Oman Law Blog

Counterpart Clauses

2012-02-28T12:56:00.004-05:00

Counterpart clauses are often used when the parties to an agreement are executing separate copies of that agreement. They are primarily used:

in large transactions involving multiple parties where not all the parties will be physically present at the signing and therefore there will be no single agreement that contains all the signatures of the signing parties;

in transactions involving the sale of property where the parties exchange signature pages (normally through their property lawyer) and keep only the signature page received from the other party; and

in any other transaction where circumstances prevent a single copy of an agreement being signed by all parties to it on the signing date.

A counterpart clause would typically read something like “This agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all counterparts together shall constitute a single agreement”.

The absence of a counterpart clause does not of itself invalidate an agreement that the parties execute by separate counterparts. A counterpart clause may however help to prevent a party from claiming that an agreement is not binding because there is no single copy of it that is signed by all the parties or because they did not know that they were entering into a binding contract by signing an agreement not signed by the other parties to it.

Counterpart clauses are also useful where the parties to an agreement want to be sure that each copy of it is recognised as an original. Parties often require more than one original copy of an agreement for tax, regulatory or other administrative purposes. Technically, where all the parties execute a number of copies of the same document, the copies are duplicates rather than counterparts and accordingly, some lawyers also refer to duplicates in the counterparts clause.

A counterparts clause may be omitted where:

all the parties are present at a signing where each party will sign as many original copies of the agreement as required, i.e., they will execute in duplicate.

original copies of the agreement are to be signed at different times by the parties, for example, all original copies will be sent to each party for signature in succession, with the agreement to be dated and take effect on the date of the last signature; and

only one original copy of the agreement is required and certified copies are made and distributed to all parties to the agreement.

Curtis Helps Omani Companies with Foreign Shareholdings Win Landmark Tax Judgment in Oman Supreme Court

2012-02-22T13:17:00.001-05:00

Muscat, February 22, 2012 – Lawyers from Curtis, Mallet-Prevost, Colt & Mosle LLP helped two Oman-based clients of the firm win an important tax judgment handed down this week by Oman’s Supreme Court.

The Court decided in favour of the two Curtis clients, who were represented by James Harbridge and Kamilia Al Busaidy, that Omani companies who have shareholdings in companies outside Oman should not have to pay tax on dividends received between the inclusive period of 2002 through 2004, the years being considered in the matter.

“The issue was hugely important for our clients, one of which is a multi-national oil and gas entity and the other concentrating in the cement business,” said Mr. Harbridge, partner in the Curtis Muscat office. “The result highlights Curtis’ perseverance on our clients’ behalf.”

This decision overturned earlier decisions of the Omani Primary and Appeal Courts in 2010 that these overseas dividends were taxable, pursuant to a 2004 Supreme Court judgment. It is expected that the written Supreme Court judgment will make it clear that the ruling also applies to the tax years immediately prior and after: 2000, 2001 and 2005-2009 inclusive.

The favourable Supreme Court judgments therefore imply that tax payers who have received overseas dividends during the applicable years should not be taxed on this income, if they have already disputed the charges or if their assessments are yet to be completed. They are deemed to have accepted their tax liability if they have already paid tax in these respective years.

Following the judgment, dividends paid in the applicable years to any Omani company on shareholdings in foreign companies will no longer be viewed as taxable income.

Curtis, Mallet-Prevost, Colt & Mosle LLP is a leading international law firm providing a broad range or services to clients around the world. Curtis has 15 offices in the United States, the Middle East, Europe, Central Asia, and Latin America. The firm’s international orientation has been a hallmark of its practice for nearly two centuries. For more information about Curtis, please visit www.curtis.com or follow Curtis on Twitter (twitter.com/curtislawfirm) and Facebook.com/Curtis.Careers).

Types of Loan Agreements: Revolving Credit Facilities

2012-02-17T13:32:00.002-05:00

Finally this month we consider revolving credit facilities. In many ways, a revolving credit facility shares features of both a term loan and an overdraft which have both been discussed in previous issues.

Common features of revolving credit facilities

A revolving credit agreement is similar to a term loan because it is usually a committed facility that provides a maximum amount of capital over an agreed period. (A committed facility is one that once the facility agreement has been executed, the lender is under an obligation to advance money when requested by the borrower, subject to compliance with certain pre-agreed conditions by the borrower.)

However, it is also similar to an overdraft because the distinguishing feature of a revolving credit facility is that the availability period extends for almost the entire life of the loan (except at the end when the final tranches need to be repaid). This means that the borrower may draw and repay tranches of the available funds whenever it chooses throughout the life (or “term” as it is commonly known) of the loan.

