, and to implement the spending review made necessary by the drop in oil prices.

The decision to reduce or cease the payment of Allowances was issued by the MOF through a “Publication” and not by way of Circular or Ministerial Decision. Publications from the MOF have been, in the past, used as means of communication from the MOF.

The Publication is issued pursuant to Article 6 of the Financial Law (RD 47/98) which authorises the Minister of Finance to undertake certain functions, one of which is to guide and coordinate ministries and government units in respect of financial affairs. Article 6 also includes the right to intervene in the recovery of payments made without justification for salaries, wages, allowances, remunerations or their equivalents in cases and under conditions specified by the executive regulations of the law. However, the content of the MOF Publication may pose legal issues, in particular, considering its interaction with the provisions of the Labour Law (RD 35/2003 as amended).

Individual employees of the Affected Entities are employed in the private sector and therefore subject to the Omani Labour Law. The MOF publication appears to be in contradiction with some provisions of the Labour Law concerning employees’ benefits. Particularly, Article 6 provides that the employer has the option to establish schemes from which his employees may obtain benefits in addition to what is prescribed by the Labour Law. Once these benefits are formalised, usually in an employment contract, the employer is forbidden from unilaterally reducing or revoking such benefits. An amendment to the Labour Law, or a new Law in the form of Royal Decree could override such provisions but, in the case of the MOF Publication, the hierarchy of laws provides otherwise. A Royal Decree will take precedence over a Publication in accordance with Article 80 of the Basic Law of the State (RD101/1996), which states that no authority in the State shall issue regulations, by-laws, decisions or directives that contradict the provisions of the laws and decrees in force, or international treaties and agreements that are part of the law of the country. Thus, where a contradiction arises the Royal Decree will prevail.

Most employees working in Affected Entities have open-ended employment contracts (i.e., for an unlimited term). Such employment contracts include different types of Allowances and the Affected Entities will find it difficult to revoke the Allowances that an employee is entitled to and has been receiving since the commencement of his/her employment. A revocation of such benefits would constitute a breach of the employment contract, opening the door to complaints to the Ministry of Manpower and subsequent litigation whereby the Affected Entities, as employers, may be sued for not adhering to contracts between them and their employees. As a consequence, Affected Entities may face legal and financial issues by cutting Allowances originating from existing contracts. Affected Entities should review and evaluate the potential impact that implementing the MOF Publication would have on the company and its operations to assess the possible effects of such implementation as board members and other company officials should ensure that the policies and plans to be adopted in relation to the company’s operation are in the best interest of the company and its shareholders. Finally, Affected Entities may consider offering more limited benefits in future employment contracts.

The MOF Publication does not provide for sanctions or penalties that may arise in the case of failure to comply with its provisions and does not specify dates with reference to its implementation. Thus, the MOF Publication appears to be structured substantially as a communication and a recommendation to the Affected Entities in the framework of the MOF’s general endeavour to reduce public spending. The MOF may issue further clarifications and take further measures in the matter in the near future, as stated in the MOF Publication in the following terms: “We are currently working on the amendment of the regulations and measures applicable in regard to what is mentioned…”. If and when such amendments to the existing regulations are issued, the matter will have to be reconsidered in the light of the interaction of such amended regulations with the Labour Law and other applicable laws.


Monday, November 7, 2016

Voluntary Liquidation in Oman

A number of limited liability companies (“LLCs”) are set up in Oman to carry out specific contracts for works and services, either as joint foreign and Omani enterprises under Article 2 of the Foreign Capital Investment Law promulgated by Sultani Decree 102 of 1994, as amended (the “FCIL”), or as 100% Omani owned LLCs. However, once the specific contract has expired, it is not always the case that these LLCs are successful in securing further contracts for works or services in Oman. As a result, these LLCs may consider voluntary liquidation.

Justifications for Liquidation

A LLC’s constitutive contract would usually set out the circumstances in which the LLC may be placed into liquidation, but justifications for liquidation are also set out in Article 14 of the Commercial Companies Law No. 4 of 1974 (the “CCL”). These are:

(a)        Expiration of the term fixed for the LLC, or the occurrence of any other event requiring
dissolution specified in the constitutive contract or articles of association of the LLC.

(b)       Accomplishment of the purpose for which the LLC was established, or impossibility of
accomplishing such purpose.

(c)        Transfer of all the shares or stocks in the LLC’s capital to one member.

(d)       Bankruptcy of the LLC, or loss of all or most of the LLC’s capital if such loss renders
the effective use of the remaining capital impossible.

(e)        Agreement of the members to dissolve the LLC.

(f)         If at the request of any interested party, and for any of the foregoing reasons or for
any other reason seriously impairing the LLC’s ability to accomplish its objectives, the Commercial
Court orders the dissolution of the LLC.

For the purpose of this article, we will consider the process to be followed where there is agreement of the members of an LLC to dissolve the LLC, although the main processes set out below would apply to the other justifications for liquidation.

Liquidation Process

Agreement to Liquidate
In accordance with Article 168 of the CCL, an LLC may be liquidated with the agreement of the 
shareholders representing 75% of the LLC’s capital.

Appointment of Liquidator

The shareholders will need to execute a resolution confirming their decision to liquidate the LLC 
and the appointment of a liquidator (usually a local law firm).   The shareholders resolution and 
appointment of the liquidator would then need to be filed by the liquidator in the commercial 
register of the Ministry of Commerce and Industry (“MOCI”) with a cheque for OMR 50 payable to the Ministry of Legal Affairs (“MOLA”).

Cessation of Business and Notices

Once the shareholders resolution discussed above is executed, the LLC must cease all of its business. The MOCI will liaise with MOLA to publish a notice of liquidation in the Official Gazette of Oman. The publication in the Official Gazette will invite the LLC’s creditors to present any claims they may have against the LLC. In accordance with Article 25 of the CCL, the creditors have six months from the first publication to present such claims, although the Minister of MOCI may authorise a shorter period, depending on the financial state of the LLC.

Any contracts, receipts, notices or other documents issued by the LLC after the publication of the notice of liquidation, must indicate that the LLC is under liquidation.

Liquidators Duties and Powers

The liquidator will take possession of the LLC’s ledgers, registers, documents and stock and with the LLC’s auditors or managers (if any) will prepare a detailed list of the LLC’s assets and liabilities. The liquidator will represent the LLC and manage its activities and take all measures necessary to liquidate the LLC’s assets and settle its debts. The liquidator will represent the LLC in law as either plaintiff or defendant and take appropriate steps to safeguard the interests of the LLC.

However, the liquidator will not be permitted to conclude any settlement arrangements with the LLC’s creditors, or to accept arbitration on its behalf or to relinquish any insurance or any other types of security belonging to the LLC at less than its full value. The Liquidator may not commence any new undertakings unless such undertakings are necessary to liquidate the LLC.

