Drafting Practical Arbitration Clauses in Oman

In recent years, arbitration has become an increasingly popular vehicle for dispute resolution in Oman. However, when preparing an arbitration clause, there are key elements that must be considered to ensure that the clause itself is both comprehensive and operates as intended by the parties.

This article will explore some of the key features that should be considered when preparing an arbitration clause.

Scope of the arbitration clause 

When preparing an arbitration clause, it is important to ensure that the clause decidedly covers all disputes that could potentially arise between contracting parties in connection with a specific contract. It is therefore recommended to construct the clause as broadly as possible, to ensure that certain types of disputes are not inadvertently excluded from the scope of the arbitration clause. Therefore, contracting parties may wish to include broad language in the arbitration clause to this effect.

Pre-dispute settlement 

Disputing parties may prefer to undertake a “good faith” attempt to settle any dispute prior to referring the matter to arbitration. Generally, however, it is difficult to determine whether negotiations have truly been made in “good faith.” Thus, a “good faith” negotiation by itself, without any other qualifiers, may cast doubt as to when a party’s contractual right to refer a matter to arbitration has matured.

Therefore, it is recommended to set a time frame within which the parties must reach an amicable settlement, to ensure that there is no question as to whether a party’s right to refer a dispute to arbitration has crystallised.

Forum 

Another important consideration is the forum for the arbitration. Essentially, the parties will have two options: (i) to select an international arbitral institution as the forum or, alternatively, (ii) for the arbitration to be administered as an Omani ad hoc arbitration, under the Omani Arbitration Law. It is important to note that if the parties’ contract does not specify a forum, the arbitration will then be administered as an Omani ad hoc arbitration, by default.

There are several prominent international forums from which contracting parties may select, including the International Chamber of Commerce (“ICC”), the London Court of International Arbitration (“LCIA”) as well as the Dubai International Financial Centre – London Court of International Arbitration (“DIFC-LCIA”).

There are many advantages to selecting an international forum when compared to an ad hoc arbitration, most notably the involvement of the court-appointed secretariat. The secretariat will be responsible for ensuring that all aspects of the arbitration, from commencement to the final award, are efficiently administered. In doing so, the secretariat will manage all pre-arbitral issues, including the tribunal selection process, and by crystallising the issues in dispute. The secretariat will also play a vital role during the course of the arbitration, as well as when the final award is rendered.

Formulation of the tribunal 

The parties are free to determine whether they prefer a sole arbitrator or a three-member arbitral panel. It is recommended that the parties specify their preference in the arbitration clause itself.

If the arbitration clause provides for a sole arbitrator, the parties should be given a reasonable opportunity to mutually agree to the appointment of the sole arbitrator. However, either party may, at any point in time, apply to the President of the Commercial Court to seek the appointment of a sole arbitrator, pursuant to Article 17(1) of the Omani Arbitration Law (promulgated by Royal Decree 47/1997).

In arbitrations comprising three-member panels, it is customary for both parties to nominate an arbitrator to sit on the three-member tribunal, with the claimant nominating their preference first, and the respondent shortly thereafter. The two appointees would normally then be required to nominate the tribunal chair.

However, in the latter scenario, it is recommended to provide the respondent with a specific deadline for appointment of its nominee, after it has been formally notified that the dispute has been referred to arbitration. Likewise, the two appointed nominees should be given a specific time frame within which to appoint the tribunal chair.

It is important to note that under Article 17(2) of the Omani Arbitration Law, the respondent will be given 30 calendar days to make its selection from the date that it is requested by the claimant to do so. Similarly, the two appointed arbitrators will also have 30 calendar days to nominate the tribunal chair after they have been tasked with the assignment. If the time period lapses regarding the respondent’s appointment of arbitrator, or the appointment of the tribunal chair, an application may be made to the President of the Commercial Court seeking the appointment of the same.

Language 

It is recommended that the arbitration clause specifies the language in which the parties wish for the arbitration to be conducted. If the parties do not specify a language for the arbitration (other than Arabic), and the arbitration is governed by Omani law, the arbitration will, by default, be conducted in Arabic.

However, it is important to note that the parties may agree for certain components of the arbitration to be in another language. A common example is when the parties wish for the arbitration to be conducted in Arabic, but prefer for the evidence and supporting documents to remain in their original language.

Governing law 

It is recommended that the parties specify the governing law in the arbitration clause itself. When selecting the governing law, it is important to note that, generally, both the substantive and the relevant procedural laws of that specific country will be applicable.

Seat of the arbitration 

Selecting the “seat” of the arbitration – not to be confused with “place” of the arbitration – is in direct reference to the jurisdiction in which the arbitral proceedings will be conducted. Therefore, the specified “seat” will enable the courts of that jurisdiction to review any procedural, emergency or interlocutory applications that could be filed from time to time. It also may be prudent to select a specific city within a sovereign territory, as certain international arbitration institutions often require a city as the “seat.”

To avoid any unnecessary confusion, it is recommended that the seat of the arbitration be a domicile within the same territory as the governing law. Therefore, if the parties wish to adopt Omani substantive law, the parties should consider agreeing to Oman (or a specific city in Oman) as the seat of the arbitration.