The recent amendments to the Omani Income Tax Law that were announced under Sultani Decree 9 of 2017 (“SD 9/2017”) – issued on 19 February 2017 and published in the Official Gazette on 26 February 2017 – made significant changes to the previous law; among these was a change to the former withholding tax structure by expanding the scope of withholding tax to include dividends.
SD 9/2017 introduced a withholding tax of 10% on dividends and interest on shares paid to foreign shareholders in Omani entities. This amount (10%) will be withheld by the Omani entity and shall be remitted to the tax authorities. A Capital Market Authority Circular – CMA Circular 3 of 2017 – was issued shortly after SD 9/2017 and specified the type of Omani entity which will be subject to the 10% dividend and interest withholding tax; the Circular stated that “the entity to which the withholding tax on dividends and interest will be applied to will be Omani joint-stock companies.” Thus, 10% of dividends and interest paid out to foreign shareholders of Omani joint-stock companies will be withheld for remittance to the Omani tax authorities. The CMA Circular further noted that the dividend withholding tax applies to foreign shareholders in both their natural and legal capacities -meaning that foreign business entities that are shareholders in Omani joint stock companies will be subject to the dividend withholding tax, too.
In addition, the CMA Circular addressed the issue of whether non-Omani GCC nationals would be treated as foreigners or as Omanis with respect to the recent amendments to the income tax law. The Circular cites Chapter II (Article 3) of the Economic Agreement between the GCC States – which was adopted by the GCC Supreme Council on 31 December 2001 in Muscat – which declared that, “GCC natural and legal citizens shall be accorded, in any Member State, the same treatment accorded to its own citizens, without differentiation or discrimination, in all economic activities, especially the following: movement and residence, work in private and government jobs, pension and social security, engagement in all professions and crafts, engagement in all economic, investment and service activities, real estate ownership, capital movement, tax treatment, stock ownership, formation of corporations, education, health and social services.” Therefore, non-Omani GCC nationals – whether they are natural or legal persons – will be treated as Omanis for tax purposes, and thus will not be subject to the foreign dividend withholding tax.
Investors and companies operating in Oman should carefully consider these amendments to the Omani Income Tax Law under SD 9/2017 along with their other obligations to the tax authorities, as the restructuring of the withholding tax to include dividends and interest may apply to them differently than it did in the past.
Monday, July 24, 2017
Oman Introduces Witholding Tax for Foreign Investors
Monday, July 17, 2017
Navigating Oman's Alcohol Policies and Permits
General overview of alcohol usage in Oman:
Oman is a Muslim country. Pursuant to the Basic Law of Oman promulgated by the Sultani Decree 101 of 1996, Islam is the official religion and Shariah (Islamic law) principles form the underlying basis for the nation’s laws. Therefore, in keeping with Islam’s prohibitions against alcohol, the purchase and consumption (and marketing) of alcoholic beverages are generally forbidden in Oman.
However, the Omani authorities have made certain exceptions to this general prohibition in order to accommodate the tourism sector and expatriates residing in Oman. Alcoholic products (beer, wine and spirits) are allowed to be sold at (i) liquor shops, (ii) airport duty-free shops, and (iii) certain hotels and restaurants which hold liquor licences issued by the Royal Oman Police (ROP), the Government authority that regulates alcohol-related matters in Oman. There is little publicly available information with respect to the rules around obtaining alcohol permits in Oman. Alcohol licences are not governed by published Royal Decrees or Ministerial Decisions, but rather by the ROP acting pursuant to its internal regulations and, to a great extent, pursuant to its ongoing discretion. In practice, we note that the ROP would only permit restaurant owners, hotels, alcohol suppliers or airport duty-free shops (Applicant) to supply/sell alcohol to the end users.
Process of obtaining an alcohol permit in Oman
- The Applicant must submit a written request together with certain supporting documents for the liquor licence to the ROP. The ROP will review and evaluate the Applicant’s request and issue a decision on a case-by-case basis.
- The Applicant must ensure that the premises are not located within a one-kilometer radius of a mosque.
- Proximity of the Applicant’s premises to residential areas.
- Religious sensitivities such as restrictions from serving alcohol in areas which are publicly visible.