Return of Stake to Shareholders

After settling all valid claims made against the LLC, the liquidator shall repay to each of the shareholders the remaining value of his stake or shares in the LLC’s capital as set out in the LLC’s constitutive contract, and distribute among the shareholders any remaining assets in accordance with the provisions of the LLC’s constitutive contract. In the absence of a specific provision to this effect, the remaining assets will be distributed among the shareholders proportionate to each of their stakes or shares in the LLC’s capital.

Completion of Liquidation Process

When the liquidation process has been completed, the liquidator shall submit a final report and a 
statement of account on their work to the LLC’s shareholders for approval.  If the LLC’s 
shareholders do not agree unanimously to the final report and the statement of account, the 
liquidator may request the competent Court to approve.

he approved final report is then presented to the Tax office at the Ministry of Finance (the “MOF”) to confirm that all taxes have been paid.  The liquidator will also be required to receive a 
statement from the Ministry of Manpower (the “MOM”) confirming that all amounts due to the 
employees have been settled.

The liquidator is then required to submit the final report along with the MOF and MOM confirmations to the MOCI and file the announcement of completion of the liquidation process on the Commercial Register at the MOCI.

The announcement of the completion of the liquidation process will also be published in the Official Gazette, after which, an official request is made to the MOCI enclosing a copy of the publication for closure of the LLC. Upon filing this request, the liquidation shall be deemed to be completed and the LLC shall cease to exist.


Monday, October 31, 2016

Implications of Narrowing the Scope of Sovereign Immunity Imposed by the Justice Against Sponsors of Terrorism Act

The Justice Against Sponsors of Terrorism Act (“JASTA” or “Act”) was passed by Congress on 28
September 2016 and according to Act, was implemented to permit persons and entities injured as a
result of terrorist attacks committed in the United States (“US”) to pursue civil claims against
foreign countries.  President Obama had earlier vetoed the Act which, for the first time in his
administration, Congress has overridden.

Before the implementation of JASTA, it was not permissible for a US national to pursue civil claims
of this nature against a foreign state on the basis of sovereign immunity.  JASTA amends the
federal judicial code (the “United States Code”) in order to narrow the scope of foreign sovereign
immunity from the jurisdiction of US courts.  The resulting effect of JASTA may open the gate for
US nationals to seek compensation from foreign states for injuries sustained as a result of acts of
international terrorism where a foreign state or any of its officials, employees or agents has also
engaged in a tortious act or acts in connection therewith.

As JASTA legislation pertains to civil actions “arising out of an injury to a person, property or 
business on or after September 11, 2001” 1, it is widely recognised that JASTA was implemented as a result of the 9/11 terrorist acts committed in the US.  Although the Saudi Arabian government
strenuously denies ever having supported the terrorists of 9/11, it is expected that Saudi Arabia
will be affected by the Act, given that fifteen of the nineteen 9/11 terrorists were Saudi Arabian

What is the Purpose of JASTA?

As mentioned above, JASTA seeks to allow all persons and entities injured as a result of terrorist
activities the recourse to civil claims against those responsible for inflicting injuries to such
persons or entities.

Specifically, JASTA’s stated purpose is to provide civil litigants with the “broadest possible 
basis … to seek relief against persons, entities and foreign countries … that have provided 
material support or resources, directly or indirectly, to foreign organisations or persons that 
engage in terrorist activities against the [US].”2

In enacting JASTA, Congress found, among other things, that “persons, entities or countries that
knowingly or recklessly contribute material support or resources, directly or indirectly, to
persons or organisations that pose a significant risk of committing acts of terrorism that threaten
the security of nationals of the United States or the national security, foreign policy, or economy
of the United States, necessarily direct their conduct at the United States, and should reasonably anticipate being
brought to court in the United States to answer for such activities” (emphasis added)3.

What is the Scope of JASTA?

Sovereign Immunity

The concept of sovereign immunity prevents a state from having a civil action being brought against
it (by individuals and states), subject to certain exceptions, without its consent.   JASTA,
however, has narrowed the scope of sovereign immunity with respect to acts of international
terrorism by asserting as follows:

“… a foreign state shall not be immune from the jurisdiction of the courts of the [US] in any case  
… for physical injury to person or property or death occurring in the [US] and caused by

(1)        an act of international terrorism in the [US]; and

(2)        a tortious act or acts of the foreign states, or of any official, employee, or agent of 
that foreign state while acting within the scope of his or her office, employment or agency, 
regardless where the tortious act or acts of the foreign state occurred.”4

The resulting impact of the provisions in (1) and (2) above means that if an act of international
terrorism occurs on US soil (by a national of a foreign state) irrespective of whether the person
acting on behalf of the foreign state is outside of the US, the sovereign immunity previously
applicable to that foreign state may no longer apply. Put simply, a civil litigant may pursue a
civil action in the US courts against the foreign state.

JASTA makes clear that reference to “international terrorism” has the same definition as in the
United States Code, meaning violent acts that are dangerous to human life and are a violation of
the criminal laws of the US or any State, and that would constitute a criminal violation if
committed in the US. Further, the terrorist act must be intended to intimidate or coerce civilians,
influence government policy, or affect a government’s conduct by mass destruction, assassination or
kidnapping and occurs primarily outside of the US.5

The Act further clarifies that a foreign state will still retain its sovereign immunity if an
omission or a tortious act “constitutes mere negligence”6.   Therefore, any omission or tortious
act committed by a foreign  state  or  an  official,  employee  or  agent  of  such  foreign  state  must constitute more  than negligence in order for the foreign state to lose its immunity protection under JASTA.

Aiding and Abetting

In addition to lifting the doctrine of sovereign immunity, JASTA also provides secondary liability,
asserting that “… any person who aids and abets by knowingly providing substantial assistance, or 
who conspires with the person who committed such an act of international terrorism.”7   This
secondary liability is only applicable however to international terrorism that is planned or
authorised by an organisation that has been designated as a foreign terrorist organisation as
provided by the Immigration and Nationality Act.   A foreign terrorist organisation is categorised
as a foreign organisation that “… engages in terrorist activity or terrorism (… or retains the  capability and intent to engage in terrorist activity or terrorism); and … the organisation 
threatens the security of US nationals or the national security of the US.”8 Contrary to the above section regarding sovereign immunity, “person” for purposes of this Section  of JASTA is broadly defined and includes natural persons.

When did JASTA come into effect?

The amendments made to the United States Code by JASTA are applicable to any civil action pending on, or commenced on or after, the date of enactment of JASTA; and arising out of an injury to a person, property, or business on or after 11 September, 2001.

Stay of Actions Pending State Negotiations

Notwithstanding its narrowing effects on sovereign immunity, JASTA does permit the US Attorney
General to intervene in any action in which a foreign state is subject to the jurisdiction of a US
court for the purpose of seeking a stay of the civil action. The court may stay a proceeding
against a foreign state if US Secretary of State “certifies that the United States is engaged in 
good faith discussions with the foreign state defendant concerning the resolution of the claims 
against the foreign state, or any other parties as to whom a stay of claims is sought.”9  A
stay brought under JASTA may be granted for no longer than 180 days; however the Attorney General may petition the court for an extension of the stay for additional 180-day periods, provided that a recertification is given by the US Secretary of State as to the state of negotiations with the
foreign state.

