Monday, July 30, 2018

Omani Arbitration Law: Time for a Change?

Domestic and international arbitrations conducted in Oman are governed by the Law of Arbitration in Civil and Commercial Disputes, Sultani Decree 47/1997 as amended (the “Oman Arbitration Law”).  While the Oman Arbitration Law incorporates some aspects of the Model Law on International Commercial Arbitration adopted by UNCITRAL (the “UNCITRAL Model Law”), overall it is not harmonised with the UNCITRAL Model Law or with other arbitration laws in the region.  Given recent developments in other GCC countries, specifically the UAE, it may be beneficial for Oman to consider commensurate reforms to its arbitration regime.

In May 2018, the President of the UAE issued a new arbitration law expected to be published imminently as Federal Law No. 6 of 2018 on Arbitration (the “UAE Arbitration Law”).  The UAE Arbitration Law repeals Articles 203 to 218 of the UAE Civil Procedure Code (Federal Law No. 11 of 1992) previously applicable to arbitration, and any other provisions contrary to the UAE Arbitration Law.  This new law is noteworthy because it is a direct adaptation of the UNCITRAL Model Law, thereby modernising the regulatory framework governing UAE arbitrations.  Because the UNCITRAL Model Law is intended to assist states in reforming and modernising their laws in a uniform matter that takes into account the features of international commercial arbitration, states that adopt or adapt the UNCITRAL Model Law make themselves more attractive to investors.

On the whole, the UAE Arbitration Law brings the country in line with international commercial arbitration norms.  For example, the new law enumerates limited grounds to annul an arbitral award, and provides for the authority of an arbitral tribunal to rule on its own jurisdiction.  While Article 22 of the Oman Arbitration Law does permit an arbitrator to rule on the question of his or her own jurisdiction, currently in Oman the courts have broad and unspecified powers to nullify an award if it conflicts with an earlier decision passed by the Omani courts or if the award contains terms which contravene public policy, among other grounds.

Another welcome change brought by the UAE Arbitration Law is its flexibility regarding the formalities of an agreement to arbitrate.  While it does preserve the requirements under the previous law for an arbitration agreement to be in writing and to be entered into by a duly authorised representative of each party, the UAE Arbitration Law is not as prescriptive in respect of these two conditions.  For example, the new law permits the incorporation by reference in any commercial contract of any document containing an arbitration clause (e.g., general terms and conditions) as sufficient to constitute an arbitration agreement.  In contrast, Articles 2 5 of the Oman Arbitration Law prescribe quite specific requirements which must be met before there is considered to be an agreement to arbitrate.  Specifically, the arbitration agreement (which must also be in writing and entered into by duly authorised representatives) must be specific to the dispute between the parties and must identify the venue, procedural rules, and applicable law in order to be valid.  This may ultimately result in fewer agreements to arbitrate being honored under the Oman Arbitration Law than may be intended by the parties.

Perhaps the most significant reform under the UAE Arbitration Law relates to the enforceability of UAE arbitration awards.  Under the new law, the procedure to enforce an arbitration award in the UAE has been simplified and shortened.  Enforcement proceedings commence directly at the appellate level, rather than at the first instance level.  In Oman, as per Article 47 of the Oman Arbitration Law, parties seeking to enforce an award file an application at the enforcement department of the primary court, and the application is subject to obstacles and delays at several levels of court examination.  One potential obstacle includes the nullification of an arbitral award as per Article 53 of the Oman Arbitration Law, which contains several grounds upon which a challenging party may rely.  Separately, under Article 363 of the Civil and Commercial Procedures Law (Sultani Decree 29/2002), a challenging party may also seek an Istishkal, or a temporary action that any party to a court judgment or arbitral award can seek, with the result of further delaying payment of the award amount.  An Istishkal also results in a delay of enforcement, as the enforcement process may only commence or resume once a final decision is rendered on the Istishkal.

One change introduced by the UAE Arbitration Law has already been partially adopted in Oman.  The UAE Arbitration Law permits both arbitral tribunals and courts to issue preliminary orders and interim measures relating to potential or ongoing arbitrations, and Article 14 of the Oman Arbitration Law permits the Omani courts to grant preliminary or interim relief in proceedings subject to arbitration.

Despite this and other positive features of the Oman Arbitration Law, there remain some uncertain provisions which may discourage parties from choosing Oman as an arbitration forum.  For example, Article 27 prescribes twelve months as the standard period for completion of the arbitration or rendering the arbitral award.  This time period starts on the day that a defendant received notice that a dispute exists and that it must be resolved by arbitration.  Although there is scope for the parties to agree to a longer period, this is a little-known provision which leaves uncertainty as to whether an arbitration lasting longer than twelve months is vulnerable to nullification.  This may be devastating to parties involved in complex arbitrations involving expert evidence, such as construction disputes, that often take much longer than twelve months to complete.

Overall, the changes introduced by the UAE Arbitration Law are designed to promote the efficiency, expediency, and ease of arbitration in the UAE, which will likely encourage business parties, both local and foreign, to arbitrate their disputes within the UAE.  Oman would be well served to reconsider its own arbitration law, and perhaps reform it according to some or many features of the UNCITRAL Model Law.  Parties doing business in Oman and seeking to resolve disputes by arbitration would take comfort availing themselves of an arbitration regime that is harmonised with others in the GCC and throughout the world.