Wednesday, April 8, 2020

Considering Dispute Resolution Clauses in Oman Part 1: Courts or Arbitration

Often, when parties enter into a new agreement, the dispute resolution clause is not considered as carefully as other important terms of the contract.  There are numerous considerations that, depending on the context, both parties should bear in mind when drafting their dispute resolution clause.  This series of articles will take a look at a number of these considerations in the context of entering into contracts in Oman.
This first article considers the issue of whether parties should choose courts or arbitration to determine their disputes.  Some of the main considerations are as follows.
If parties decide that their dispute will be resolved by the Omani courts, the following will apply:
  • Proceedings will be held in Arabic.
  • Parties will have several rights of appeal of decisions.
  • The costs paid to the court will be much lower than costs paid to a tribunal.
  • A court decision will be enforceable in Oman as well as other countries that are party to the Riyadh Convention on Judicial Cooperation 1983.[1]
If parties choose arbitration to resolve their disputes, some of the key characteristics are as follows:
  • Proceedings will be held in the language agreed to by the parties, which is often English.
  • There is no right of appeal; however, an application will need to be submitted to the court to have the award enforced, even if the arbitration is held in Oman and subsequently enforced in Oman.
  • There are higher administrative costs related to arbitrations; however, a tribunal has the authority to award the successful party these costs, though it is not certain that a successful party will have all of its costs paid.
  • An award is enforceable in the 161 countries that are party to the New York Convention.
Building on the points above, parties will need to consider many factors when deciding what type of dispute resolution mechanism they will choose.  If contracting with a counterparty that has little assets in Oman but significant assets in other countries, it will be critical that any award or decision can be enforced against the counterparty; therefore, where an award or judgment is going to be enforced also needs to be taken into consideration when choosing a dispute resolution mechanism.
Another key consideration is that the process in arbitration and in courts can be very different.  In Oman, all submissions are made through documents rather than through oral arguments and witness testimony.  If parties choose arbitration rather than courts, the parties will determine with the arbitrator what the arbitral process will entail, often a more common law style of proceeding with oral arguments and oral witness testimony being adopted.  However, some arbitrations, particularly those where the parties choose Arabic as the language of the arbitration, more often follow the procedures of Omani courts.
Overall it can be said that depending on the nature of the dealings between the parties as well as any potential dispute that may arise will determine whether courts or arbitration is most appropriate.  Unfortunately, it will not be possible for parties to opt for courts or arbitration at the time a dispute arises; therefore, careful consideration of a number of factors must be weighed up at the time of entering into a contract when deciding what dispute resolution mechanism the parties should choose.

[1]  Algeria, Bahrain, Djibouti, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, UAE, Yemen.