Potential Implications of JASTA

Proponents of JASTA argue that it is justified on the basis that governments should be able to be
held accountable where their people commit acts of international terrorism and the government
committed a tortious act or acts in connection with such acts.

Critics of JASTA, including President Obama’s administration and the Central Intelligence Agency
(“CIA”), argue that JASTA will have severe implications for the national security of the United
States, so much so, that CIA Director John O. Brennan has recently stated that “any legislation 
that affects sovereign immunity should take into account the associated risks to our national 
security.”10    This viewpoint is based on the fact that sovereign immunity is a reciprocal
arrangement, with the concern being that it could make the US exposed to similar litigation in
foreign courts that could affect US officials working overseas if other states impose retaliatory
legislation. In addition, critics also argue that JASTA could significantly weaken the relationship
the US has with other states, such as Saudi Arabia which, as mentioned above, is one foreign state
that could largely be impacted by JASTA.

Despite being passed by Congress with 97 – 1 in favour in the Senate and 348 – 77 in favour in the
House, following the severe criticism of the Act, there has been speculation that legislators may
seek to revisit and modify JASTA after the US Presidential elections in November 2016.  However, it is not yet clear to what extent legislators shall seek to modify the Act, or indeed whether the
narrowing in scope of sovereign immunity shall be amended.

1 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §7.
2 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §2(b).
3 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §2(a)(6).
4 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §3 to be codified
at 28 U.S.C. §1605B.
5 18 U.S.C. §2331.
6 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §3.
7 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §4 to be codified
at 18 U.S.C. §2333.
8 8 U.S.C. §1189.
9 S.2040 - Justice Against Sponsors of Terrorism Act, 114th Congress (2015-2016), §5(c)(1).
10 Statement from Director Brennan on JASTA, available at:


Wednesday, October 19, 2016

Dispute Avoidance Processes in Oman - Friend or Foe

The costs associated with construction litigation are often disproportionate to the quantum in dispute due to their complex and technical nature, and the proliferation of associated documentation. Arbitration costs (often promoted as a less expensive and more expedient process as compared to the court process) often rival the costs associated with a court-adjudicated process.   Rarely does either party exit a litigious process unscathed.  A more collaborative philosophy of contracting and dispute resolution  may  be  helpful  in  this  region  to  effectively  resolve  construction  disputes  early  on, particularly if the relationship of the parties is ongoing and one that requires preservation.    Dispute review boards (“DRBs”) and dispute adjudication boards (“DABs”) are two dispute adjudication processes that have been effective in other jurisdictions at reducing the time and costs associated with resolving construction disputes.

What are DRBs and DABs?

DABs are designed to provide decisions in relation to matters arising between contracting parties throughout a project, and the parties are generally bound by these decisions if provided for by contract. However,  where  non-binding  recommendations  are  provided,  and  the  DAB  acts  in  an  advisory capacity, the DAB would generally be referred to as a DRB.  DRBs have the dual purpose of assisting the parties to avoid disputes and also resolving disputes, ensuring, as far as possible, that disputes do not escalate to a more adversarial and hostile forum.  DRBs and DABs are implemented at the outset of a project, rather than at the time of the dispute such as with an arbitration process.   The DRB has intimate knowledge of the project at all stages, attends site and meetings every few months and produces reports on an ongoing basis to the parties.  The board in each case is generally comprised of an engineer selected by each party and a third engineer, generally with dispute resolution and contractual interpretation experience selected by agreement of each party’s engineer.


DABs and DRBs have gained popularity in many jurisdictions over the years.  DABs are provided for in each of the FIDIC Red, Yellow, Silver and Gold Books and the International Chamber of Commerce (“ICC”) has released its own dispute board procedure in October 2014.     However, despite the significant success of dispute boards elsewhere in the world, neither DABs nor DRBs are popular in Oman.

Forms of dispute resolution in Oman have, to date, been primarily restricted to mediation and, more often, arbitration.  This, in part, is due to the prevalent use of the Oman Government Standard Form Construction Contracts that are based on a modified form of the standard forms of contract issued by FIDIC.  As standard, in the Oman Government Standard Form Construction Contract, provisions relating to resolution of disputes via arbitration are retained, and the clauses relating to DRBs/DABs are omitted.  It is normally not possible to amend these Standard Form Contracts.

Dispute adjudication processes

Currently, courts in Oman and across the Middle East are reluctant to enforce DAB or DRB decisions, particularly where an arbitration clause  is also in the contract  or  at  all.   Arbitrators are  likewise reluctant, or without jurisdiction, to enforce the decisions of a dispute board without hearing the issues in dispute afresh.  Additionally, during a DRB or DAB process, matters are not discussed on a “without prejudice” basis and information disclosed can be used if the matter proceeds to an arbitration or court- adjudicated process.  The absence of recognition of “without prejudice” negotiations is a major reason methods of alternative dispute resolution such as mediation or dispute boards are not used in the region.  Further, a contractually agreed confidentiality agreement does not afford reliable protection. The Oman courts may allow any evidence to be presented which sheds light on the matters before it. Further, and most importantly, dispute board decisions are not likely to be enforced by the courts in Oman.

Other jurisdictions have introduced a statutory framework to support the implementation of effective alternative dispute resolution methods, rather than simply a contractually agreed framework.  Such frameworks were introduced in the UK in 1996, followed by Australia in 1999, New Zealand in 2002 and Singapore in 2004 and have enabled alternative dispute resolution (particularly DABs and DRBs) to be a legitimate and enforceable means to resolve construction disputes.


It is advisable to seek legal advice before considering whether to contractually implement a dispute board to resolve contractual disputes at any stage of the dispute process.  There are considerable merits in that high-quality opinions from a DRB or DAB may provide the deep understanding and rational compass  for  construction  projects  necessary  to  keep  litigation  at  bay.  However,  the  lack  of enforceability of dispute board decisions continues to greatly detract from their usefulness in Oman.  If a statutory framework is developed in Oman such that dispute board decisions can be enforced, DRBs and DABs may become an attractive alternative to arbitration.


Wednesday, October 12, 2016

Oman's New Engineering Consultancy Law

The  May  edition  of  the  Client  Alert  contained  a  comprehensive  discussion  on  the  procedural formalities that must be met in order to establish an Engineering Consultancy firm under the new Engineering Consultancy Law, entitled “Issuing the Law Regulating the Work of Engineering Consultancy Offices” (“Engineering Consultancy Law”) (Royal Decree 27/2016).  The primary focus of this  article  is  to  identify  key  features  that  have  been  introduced  by  the  legislature  in  the  new Engineering Consultancy Law.

Engineering consultants play a vital role in administering large-scale infrastructure projects.  Broadly speaking, the engineering consultant is responsible for providing both technical and administrative support needed to ensure that a construction project runs smoothly.