- Suitable classification of the establishment in accordance with the applicable rating described in Ministerial Decision 39 of 2016 of the Ministry of Tourism (MOT) to be submitted along with the written request.
Further, Article 49 of Ministerial Decision 39 of 2016 provides that a restaurant licenced by the Municipality may apply to obtain classifications from the MOT in accordance with the following requirements: (i) the restaurant shall have operated for at least one year prior to the application; and (ii) the restaurant shall satisfy the requirements and standards of the approved classification system for restaurants set out by the MOT.
Marketing of alcoholic beverages in Oman
The Government’s stance on marketing of alcoholic beverages is that it is strictly prohibited. In practice, however, modest forms of marketing, such as signage for branded alcoholic beverages, can be found in many of the venues where alcohol is allowed to be sold (e.g., liquor shops and hotel pubs).
- ROP regulates all matters related to alcohol including marketing alcoholic beverages.
- Alcohol sales are allowed – and branded alcohol marketing can frequently be seen – in liquor shops, airport duty-free shops, and licenced hotels and restaurants. However, alcohol sales are – and likewise alcoholic products marketing would be – strictly prohibited outside of these venues.
- In the above-mentioned venues where alcohol is allowed, the alcohol marketing materials that can be seen tend to be modest in nature – for example, branded signage and furniture. A more aggressive form of alcohol products marketing (e.g., promotional models, contests, or sampling) could likely attract a penalty from the ROP.
It is difficult to give definitive guidance on the consequences for failing to comply with alcohol rules, as there is no publicly available written guidance on the rules for marketing alcoholic products in Oman or the penalties for any violation in this area. The Omani Penal Code, Sultani Decree 7 of 1974, in Article 228 addresses only a few alcohol-related matters, such as penalties for (i) appearing in public in an inebriated state or disturbing the peace while intoxicated (10 days in jail and/or fine of OMR 200 and (ii) selling alcohol without a licence (6 months to 3 years in jail plus a fine of OMR 300).
- For first offence, fine of OMR 1000 (US$2600).
- For second offence, fine of OMR 2000 (US$5200).
- For third offence, 3-month suspension of liquor licence.
- For fourth offence, cancellation of liquor licence.
Monday, July 10, 2017
Understanding Construction Contracts in Oman: An Employer's Perspective
The scope of work represents a key constituent of a construction contract as it is a key factor in a decision of an employer to choose a contractor and the structure of the contract. Accordingly, the scope of work can be summarised as the tasks promised to be accomplished by the contractor and expected by the employer.
Determining the contractor’s liabilities, the scope of work and its implementation are generally at the source of a significant amount of litigation; therefore, it is key for any business to make sure that the scope is drafted with no ambiguities in the purpose of the smooth running of its project.
The scope of work, specifically in construction contracts, is frequently subject to change (variation); consequently, the parties should be aware that the foreseeability of such variations can be instrumental to ensure the continuity of the progress of work.
We published an earlier article (19 December 2013) which addressed “Variations to Construction Contracts” under the Standard Documents for Building and Civil Engineering Works (Fourth Edition – September 1999); today, Decree 29 of 2013 enacting the Civil Code (“SD 29/13”) provides a regulatory framework on this matter.
Article 640 of Decree 29/2013 enacting the Civil Code states the following:
1. If a contract is made under an itemized list on the basis of unit prices and it appears during the course of the work that it is necessary for the execution of the plan agreed substantially to exceed the quantities on the itemized list, the contractor must immediately notify the employer thereof, setting out the increased price expected, and if he does not do so he shall lose his right to recover the excess cost over and above the value of the itemized list.
2. If the excess required to be performed in carrying out the design is substantial, the employer may withdraw from the contract and suspend the execution, but he must do so without delay and must pay the contractor the value of the work he has carried out, assessed in accordance with the conditions of the contract.
Article 641 of the same Decree states as follows:
1. If a contract is made on the basis of an agreed plan in consideration of a lump sum payment, the contractor may not demand any increase over the lump sum as may arise out of the execution of such design.
