Monday, September 17, 2018

Debt Recovery in Oman

In the current climate, increasing numbers of contractors and consultants are finding it difficult to recover payment for work they have already undertaken in Oman.

In the past, many companies working in the region have been wary of pursuing their entitlements through formal dispute resolution processes, due to perceived cultural sensitivities.  However, many now feel that they have no choice but to consider the available debt recovery options.

In many instances, the amounts owed are not disputed.  However, in the current market, some developers/contractors consider that they should not be obliged to pay their debts in full, and are attempting to avoid, defer, reduce and/or make piecemeal payments over a substantial period of time.

How to recover your debts in Oman

Wherever you are from, outstanding payments can be frustrating, not to mention costly.  However, a contractor will usually be aware of the tools available in its home jurisdiction in order to speed payment along.

When working overseas, however, the different cultural, legal and practical issues can make the whole process much more challenging.  In Oman, this challenge is in part due to the local civil legal system.  Those instruments that common law practitioners are used to wielding are not present in quite the same form.

The options available to pursue non-payment of due monies will depend on the dispute resolution mechanisms contained within the relevant contract.  Typically, a contractor/consultant will have to litigate or arbitrate to recover payments.

In addition, there are a number of procedures available under local laws that could assist in the recovery of debts.  Potential options available under Oman law include:

An order of payment

An order for payment within Oman is a developing area of law.  It can therefore often be hard to determine the likelihood of success before the Omani courts when making such an application.  It is a procedure by which a party applies to the courts for summary judgement against a defendant for commercial debts, substantiated by a commercial instrument such as a bill of exchange, promissory note or cheque, which are valid, but not paid.

If a party has a successful application for an order for payment, the outcome would be a direction from the courts for the outstanding debts to be paid by the debtor.  Success is by no means guaranteed, but the mere threat of an order for payment can be a persuasive tool for the creditor, as an outstanding debt can bring with it considerable public embarrassment within the local community.  This in turn can act as an incentive for the debtor to settle any outstanding debts.

Precautionary attachment order

A precautionary attachment order, if granted, essentially allows the court to seize the assets in question at the claimant’s request prior to judgement/arbitral award in order to preserve those assets during the trial.  It is as close to seeking injunctive relief as it gets in Oman.  The procedure, timing and effect of precautionary attachment orders can at times be somewhat unclear.

Precautionary attachment orders are made in absence of the other party and are ordinarily used as a tool to ensure that assets are not disposed of prior to receiving the court’s judgement/arbitration.

The order can be made against any assets in Oman, including machinery, bank accounts, goods or other assets owned by the defendant and under his possession, or owned by a defendant but in the possession of a third party.  It should be noted that the assets, money or material to be attached must be specified before the application will be granted.

If a precautionary attachment order is granted, the substantive case must be filed at court within eight days.

An order for sale

This is a procedure whereby a claimant applies to court for an order that a property or part thereof be sold where a defendant has failed to pay for material and equipment supplied for that property.

An order for a charge over property

In certain circumstances a contractor can exercise a form of charge over a property on which it is doing work until payment for that work is received.

Substantive action

As discussed above, pursing substantive action is also a possibility, either through the local courts or via arbitration.  Litigation in Oman can be both costly and time-consuming.  There are cases that continue for five years or more, and only local advocates can appear and plead before the courts. 

Arbitration might allow a claimant to remain within their common law comfort zone; however, cases usually take at least a year to reach a decision and the costs are not insignificant.

Practical tips

(a) Examine the payment terms in the contract;

(b) Ascertain entitlement to the outstanding debt and collate all the documentation in support of it;

(c) Review the dispute resolution mechanism in the contract, if any;

(d) Determine what assets the debtor owns and where these assets are held; and

(e) Review the amount in question and determine what is the best avenue for recovery.