The scope of an engineering consultant’s responsibilities may be classified into two distinct categories, namely as a project’s administrative manager and as a project’s technical expert:

a)   Administrative manager:  In its capacity as administrative manager, the engineering consultant’s responsibility may include administering the tendering process, managing contractors and sub- contractors on behalf of a project owner, as well as reviewing and approving contractor’s variation requests.   In some instances, engineering consultants may also be tasked with reviewing any potential disputes that arise between contracting parties.

b)  Technical expert:  Engineering consultants are often called upon to provide technical, engineering and/or quantum expertise on a specific project.   In this regard, the scope of an engineering consultant’s responsibilities may include conducting and interpreting feasibility studies, such as soil and/or rock investigation, producing the detailed project design, and resolving any potential design related issues that may arise.

In light of the number of large-scale construction projects in Oman, engineering consultants, perhaps unbeknownst,   play   a   pivotal   role   in   the   Sultanate’s   long-term   economic   and   infrastructural development plans.  It is in this context that the Omani legislature considered it necessary to appraise and, ultimately, to modernize the Engineering Consultancy Law in Oman.

The new Engineering Consultancy Law – Royal Decree 27/2016

Until very recently, the primary legislation which regulated Engineering Consultancy profession was the Engineering Consultancy Law of 1994, promulgated by Royal Decree 120/1994 (“Previous Law”). However, on 22 May 2016, the Omani legislature issued a new, and more comprehensive, Engineering Consultancy Law, under Royal Decree 27/2016.   The Engineering Consultancy Law replaces the Previous Law, and thus provides a new and comprehensive framework to regulate the engineering consultancy profession.
The Engineering Consultancy Law in many ways resembles the Previous Law.   However, there are many new and noteworthy features in the new law, some of which we discuss below:

Credentials necessary to register an Engineering Consultancy Office

Significantly, Article 7 of the Engineering Consultancy Law has raised an applicant’s credentials required to establish an engineering consultancy office.

The legislature now draws an important distinction between an “Engineering Office” and an “Engineering ‘Consultancy’ Office” under the aforesaid Article 7.  In order to qualify to open an Engineering Consultancy Office, an applicant must first have a registered Engineering Office.  The applicant must also meet one of the following criteria: (i) gained a minimum of five years of specialized work experience after having obtained a BSC (Bachelors); (ii) gained three years of specialized work experience after having obtained an MSC (Masters); or (iii) gained two years of specialized work experience after having obtained a PhD in the same area of specialization.

However, as mentioned above, an applicant for an Engineering Consultancy Office must first have an established Engineering Office.  In order to establish an Engineering Office, Article 7 provides that the applicant must have either: (i) obtained at minimum three years of specialized work experience after having obtained a BSC (Bachelors); or (ii) gained one year of specialized work experience after having obtained a PhD in the same area of specialization.

The qualifications set out above are more stringent than what was provided under the Previous Law. Under Article 3(c) of the Previous Law, an applicant only needed to have either: (i) gained five years of specialized  work  experience;  (ii)  gained  three  years  of  specialized  work  experience  after  having obtained a BSC (Bachelors); or (iii) obtained a PhD in order to open an Engineering Consultancy Office.

Chapter 3 – “Working Engineer”

The Engineering Consultancy Law has introduced new provisions intended to elevate professional engineering standards under Chapter 3, Working Engineer.   For example, Article 17 restricts the right to sign off on key documents, including schemes, graphics, designs, specifications, project report samples, and supervision bonds, to only the licensee, and to engineers who: (i) are registered as authorized signatories with the MOCI; (ii) have met the requirements to obtain the professional degree from the authority; and (iii) work exclusively for the specific office.

Chapter 5 – Violations Committee

Chapter  5  of  the  new  Engineering  Consultancy  Law  has  introduced  a  formalized  Violations
Committee, to be chaired by the undersecretary of the MOCI.  Once formed, the Violations Committee will be comprised of four experienced engineers, with two of the four serving as representatives of the Omani Engineer’s Association, each for a five-year term.

The Violations Committee is to serve as a quasi-adjudicatory board, to consider any complaints and/or potential violations of the Engineering Consultancy Law.  The Violations Committee will be authorized to levy one of the following penalties: to issue warnings, to suspend a licence up to one year, or to cancel  a  licence  altogether.    Any  adverse  decisions  issued  by  the  Violations  Committee  may  be appealed to the Minister within 60 days from the date of the Violations Committee’s decision.

Chapter 6 – Penalties

Perhaps most notably, Article 29 of Chapter 6, Penalties, introduces criminal culpability for acts of “gross negligence,” or for having failed to “take necessary precaution which jeopardized the safety of the people or the properties or the environment” by an engineering consultant.  The Previous Law does expressly provide for criminal culpability for any violations of its provisions.

It is reasonable to assume that the legislature has included criminal penalties for gross misconduct, as perpetuation of its firm commitment to protecting those who may be unnecessarily placed in harm’s way due to any compromised or unsafe civil structures.


Wednesday, October 5, 2016

Extending the Period of Arbitral Proceedings in Oman

Arbitration is one of the most popular types of alternative dispute resolution methods used by parties to resolve a dispute, both in the private and public sectors in Oman.  An often-cited reason for selecting arbitration is to reach a final resolution of a dispute in a timely, inexpensive and less formal manner.

Under the Omani Arbitration Law issued by Royal Decree 47/1997 (as amended), Article 4 defines “Arbitration” as the arbitration agreed upon by both parties to the dispute at their own free will, irrespective of whether the body that would be attending to the arbitration proceedings, in accordance with  the  agreement  between  the  parties,  is  an  organization,  a  permanent  arbitration  centre,  or otherwise.

To  ensure  that  disputes  are  resolved  expeditiously,  the  Omani  Arbitration  Law  (Sultani  Decree
47/1997) sets time limits within which an award must be issued.

Per Article 45 of the Omani Arbitration Law, the arbitral tribunal shall have to pass a final award in respect of a dispute within the time period agreed upon by the parties.  Article 45 further says that if the parties fail to agree on the timeframe for adjudicating the dispute, then the award shall be required to be passed within 12 months from the date of commencement of the arbitration proceedings.

Once an arbitrator is appointed, for the purposes of these timeframes, the commencement date of the arbitration proceedings can either be a date agreed between the parties in an arbitration agreement, or a date determined by the arbitral tribunal (in which case it will often be the date of service of notice of arbitration by one party to the other party).

Period of extension under Oman Arbitration Law

If the dispute is not settled by the arbitral tribunal within the initial timeframe described above, Article 45 of the Omani Arbitration Law allows the arbitral tribunal to extend the period of the arbitration proceedings for a further period of six months from the date that the initial arbitration period expired. The arbitral tribunal’s decision for an extension of a further period of six months must be in writing.

However,  parties  to  a  dispute  must  keep  in  mind  that  any  further  extension  of  the  period  for arbitration proceedings beyond the above-referred six months requires consent of the parties as per Article 45 of the Omani Arbitration Law.

Article 45 (2) of the Omani Arbitration Law says that if the arbitration award has not been passed within the period specified above, either party to the arbitration may request the President of the Commercial Court to pass orders prescribing an additional period or have the arbitration proceedings brought to an end. In such a case, either party may file their claims before the competent court.