With the two above-mentioned articles, it is clear that the Civil Code adopts a clear segregation between contracts based on the type of pricing and subjects each to a specific regime with regard to the effect of the variation in the scope:
- The first type of contract is the one in which the pricing is set based on a “unit price”; in this case the legislator subjects the possibility of increasing the price to two conditions:
- Discovery during the work for the necessity of substantially exceeding the scope of work; and
- The immediate notification to be made by the contractor to the employer of the excess.
- The lack of an immediate notification would lead directly to the loss by the contractor of its right to recover the excess.In this first type, Article 640 offers to the employer the possibility, in case of a substantial increase, to withdraw from the contract and resort to remedies, such as the suspension of the contract.
- The second type of contract is the one in which the pricing is set based on a “lump sum payment” where the contract, in principle, may not demand an increase over the lump sum for the execution of the design agreed on earlier; any change to this design should be made with the consent of the employer.
Facing this broader interpretation of the employer’s consent, it is in the interest of the employer to properly document, in explicit terms, its position in relation to matters in connection with the scope of work in a construction contract.
Wednesday, July 5, 2017
Drafting, Enforcing and Terminating Power of Attorney in Oman: Key Considerations
Definition of Power of Attorney under Omani law
While there is no specific law in Oman governing the granting and use of a power of attorney (“POA”), POAs are described and regulated through various Sultani Decrees and other laws. According to Article 44 of the Property Registry Act, promulgated by Sultani Decree 2 of 1998 (“SD 2/98”), each POA shall refer to the specific contract which allows a person (the “attorney”) to undertake certain business for the sake of the principal. The attorney shall not be permitted to enter into an agreement with himself, unless the POA clearly refers to such an arrangement.
Article 45 of SD 2/98 requires that a POA be specific and explicit. A POA in relation to sales, mortgages, donations, distributions, or waivers must state the specific transaction that needs to be effected. In contrast, a POA that contains general expressions only authorises the attorney to undertake administrative works.
With respect to lawyers, the Advocacy Law promulgated by Sultani Decree 108 of 1996 (“SD 108/96”) does not permit lawyers to represent clients in a dispute unless a POA specific to this purpose is issued and certified. According to Article 43 of SD 108/96, this POA should be granted with specific reference to the lawyer, who may only act within the limits assigned to him by the client in accordance with the claim. Unless specifically prohibited by the POA, a lawyer may delegate acts permitted by the POA to other lawyers associated with his office. In practice, Omani judges generally request lawyers to provide a copy of their POA during the first court hearing in order to verify their powers and obligations in representing their clients.
Enforceability of POAs
In order for a POA to be valid and enforceable, it must be executed and signed before a notary public in Oman. Alternatively, if the POA is executed outside Oman, it must be: (i) signed before the notary public in that country; (ii) stamped by the Ministry of Foreign Affairs in that country; and (iii) stamped by the Omani Embassy in the country where the POA is issued.
The notary public in Oman only certifies POAs that are issued in Arabic. If a POA is in another language, before taking it for signature before the notary public, applicants must ensure that the POA is translated into Arabic, stamped and attested by an official translator (who is certified and registered as a translator by the Ministry of Justice), and attested by the Oman Chamber of Commerce and Industry.
It is important to note that the notary public in Oman takes an active approach when certifying a POA. According to Article 42 of SD 2/98, prior to undertaking the authentication, the certifier (i.e., the notary public) shall verify the identity of the contracted parties and their eligibility, as well as the relationship of the representative and the scope of his authorisation. Article 43 of SD 2/98 requires that prior to the concerned parties signing the POA, the notary shall read the POA in its entirety and explain its legal effect to the parties.
In order for the notary public to comply with these obligations, the notary public generally requests the applicant to provide a valid passport copy (if the applicant is a foreign national) or a copy of the Omani identity card (if the applicant is Omani). If a POA is executed on behalf of a company, the notary public will require the company’s valid commercial registration document to verify the powers of the authorised signatories signing on behalf of the company.
Key considerations when drafting a POA
Omani law does not provide a comprehensive list of what needs to be included in a POA, but in practice the notary public tends to review POAs in detail to ensure that the following items are included:
1. the duration of the POA;
2. the obligations of the attorney;
3. the limitations on the authority of the attorney;
4. if applicable, the party signing on behalf of the company (i.e., whether he is authorised to act on behalf of the company); and
5. the governing law of the POA.