If the arbitration award is not issued within the initial timeframe plus the six-month extension period, the parties should send written notice to the Arbitrator requesting a further extension of the arbitration period proceedings.  This must occur before the initial arbitration period plus the six-month extension period expires.  In this way, the parties can avoid the premature closure of the proceedings, or an application to the courts.

In summary, the most important points to note are:

  • clearly record the date of commencement of the arbitration proceedings in writing at the start of the arbitration; and
  • both parties should communicate their consent for an extension beyond the initial arbitration period  plus the six-month extension  period  before  expiration  of the extension  period  to the arbitral tribunal.


Thursday, September 29, 2016

Regulations for Working in the Sohar Free Zone

In recent years, the Sultanate of Oman has established a number of free zones, predominantly to boost foreign investment as part of its wider diversification plan for the country.  The focus of this article is the Sohar Free Zone (“SFZ”), in particular, the regulations applicable to companies operating within the SFZ.

Earlier  this  year,  the  Ministry  of  Commerce  and  Industry  (“MOCI”)  issued  Ministerial Decision 35/2016, on the Governing Regulations for Operation of SFZ (“MD 35/2016”), which came into force on 8 February 2016.  MD 35/2016 is to be read in conjunction with the Establishment of the Sohar Free Zone Law issued by Royal Decree 123/2010 (“Sohar Free Zone Law”) and was implemented in order to set out how companies (or rather “Working Companies,” a term defined by MD 35/2016) are able to operate.  Such detail includes:

  • how to acquire licenses;
  • benefits and incentives for operating in the SFZ;
  • tax exemptions available in the SFZ;
  • rules governing the import and export of goods;
  • rules of responsibility relevant to Working Companies; and
  • incorporation fees (including license, permit and service fees) for setting up within the SFZ.


There are two categories of licenses for operators within the SFZ; the Working Company License and a Service Provider’s License.  Each license shall specify the activity permitted to be conducted by the licensee and, in the event that the licensee wishes to add activities, it must obtain an additional license for each additional activity.   Each license application must be submitted to the Operating Authority (the “Sohar Free Zone LLC” or “OA”) who is responsible for the management and development of SFZ.

If a license application is refused by the OA, a party may re-apply six months later.  However, there is an option to appeal against refusal within a period of 60 days from the date of notification or from the date that the Working Company first became aware of the refusal decision, whichever is earlier.

Benefits and incentives of the Working Company

Further to the incentives available under the Sohar Free Zone Law and the tax incentives below, provided certain measures are adhered to, the Working Company is permitted to sub-let plots of land by virtue of a sub-lease agreement. Measures include but are not limited to obtaining the OA’s written approval of the sub-lease, registering the tenant as a Working Company, and providing a written undertaking evidencing the responsibility of the Working Company jointly with the tenant for any liabilities to the OA.

Tax exemption

Working Companies are exempt from taxes for a period of ten years, provided they register within the SFZ,  obtain  a  license  (in  accordance  with  the  above  heading),  enter  into  a  lease  agreement  or investment agreement with the OA, conduct business within the SFZ, and have not less than 15% Omanisation of its total workforce.  In order to benefit from tax exemption after the first ten years, the following Omanisation percentages must be met:

  • 25% for years 11 to 15;
  • 35% for years 16 to 20; and
  • 50% for years 21 to 25.
To qualify for the tax exemption status, under Chapter 4 of MD 35/2016, each Working Company is required to present a tax statement at the end of each year, including a list of its employees and the achieved level of Omanisation to date.  In a situation where the Working Company has not achieved the required Omanisation percentages described above for any given year: (1) it shall not be permitted to extend the period of exemption for that year; (2) any profit mentioned during that tax year should be subject to the applicable income tax; (3) it shall not be possible to transfer any accumulated losses in the annual profit and loss statement; and (4) the tax exemption shall not be effective unless the OA has otherwise issued a tax exemption certificate.

Import and export of goods

Chapter 5 of MD 35/2016 describes the arrangement of the import and export of goods into and out of the  SFZ.    For  example,  goods  shall  freely  enter  into  the  SFZ  (and may  remain  for  an  unlimited duration) and goods exported out of Oman or to another free zone are not subject to customs duty.

Certain goods, however, are prohibited from entering the SFZ including but not limited to, narcotics, arms and ammunitions and explosives, chemical materials or radioactive substances, toxic waste that is harmful  to  the  environment  and  any  goods  which  shall  violate  the  laws  protecting  intellectual property, commercial, industrial, literary and artistic property rights.

Procedures must be adhered to for importing and exporting goods into the SFZ, for instance:

 Goods imported into the SFZ from outside of Oman

a)   Customs officers shall prepare a statement of transit addressed to the SFZ at the border crossing point (i.e., the point of entry where the goods enter the SFZ). The goods are treated as goods passing the “Customs Territory” (defined by MD 35/2016 as any territory within Oman) provided that the owner of the goods submits a guarantee equal to the value of customs taxes, in accordance with the Unified Customs Law.

b)  Customs officers in the SFZ shall verify the statement of transit and record the detail in the relevant register.

c)   The OA or the Working Company shall take delivery of the goods, after a preliminary inspection of the goods has been carried out by customs and the inspection form is duly completed.

Foreign goods that are imported from the Customs Territory must enter the SFZ through customs by virtue of a certificate of origin and a bill from the exporter together with an export or re-export customs statement.

Goods exported out of the SFZ

a)   The owner of goods shall submit an application to the OA together with payment of any fees and relevant invoice.

b)  Upon the request of customs in the SFZ, the owner of the goods shall arrange for the goods’

c)   A customs statement shall be prepared by the owner of the goods. d)  The OA’s approval must be acquired before goods can be exported.

Any goods taken out of the SFZ and into the Customs Territory are treated as foreign goods, regardless of whether the goods contain domestic primary materials.  Any goods manufactured or assembled within  the  SFZ  shall  be  treated  as  goods  of domestic  origin  with  the  purpose  of being  exported overseas.


In addition, Chapter 7 of MD 35/2016 sets out the penalties that may apply to Working Companies where the OA may withdraw a license or terminate a lease if any of the following circumstances apply:

a)   failure to start building, construct works and prepare the site within six months from the issuance of a license without a justifiable reason;

b)   failure to carry out the activity provided for in the license for six months from the date of issuance without a justifiable reason;

c)   if the licensed activity is suspended for six months;

d)   if rent is delayed by a period of six months from its due date;

e)   bringing prohibited goods into the SFZ; and

f)   a violation of the provisions of MD 35/2016.

Penalties  for  non-compliance  with  MD  35/2016  and  the  Sohar  Free  Zone  Law  include  written
warnings, fines amounting to no more than 5,000 Omani Rials, prohibition from entering the SFZ for a period of one year, suspension from working for a period of three months, or prevention from conducting business within the SFZ, including being prevented from removing goods out of the SFZ until such violation is rectified.