Validity period of POAs
POAs executed in Oman must be issued for a defined period of time, and cannot be indefinite. The Ministry of Justice has recently announced that the validity period of all POAs executed in Oman must be two years or less from the date of issuance. Prior to this, all POAs issued in Oman were valid for a period of five years. It is now necessary to renew POAs every two years, and it may also be advisable in certain cases to include an undertaking to renew within the POA itself.
Termination or revocation of POAs
Generally, a POA will automatically terminate upon the death or the insolvency of the principal, or after two years from the date of execution of the POA. Omani law does not allow for a POA to be irrevocable, and principals are entitled to revoke a POA prior to the lapse of the two-year validity period. In order to revoke a POA, the principal must sign a revocation deed before the notary public. If the principal is a company, the notary public requires that the revocation deed be signed by the authorised representative(s) of the company holding unlimited powers to act on behalf of the company. The principal must also ensure that the original POA is attached to the revocation deed, along with a valid commercial registration document in the case of a company.
Monday, June 26, 2017
Declaring Bankruptcy in Oman: What to Expect
The Law of Commerce issued by Royal Decree 55/1990 and the Civil Transactions Law issued by Royal Decree 29/2013 set out various provisions relating to insolvency and bankruptcy in Oman. Under the laws of Oman, bankruptcy of a person must be declared by the Court. An application for bankruptcy may be made by the insolvent person him or herself, or by a creditor of the insolvent person.
Following the declaration of bankruptcy of an insolvent person, interest will cease to accrue on the debts of the bankrupt person. On declaration of bankruptcy, debts shall be settled in the following order of priority:
(i) salaries of employees;
(ii) government dues and taxes;
(iii) preferred or secured creditors; and
(iv) unsecured creditors.
Under the provisions of the Law of Commerce, upon being declared bankrupt, the bankrupt is required to relinquish, in favour of the appointed administrator in bankruptcy, the management of all his or her assets. The fact that a person has been declared bankrupt does not have the effect of vitiating, or automatically terminating, those contracts that were entered into by the bankrupt person prior to his or her declaration of bankruptcy. Any contract entered into by the bankrupt prior to the date of declaration of bankruptcy remains valid and continues to exist although certain obligations under those contacts may become suspended by reason of bankruptcy. It is common for commercial contracts to include a right of termination for a party in the event the other party under the contract is declared bankrupt.
Effect of bankruptcy on a company
The Commercial Companies Law issued pursuant to Royal Decree 4/1974 sets out the various grounds for dissolution or liquidation of a company. The declaration of bankruptcy of a company is one of the grounds for its dissolution. As a result of being declared bankrupt, a company is liable to be liquidated and struck off the Commercial Register.
Effect of bankruptcy on employees
Under the provisions of the Oman Labour Law issued by Royal Decree 35/2003, an employer is responsible for all obligations towards its employees arising under the contract of employment and the Labour Law. Article 47 of the Labour Law states that the liquidation, insolvency or bankruptcy and final authorised closure of an employer is valid ground for termination of the employment contract by that employer. To the extent that the employer terminates its employees on the ground of its insolvency, that would be considered a valid ground for termination of those employees.
Effect of bankruptcy on parties to a contract and third parties
As a general rule, a contract counterparty is not responsible or liable to third parties, including employees of the other party, if the other party to the contract becomes insolvent or bankrupt. Any obligation of the bankrupt or insolvent party towards its employees remains with that party. Nonetheless, it is important to consider the scenario in which the contract with the bankrupt party is terminated and the counterparty would like to replace the bankrupt party with another contractor (the “Replacement Contractor”).
Under Article 48 bis of the Labour Law, a Replacement Contractor is required to employ the national manpower which was employed on the same project that has passed, either in whole or in part, to that Replacement Contractor. Accordingly, when a contract comes to an end and the remaining scope under that contract passes to a Replacement Contractor, in that case the Replacement Contractor is required by law to take over the Omani employees of the last contractor who were involved in performing that contract. Furthermore, the Replacement Contractor is required by law to provide those employees with the same benefits and financial incentives they were receiving earlier as long as their work exists and continues.
Conclusion
The insolvency and bankruptcy of a contract counterparty can potentially affect other parties to the contract and third parties. The recent slump in oil prices has affected the economy as a whole. This has the effect of rendering various businesses and companies insolvent and potentially liable to be declared bankrupt. It is important to consider the risks involved in dealing with companies that are potentially liable to be declared bankrupt or projects that are taken over from those companies. This also signifies the need for proper due diligence of contract counterparties and companies from whom projects are being taken over and having in place a strategy to mitigate the risks involved.
Monday, June 19, 2017
Petition Orders: Oman's Injunctive Relief Mechanism
What are petition orders?
A petition order, or an application for injunctive relief, is a mechanism that allows a petitioner to seek a declaratory judgment on an emergency basis when irreversible harm is reasonably feared to be imminent.
Common examples of when a petition order would be appropriate are when a petitioner reasonably fears that key evidence is at risk of being physically destroyed or damaged and when there is reasonable belief that recoverable assets will be removed from a sovereign territory.
A petitioner’s right to seek interlocutory or injunctive relief is established in Chapter 10 of the Civil Procedure Law (promulgated by Royal Decree 29/2002). Article 190 thereof expressly provides:
“In cases where the law sets out the legal right of the litigant to bring about an injunction he shall apply by petition to the judge for the provisional matters or to chairman of the panel which examine the case. The said petition shall be of two counter parts and includes facts of the application and supporting documents besides stating a domicile of choice to the applicant at the city in which the court is located.”
The application for a petition order must be sufficiently detailed so as to enable the judge to review the file and to make an informed determination on its merits. Further, the application, and all assertions made therein, must be fully substantiated with evidence.
What is the process for filing a petition order?
A petition order should be filed with the Primary Court – Commercial Circuit. The Primary Court will have exclusive jurisdiction to review the application, and to determine whether to issue a petition order. There is a presumption that the petition order will be immediately enforceable in the event that a favourable decision is granted by the Primary Court.
It is important to note that petition orders are not ex parte applications, that is, the party against whom the petition order is filed (i.e., the respondent) must be served, and must respond. Notwithstanding this, the Primary Court still may issue an interim decision prior to considering the respondent’s rejoinder, if it believes the circumstances indeed warrant immediate action.
The respondent will have the right to appeal the Primary Court’s decision to the Appeal Court, and, if necessary, to appeal the Appeal Court’s decision to the Supreme Court. However, a petition order issued by the lower courts will remain enforceable even if the respondent elects to appeal. It is only if the respondent is successful upon appeal that the petition order will be lifted.
Under what circumstances will a petition order be granted by the Omani courts?
Article 190 of the Civil Procedure Law only permits the courts to consider injunctive application when the application itself is substantively grounded in a specific law. The legislature has chosen to regulate petition orders in this manner in order to prevent frivolous and groundless injunctive applications from being filed.
We touched on a few common examples as to when an injunctive order may be grounded in a specific law. Some further examples include:
- the right to arrest a ship, pursuant to the Omani Maritime Law (promulgated by Royal Decree 35/1981), when it is reasonably feared that a vessel may leave Omani territories when there is a commercial debt owed;
- potentially freezing assets when parties are in the midst of a financial dispute; or
- seeking a travel ban on an individual when a criminal investigation may be forthcoming, pursuant to the Omani Penal Code (Royal Decree 77/1974).
Monday, June 12, 2017
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.
Monday, June 5, 2017
Bring in the Linguists: Common Arabic/English Legal Translation Issues
Introduction
Any legal practitioner who has been working for some time in the Sultanate of Oman – or in the wider Arab world - will be familiar with the pitfalls that can develop when legal documents are translated from English to Arabic or vice versa.
Much of the time, mistakes in translation are harmless enough either to pass unnoticed or to give rise to nothing more serious than wry amusement. But there are instances in which the consequences of mistranslation can be more serious.
Under Omani law, all documents, correspondence and agreements submitted to the Government must be in Arabic. Omani courts and tribunals will consider and construe only documents submitted in Arabic.