Wednesday, September 21, 2016

Oman Officially Ratifies the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

Royal Decree 41 of 2016 (“RD 41/16”), was issued on the 18th of August 2016 in relation to approving the Sultanate of Oman joining and becoming a party to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”).  The Organisation for Economic Co-operation and Development (the “OECD”) created the anti-bribery convention as a means of establishing certain legally binding standards to criminalise the bribery of foreign public officials in international business transactions and to allow the nations who join the convention to have effective measures in this regard.  RD 41/16 comes in the wake of the Sultanate of Oman’s recent focus on combating bribery, money laundering, fraud and other financial crimes.

The Convention was drafted in a manner to give parties a certain amount of flexibility in applying its articles, as it generally makes recommendations regarding the measures that parties should implement rather than forcing the parties to implement them.  The Convention deals with offences committed by persons who promise or give bribes, as opposed to dealing with the offence committed by the official who receives the bribe.   The Convention is the first international anti-corruption mechanism that focuses on this side of bribery transactions and it allows parties to implement the recommendations contained within the Convention without the need to initiate changes in the fundamental principles of the laws of any given party.  It also seeks to maintain efficient uniformity among the measures taken by all the parties in deterring bribery of foreign public officials.

In essence, the Convention allows the parties to implement penalties that they deem fit which would normally apply within their own legal systems. This was illustrated in article three of the Convention which states that the bribery of a foreign public official shall be punishable by effective, proportionate and dissuasive criminal penalties which are comparable to the penalties applicable to the bribery of the party’s own public officials in a manner that allows effective mutual legal assistance and even extradition if the case calls for it.

In order to achieve its main purpose, the convention clearly outlines the required measures needed to be taken by the “accounting” department in order to combat bribery. These measures include the prevention of establishing off the books accounts, recording non-existent transactions, keeping false expenditure records. The Convention strongly urges members that such methods should result in either a civil, administrative or criminal penalisation.

The Convention includes several recommendations for member countries regarding reporting foreign bribery, maintaining external audits and compliance.  Moreover, in order to raise awareness in the public and private sectors for the purpose of preventing foreign bribery, the Convention includes numerous recommendations for parties to have strong ethics and compliance regulations as well as obliging companies to maintain external auditing. Business organisations should be encouraged by the member countries to assist companies in developing internal controls, ethics, and compliance programmes or measures.

Additionally, member countries should necessitate that companies reveal the full scope of material liabilities within their financial statements.   Furthermore, the convention encourages a company’s management to disclose in their annual reports or otherwise publicly disclose their internal controls, ethics and compliance measures, including those measures which contribute to detecting bribery.

Fundamentally, companies should consider visible policies in prohibiting bribery. Clear and strong support from senior management to maintain high standards in ethics and compliance can be considered as one of the expected recommendations from the articles of the Convention. Likewise, a financial and accounting procedural system with internal controls which are reasonably designed to ensure the maintenance of fair and accurate records are required under the Convention. The guideline encourages companies to provide positive support for the observance of ethics and compliance programmes or measures against foreign bribery. Companies should ensure that they have periodical reviews of the ethics and compliance programmes in a manner designed to assess their efficiency in avoiding foreign bribery, taking into account related developments in the field.

With regards to reporting foreign bribery, members should ensure having easily accessible channels in place for the reporting of suspected acts in international business transactions to law enforcement authorities. In addition, appropriate measures should be in place to facilitate the reporting of public officials, in particular those posted abroad. In accordance with Article 8 of this Convention, Members shall provide effective and proportionate civil, administrative or criminal penalties for such omissions in respect of the books, records, accounts and financial statements of such companies.

Therefore, being a member to this Convention and adhering to the articles of the Convention enables companies to avoid financial crimes especially those in relation to bribery. Joining in the Convention does not necessarily mean that the country has been given new regulations. Rather, the Convention reaffirms the regulations that the Sultanate already has in place such as the Code of Corporate Governance for Public Joint Stock Companies, the Law on Anti-Money Laundering issued through Royal Decree 30 of 2016 as well as other laws and regulations which relate to compliance, ethics and avoiding financial crimes.


Wednesday, September 14, 2016

Islamic Finance - Part 3

This is the third part of a series of articles discussing Shari’ah compliant structures used in project financing  transactions.  In  the  second  part  of  this  series,  we  discussed  two  Sukuk  (i.e.,  Shari’ah compliant capital markets instruments) structures used to finance particular projects. In this article, we will discuss the third structure, namely, the Sukuk al-Musharakah structure and the different ways in which it can be used in project financing transactions.

Sukuk al-Musharakah

The term Musharakah literally means sharing. This term is derived from the Arabic word Shirkah, which means partnership. In Shari’ah, Musharakah means a partnership arrangement formed between two or more partners for some business purpose where each partner makes a contribution (in cash or in kind) to the Musharakah (i.e., the partnership). The profits of the Musharakah are shared amongst the partners according to an agreed ratio whereas the losses are shared according to the ratio of their respective contributions.

Musharakah can be divided into two structures, namely, the Shirkat-ul-Aqd structure and the Shirkat- ul-Milk  structure  for  the  purposes  of  Sukuk  issuance  for  financing  a  particular  project.  We  are discussing below the salient features of the said structures and the key principles involved in their utilization in project financing transactions.

A. Shirkat-ul-Aqd (Partnership by contract)

In this type of Shirkah, Musharakah is created by a mutual contract between the originator and the trustee where the originator and the trustee agree to contribute their efforts and resources towards achieving a common business purpose.

For the purposes of structuring a Sukuk issuance based on the Shirkat-ul-Aqd structure, a special purpose vehicle (“SPV”) is established to hold the Sukuk holders’ interest in the Musharakah. The SPV issues Sukuk certificates representing an undivided ownership interest in the underlying Musharakah and the Sukuk holders contribute towards the capital of the Musharakah by contributing cash to the SPV in exchange for Sukuk certificates.

A trust is declared by the SPV over the proceeds and any asset(s) acquired therefrom.  The SPV acts as a trustee for and on behalf of the Sukuk holders. Subsequently, the trustee enters into a Musharakah agreement with the originator where both the trustee and the originator contribute towards the capital of the Musharakah. In return, both the trustee and the originator receive a proportionate number of units in the Musharakah. Contribution from the trustee comes in the form of proceeds from the Sukuk issuance. The respective contributions of the trustee and the originator are used for the purposes of the Musharakah.

The profits generated from the Musharakah are shared between the originator and the trustee in an agreed proportion. The said proportion may not necessarily be the same as the proportion of their respective contributions to the Musharakah. The trustee’s share of the profits is calculated in such a manner so as to be enough to pay the periodic distribution amounts to the Sukuk holders.

The losses, on the other hand, are shared strictly in proportion to the respective contributions of the trustee and the originator to the Musharakah.

The trustee and the originator also enter into a purchase undertaking pursuant to which the trustee is granted the right to require the originator to purchase the Musharakah asset at an agreed exercise price on the maturity of the Sukuk or upon the occurrence of an event of default; thereby dissolving the Musharakah. The exercise price is equal to the Sukuk holders’ subscription amount plus any accrued but unpaid periodic distribution amounts.

In some cases, the originator is granted a call option by the trustee under a sale undertaking pursuant to which the originator can require the trustee to sell the Musharakah asset to the originator prior to the maturity  of  the  Sukuk.  The  sale  price  in  such  cases  is  equal  to  the  Sukuk  holders’  amount  of contribution to the Musharakah plus any accrued but unpaid periodic distribution amounts.

Under a management agreement, the trustee appoints the originator as the managing agent to manage the joint venture according to an agreed business plan. In consideration for its services, the originator is paid a nominal management fee.

B. Shirkat-ul-Milk (Partnership by joint ownership)

Under this structure, Musharakah is created by the joint ownership of the originator and the trustee in a particular asset. This joint ownership can be created in two ways, either by both the originator and the trustee making cash contributions to the Musharakah for jointly acquiring an asset, or by the originator selling its ownership interest in an asset to the trustee.

There are three essential ingredients of this structure. The first is that both the originator and the trustee are the joint owners of the relevant Musharakah asset. Secondly, the originator (in the capacity of a lessee) utilizes the share of the trustee (in the capacity of a lessor) in the Musharakah asset. Lastly, the originator buys back the share of the trustee in the Musharakah asset.

To begin with, the SPV issues Sukuk into the capital markets. The Sukuk holders subscribe to the Sukuk by contributing cash to the SPV in return for Sukuk certificates. The Sukuk certificates represent the proportionate ownership of the Sukuk holders in the underlying Musharakah asset.

The SPV declares trust over the Sukuk issuance proceeds and acts as a trustee for and on behalf of the
Sukuk holders.

The trustee and the originator then enter into a Musharakah agreement pursuant to which they jointly acquire the Musharakah asset or the trustee acquires the ownership interest of the originator in the Musharakah asset (as the case may be). Following such acquisition, the originator and the trustee become co-owners of the Musharakah asset.

Under a rental agreement, the originator (in the capacity of a lessee) uses the trustee’s share in the Musharakah asset against periodic rental payments. Such rental payments are then passed on by the trustee to the Sukuk holders as periodic distribution amounts.

The originator, pursuant to a purchase undertaking, purchases the units or the ownership interest of the trustee in the Musharakah asset on specified dates. Such purchase can be either during the tenor of the Sukuk or at maturity.

Where the Sukuk is structured on a diminishing Musharakah basis, the units are purchased during the term of the Sukuk. With each such purchase, the ownership interest of the trustee in the Musharakah asset decreases with corresponding increase in the originator’s ownership interest.

The originator and the trustee also enter into a management agreement under which the trustee appoints the originator as its agent to manage the Musharakah asset and to carry out the services pertaining to the major maintenance, takaful and payment of ownership-related taxes and expenses in
respect of the Musharakah asset.


Wednesday, September 7, 2016

Commercial Name Reservations

The Ministry of Commerce and Industry (“MOCI”) has recently issued a Ministerial Decision No. 124 of 2016 on issuing the regulation regulating to Commercial Names (“MD 124/16”).

In order for an investor (i.e., a company or individual) to set up a new company in Oman, the investor shall first identify and seek approval on the proposed name of the new company. Previously, whilst the MOCI permitted investors to include the foreign investor’s name, it has generally prevented the investors from including the word “Oman” in the new company name, unless the minimum capital invested in the company was RO 500,000 or more.   However, under the new MD 124/16 only joint stock companies have the right to include the word “Oman” in the commercial name.  This means that limited liability companies would not be able to include the word “Oman” in the commercial name, regardless of whether the limited liability company has a capital investment of RO 500,000.

The  MOCI  has  recently  taken  the  initiative  in  implementing  rules  and  regulations  relating  to company’s name reservation.  MD 124/16 cancels all provisions or rules that contradict the regulations. Article 4 of MD 124/16 provides that the investor is not permitted to reserve or register the company name unless the name has a meaning or expression in Arabic, and must not include a term or a word that cannot be translated into Arabic.  Such rule however does not apply to foreign branches that are registered in Oman or Omani companies that have joint foreign ownership or foreign companies that have full ownership.

Further, it is not permitted for any branch of a company to hold an independent commercial name different to that of the name of the company.  Any trademark of the establishment or its branches may be registered as per the Intellectual Property Law.

MD 124/16 provides that any names that fall under the following categories are not permitted to be registered:

  • plural of a tribe name, which includes the two letters (AL);
  • a name that is identical to a commercial name of an establishment which has a local and an international reputation;
  • a name which may indicate or include a religious, political, military meaning or content;
  • a demonstrative pronoun, an honorary sign or a special character in any of the regional, Arab or international organizations or one of its institutions;
  • a name that resembles a name of an authority or organisation, a social institution, local charities or international institutions;
  • a name that resembles a registered trademark or its name, or contains one of its components;
  • a  name  that  carries  a  synonymous  meaning  to  the  commercial  name  of  an  establishment  or pluralizes or singularizes the name of a registered establishment;
  • a name that carries the word “Oman” or “Omani” or one of its derivatives or implications, except for the joint stock companies; and
  • a name that indicates an incorrect geographical division of the Sultanate.

Article 8 of MD 124/16 grants the MOCI the power to cancel, or request an applicant to change or amend  the  commercial  name  of  the  establishment  if  it  does  not  comply  with  these  rules  and regulations.   The applicant will bear its costs and expenses associated in amending or changing the name.

An applicant may appeal the MOCI’s decision to cancel the registration or its request to amend the name by submitting a written request to the undersecretary of the MOCI within sixty (60) days from the date of notification of its decision.  The MOCI shall decide on the appeal within thirty (30) days from the date of submission. If no decision is made within thirty (30) days, the decision shall be deemed to have been rejected.

Therefore, in light of the new MD 124/16, it is important for an investor to understand the rules relating to name reservation.  The investor must ensure that they comply with MD 124/16 prior to forming a company in Oman, as it will clearly mitigate any additional expenses (and time) that may be incurred by the investor if it is required to amend or change its proposed name.


Wednesday, August 31, 2016

The Competition Protection and Monopoly Prevention Law

Few people are aware of the Competition Protection and Monopoly Prevention Law, RD 67 of 2014 (“CPMPL”).   Yet its scope of operation is very broad, and the consequences of being in breach are severe.  It is particularly important that any chairman, CEO, director or authorised senior manager of any major company be aware of the CPMPL and its potential consequences.

The CPMCL applies to all activities of production, trade, services, intellectual property rights and other economic activities that may have a damaging effect on competition.

What is unlawful?

The CPMCL sets out a new merger control regime and prohibits restrictive agreements and abuse of market dominance. Private sector businesses with a position of dominance in the market are prohibited from engaging in practices that would undermine, lessen or prevent competition.

The new law does not apply to wholly owned government entities.   However, it otherwise has significant implications for private sector businesses that have a dominant market share. In broad terms, any of the following behaviour is likely to be prohibited:

  • entering into an agreement to create a monopoly in the importation, production, distribution, sale or purchase of any commodity (Art 8);
  • engaging in monopolistic behaviour (Art 8);
  • entering into an agreement concluded with the intent to prevent, limit or weaken competition (Art 9); and
  • any act to reduce or limit competition by a person or company that is in a “dominant position” (Art10).