When issuing a prospectus for the offering of securities in Oman, the Arabic-language version approved by the Capital Markets Authority is, by law, the official version of the prospectus. If any difference or discrepancy arises between the Arabic and the English texts, the Arabic text prevails.
In practice, many of the above documents are first prepared in English, then translated into Arabic. Conversely, when non-Arabic speaking lawyers are advising clients on local legislation, they will be relying on translations from Arabic into English.
It is easy to see how, in the above examples, even an apparently small translation error could have regrettable repercussions.
Problems specific to translating legal documents between Arabic and English
In his 2002 article, “What is so Special about Legal Translation?” Malcolm Harvey describes the challenge of legal translation as “combining the inventiveness of literary translation with the terminological precision of technical translation.”
The challenge is compounded when translating legal English into Arabic or the other way around, not only because of the gulf between the English and Arabic languages, but because of the wide differences between English common law and the civil law system prevalent in the Arab world.
There are many technical terms in legal English that only make sense in a common law framework, and for which there are no direct equivalents in either Sharia or Arab civil law. Similarly, legal Arabic incorporates elements of both Sharia and Arabic civil law, many of whose concepts have no counterpart in English common law.
Such specialised legal terms often have fixed legal meanings and cannot be replaced by other words. In these cases, literal translation by the unwary is unlikely to offer a correct rendering of the term.
Further, in legal English, lawyers still use Old and Middle English terms such as “hereby,” “hereof,” “hereinafter,” “thereby” and “aforesaid.” To add to the mix, legal English employs many Latin terms and expressions, some of which date back to the Middle Ages, such as “contra proferentem,” “delegatus non potest delegare,” “res ipsa loquitur,” et cetera.
Archaic English or Latin terms can often be translated perfectly accurately into modern Arabic. Sometimes such terms can safely be omitted altogether when they do not affect the meaning of the whole text. However, in cases in which no accurate equivalent is available and the term cannot be safely ignored, the translator will need to act as a cultural intermediary. He may have to interpret the wording conceptually rather than literally, then paraphrase fully the intended effect of the term or expression to avoid losing vital meaning in translation.
There are numerous English legal terms of art which are almost invariably mistranslated into Arabic, such as “indemnity,” most often translated as تعويض, the typical back-translation of which would be “compensation.” To any lawyer trained in the common law tradition, this rendering is gravely deficient.
The Arabic word رهن is used for both “mortgage” and “pledge,” while “assignment” is translated into Arabic by (inter alia) the words اØالة، نقل and تنازل, used seemingly interchangeably. Unfortunately, depending on context, each of the three can convey an entirely different meaning. Unless the translator has sufficient grasp of the legal purpose of the document to be able to determine in such cases which meaning is intended, confusion is inevitable.
Conclusion
To avoid the dangers posed by the specific problems inherent in translating legal documents between English and Arabic, practitioners need to ensure they are entrusting the business of legal translation to professionals with the necessary expertise.
Legal translators must have in-depth linguistic training and knowledge of the source language, and should ideally be native speakers of the target language. Finally, they must be steeped in the local culture and have a firm grasp of the applicable legal concepts and terminology.
Monday, May 22, 2017
Oman Free Zones or Oman Onshore: Where Best to Operate?
Establishing an entity in a free zone area offshore Oman – as opposed to establishing it onshore Oman – has its many advantages and privileges. These include: 100% foreign ownership, no minimum capital requirements, no custom duties, and a strategic location on the international trade route, among others. In addition, all free zones in Oman offer a single window (one-stop shop) through which licenses, permits and approvals can be obtained in an effort to streamline procedures required to set up entities within them. The authority to set up such a one-stop shop has been accorded to free zones via Royal Decrees. For example, Article (13) of Royal Decree 79/2013 – Issuing the Regulation for the Special Economic Zone at Duqm – states that the free zone authority shall have the functions of the General Secretariat of the Commercial Register at the Ministry of Commerce and Industry regarding the registration of projects, meaning that the free zone authority will be able to issue approved commercial registration documents to set up entities in the zone.
The procedures required in order to set up an entity in a free zone area differ from those required to set up an entity in onshore Oman.