Each of these activities is separately defined as a criminal offence, although there is considerable potential overlap between them.   For the purposes of the CPMPL, a person or company is in a “dominant position” if it has control, or has an influence over, the relevant market, including the acquisition of the market volume by more than 35%.

Articles 9 and 10 of the CPMPL give a series of examples of what may constitute limiting, weakening competition or reducing competition.  The examples are very broad, and include things such as:

  • predatory pricing;
  • refusing to deal with specific people to prevent market entry;
  • creating artificial shortages by reducing quantities;
  • suddenly increasing the quantities of products available;
  • fixing prices or conditions of resale;
  • colluding in tenders;
  • making it a condition that a purchaser also purchase another commodity or service; and
  • forcing a manufacturer to not deal with a competitor.

The effect is that the CPMPL could have an operation in relation to a whole range of businesses, from selling basic goods, providing transport, providing labour, construction, pharmaceuticals, quoting for services or even consultancy services.

Criminal Penalties

Penalties for breach of Articles 8, 9 or 10 include:

  • imprisonment for between 3 months and 3 years;
  • a fine equivalent to the profits on the sales of the relevant products;  and
  • fines of between 5% and 10% of total annual sales.

Where a corporation is involved, the Chairman, members of the Board of Directors, the Chief Executive Officer and authorized managers can all be potentially penalized if they are aware of the breach.

In any of these violations a court may also require the company or individual to rectify the violation, dispose of shares or assets or make the payment of OMR 100 – 1,000 until the violation has been stopped.

In the case of a second offence, the above penalties may be doubled, and the business may be closed for up to 30 days.  The CPMPL includes other penalties relating to procedural issues as well.


If a person or corporation wishes to carry out any step or enter into any agreement that may potentially be in breach of the CPMPL, there is a procedure available under the CPMPL to apply to the Public Authority for Consumer Protection for permission to do so under Article 11.  The Authority must issue a decision within 90 days.  The Authority can not permit any procedure that would result in an acquisition of more than 50% of a relevant market.


The primary rationale for laws of this type is to protect the consumer from unfair market practices that exist in many countries.  For example, Federal Law 4 of 2012 (also known as the “UAE Competition Law”) performs a similar function in the United Arab Emirates.  The CPMPL is broader than the laws in some countries, as it protects other businesses, not just consumers. We are not aware of any prosecutions so far, under the CPMPL, but we are aware of one case where an Omani Court held that an agreement was void as it breached the CPMPL.

The most important point to note is that if your business is proposing to enter into any agreement or carry out any act which may lessen competition, you should seek legal advice and consider applying to the Public Authority for Consumer Protection for permission.


Monday, August 22, 2016

Health and Safety in Oman

What is the main legislation governing health and safety in Oman?
Generally, the laws concerning health and safety in Oman are contained in:
(i) Royal Decree 35/2003 promulgating the Oman Labour Law; and

(ii) Ministerial Decision 286/2008 – the Regulation of Occupational Safety and Health for the Establishments.
Are there any material differences between health and safety legislation in Oman and other major jurisdictions?
There are no material differences. Oman’s health and safety regime is similar to other jurisdictions.
What are the main bodies responsible for health and safety monitoring, regulation and prosecution in Oman?
What are their key powers?
The main body responsible for health and safety monitoring in Oman is the Ministry of Manpower, and its various departments including the Department of Vocational Safety and Health (the “Department”).
The Ministry of Manpower has a number of powers with regard to health and safety, including the power to:
  • investigate any breach;
  • impose penalties on entities in breach of the Law;
  • take necessary measures for the closure of the place of work, fully or partially, or the suspension of the use of equipment until it is satisfied that the causes of the risk have disappeared; and
  • refer violations to the Royal Oman Police.
Following an accident or a fatality - what reporting is required? What investigations may follow?
The owner of an enterprise must notify the Directorate General of Labour Welfare at the Department in writing within 24 hours of any major incident taking place and of every industrial accident or vocational disease that has been established. The owner must also notify the Public Authority for Social Insurance of any industrial accident involving workers with relevant insurance cover.
What are the core health and safety records that companies must keep?
The core health and safety records that a company is required to keep will depend upon the nature of the work it is undertaking, for example:
(i) if a company uses scaffolding for the purpose of building, the scaffolding must be installed by a competent person who shall test them at least once every week and the test must be recorded in a special register maintained for such purpose;
(ii) regarding the use of boilers and steam and air stores, the boilers must be tested every 12 months and the steam and air stores every 24 months by a competent technician and a special register shall be maintained to record the date of the test and the technician’s name and remarks;
(iii) regarding the use of chemical substances, a special register shall be opened for hazardous chemical substances to immediately record information related to the safety of their circulation and use and the movement of such substances;
(iv) where relevant, equipment for measuring chemical agents in the work environment shall be provided according to the nature of the business conducted; necessary periodical measurements must be taken, recorded in a special register and compared periodically to ascertain that they are within the secure limits fixed by the competent authorities; and
(v) fire devices must also be tested at least once every six months by a specialist and recorded in a special register.
What are the obligations of an employer to report health and safety breaches?
The owner of an enterprise employing 50 or more workers must provide the Department with periodical statistics on major incidents, industrial accidents and vocational diseases that have occurred. The statistics must be submitted in the months of January and July of each year.
Additionally, the owner of an enterprise must notify the Department or the section in writing within 24 hours of every major incident taking place in the enterprise, every industrial accident or vocational disease that has been established. He must notify the Public Authority for Social Insurance of an industrial accident involving workers carrying insurance cover.
Are there any specific rules governing working time?
Workers must not work on construction sites or open uncovered areas of high temperatures between the hours of 12.30 pm to 3.30 pm throughout the months of June, July and August, subject to certain exemptions to those establishments providing essential public services.
What are the potential penalties an employer may face for breach?
With regard to any breach or alleged breach of any law regarding health and safety, inspectors have authority to take the following measures:
(i) issue the necessary orders for rectification within a specified period of time; and
(ii) immediately suspend work fully or partly, or require discontinuation of the operation of one or more machines in cases of an imminent danger, including seeking the assistance of the Royal Oman Police, if required.
The law also provides for penalties for violation of industrial security. In the event of a violation relating to industrial security, without prejudice to a harsher punishment stipulated in Oman Labour Law or any other law, an employer or his representative shall be penalized by a minimum fine of OMR 100 and a maximum of OMR 500 and/or imprisonment for a period not exceeding one month. The penalty can be doubled for repeat offences.
Are there any specific rules regarding health and safety in different work areas?
Further to the above, there are specific rules regarding health and safety in relation to the following:
  • working in extreme temperatures;
  • working at heights;
  • working in confined spaces;
  • working with dangerous substances, radiation and chemicals;
  • manual handling of heavy goods;
  • noise, vibration and lighting;
  • equipment and machinery; and
  • transportation of dangerous goods and substances.