In order to set up an entity in onshore Oman, the party aiming to establish the entity must complete the following steps:
- Step 1 – Set up a bank deposit of the required capital;
- Step 2 – Register the entity commercially via the Ministry of Commerce and Industry’s one-stop shop; submit an application form with the necessary documents and pay the necessary fees;
- Step 3 – Obtain licenses and permits required from the relevant ministries and authorities, which will depend on the nature of the business being established; and
- Step 4 – Obtain a permit from the Muscat Municipality; this step entails submitting all the approved applications from other relevant ministries and authorities, and paying the required fees.
- Step 1 – Submit a plot application form along with other necessary application forms to the designated one-stop shop at the free zone;
- Step 2 – Obtain the internal approval of the free zone and be allocated a plot; this step entails obtaining a letter of “no objection” from the free zone, completion of a due diligence report on the entity being established, the selection of a plot and the payment of the required fee amount; and
- Step 3 – Sign the land lease agreement.
Limited Liability
Company
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Branch of an Existing
Company
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1
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Copy of current Certificate of Registration of the company
or Certificate of Good Standing
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Copy of the Certificate of Incorporation or Certificate of
Good Standing of the parent company
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2
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Copy of the Memorandum and Articles of Association
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Copy of the Memorandum and Articles of Association of the
parent company
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3
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Original board resolution specifying establishment at the
free zone area and appointment of manager along with a copy of his passport
and specimen of signature
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Original board resolution stating the setting up of a
branch at the free zone area and appointment of a manager for the branch
along with a specimen of his signature and a copy of his/her passport
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Monday, May 15, 2017
A New Law Re-defining Some of the MOCI's Responsibilities
Royal Decree 11/2017 (the “New Law”) issued on 12 March 2017 seeks to redefine some of the specialisations (i.e., responsibilities) of the Ministry of Commerce and Industry (“MOCI”). In other words, under the New Law, a number of the MOCI’s responsibilities have been reallocated to other departments, for example, responsibilities concerning the mining sector, commercial ventures concerning artistic works, and consumer protection. This article summarises some of the key changes to the specialisations of the MOCI and aims to provide an overview on the changes.
The New Law repeals Royal Decree 102/2005 (the “Old Law”) which originally determined the MOCI’s structure and specialisations.
In practice, the MOCI undertakes various activities through the numerous departments. These activities include governing commercial entities, facilitating the commercial and industrial sides of the relationship between the Sultanate of Oman and other countries, generally improving the various sectors and their contributions to the economy as well as many other matters in relation to the commercial and industrial sectors in the Sultanate.
The New Law specifies the various activities that the MOCI shall undertake. Further, there are a number of activities that have been removed from the MOCI’s responsibilities. For example, Royal Decree 49/2014 had established the Public Authority for Mining (the “Mining Authority”) and specifically noted that the Mining Authority is to form part of the MOCI. However, the New Law does not mention the Mining sector at all, in contrast to the Old Law which specifically mentioned that the MOCI governs improving the relationship between the Sultanate and other countries in the commercial, industrial and mining sectors. This change can be construed as granting the Mining Authority greater autonomy from the MOCI.
Another example of the amendment made by the New Law is the exclusion of the MOCI from inspecting shops and commercial establishments that operate in the sector of artistic works. Omitting these provisions from the New Law suggests that this task has been reallocated to a different branch of the government apparatus.
Another important amendment concerns the task of specifically protecting the consumer and spreading awareness in this regard. Previously, the MOCI was tasked with all matters in relation to consumer protection. However, Royal Decree 26/2011 established the Public Authority for Consumer Protection (the “PACP”). Therefore, tasks in relation to consumer protection were transferred through Royal Decree 53/2011 to the PACP including the task of protecting consumers and spreading awareness in relation to these matters. Certain matters in relation to products and commodities have remained under the authority of the MOCI, such as determining the specific measurements of certain products and inspecting their quality. However, the main task of protecting the consumer has now been transferred to PACP, who in certain matters may consult the MOCI for certainty.
Generally, the New Law can be seen as an amendment to and replacement of the Old Law in many provisions and an accounting of the changes that have taken place in the past twelve years, as aforementioned. Certain other provisions have remained the same or have been partly amended in a manner as to improve the structure and interpretation of the law.