The revolving element of the loan facility is reflected in the fact that the borrower may take a tranche for an interest period and at the end of that interest period decide whether to repay that tranche or "roll over" into the next interest period, provided that an event of default has not occurred and is continuing.

Further funds can be drawn down at any time with interest periods running in parallel. As with term loans, the borrower must give the lender a drawdown notice and the borrower must specify its chosen interest period. Interest periods are usually 3 or 6 months long.

Revolving facilities tend to be used if a borrower requires a substantial advance but gives the borrower greater flexibility than if it used a term loan.

Advantages of a revolving facility

A revolving facility is usually a committed facility but its advantage from the borrower’s perspective is maximum flexibility; it can draw as much or as little as it requires at any time, and if cash flow is sufficient it can repay outstanding tranches that are no longer required and thereby reduce its borrowing costs.

Disadvantages of a revolving facility

A revolving facility is likely to include more restrictions than an overdraft. For example, there may be minimum notice periods before a sum is advanced; the lender may set upper and lower limits on the amounts which may be drawn at any one time or the number of interest periods that may exist in parallel at any one time (in order to reduce the administrative burden on the lender) and the lender may reduce the available funds towards the end of the term. As the availability period for draw downs is long, the total commitment fees will be higher. (Commitment fees are fees payable to a lender on available but undrawn amounts and is calculated as a percentage of those undrawn funds from time to time. The commitment fee is not as much as interest because the lender is not actually taking any risk on the money.)

Health and Safety in the Workplace

2012-02-15T11:46:00.003-05:00

In 2008 the Ministry of Manpower issued Ministerial Decision no. 286/2008 introducing the Regulation of Occupational Safety and Health for Establishments Governed by the Labour Law. The Regulation provides for a comprehensive regulatory framework with the aim of improving health and safety standards in the workplace and protecting workers from various occupational hazards. The Regulation consists of 43 Articles covering a wide range of issues including: lighting, ventilation, heat stress, noise, uniforms, personal protection equipments, first aid and occupational diseases.

In general, the workplace must support good health by promoting healthy food and physical activity in the workplace, prohibiting smoking in the workplace, and enhancing psychological health and social integration of workers.

Workplace Safety Issues

According to Article 15, the employer must take all necessary actions to provide adequate protection for the workers' safety while at the workplace.

Work uniform and equipment for personal protection must comply with the specified standards of safety required depending on the actual hazards the workers are being exposed to. The employer should train the workers on the best ways of using, maintaining and storing such equipment. Prominent signs in the relevant languages need to be posted in all hazardous areas where entry is prohibited without using personal protection equipment.

Most importantly, workers must not work on construction sites or open uncovered areas of high temperature at noon, from 12:30pm up to 3:30pm throughout June, July and August; subject to certain exemptions for establishments providing essential public services.

In dealing with the various hazards in the workplace, the Regulation provides a list of measures which employers need to implement to minimise occupational accidents and the exposure to various risks and hazards including: fire, mechanical and electrical risks, chemical hazards, heavy duty machinery, workers` transport vehicles, in addition to risks of harmful rays, occupational cancer and asbestos.

The employer must provide sufficient, adequate, natural or artificial lighting, distributed in the workplace equally, free from direct or reflective rays, in addition to a system of emergency lighting in case of the failure of the normal lighting. The lighting system must clearly show emergency exits so that the workers can locate and use them. The position of fire alarms and fire extinguishers must be clearly indicated.

Polluted air shall be avoided by providing a natural or artificial ventilation system that provides fresh air in the workplace and use local ventilation where sources of pollutions exist. This system must effectively suck the polluted air out. The Regulation also specifies the minimum percentage of oxygen, speed of air, and the maximum degree of relative humidity in the workplace.

To protect the workers from exposure to noise, noisy operations that exceed the permissible levels must be isolated away from the workers, or sound insulated rooms should be used. Additionally, insulating, absorbing or reflective equipment should be installed on noisy machines.

Food and Water

The employer must also provide workers with sufficient potable water within easy reach and a reasonable number of water coolers proportionate to the number of workers. Bacterial analysis of the groundwater shall be carried out once every six months and chemical testing once every year in one of the government laboratories.

If food is provided for workers, employers should ensure that food safety measures are strictly observed. A separate place for cooking shall be provided and food serving places must be equipped with hand-washing facilities.

Women's Safety Issues

The Regulation also deals with specific health and safety needs related to women and people with special needs. Employers, for instance, must not expose women to materials or occupational practices which could adversely impact on the safe delivery of children or the health and safety of the foetus.

The Redefined State Financial and Administrative Audit Institution

2012-02-14T13:27:00.001-05:00

In the first half of 2011, the government body formerly known as the “State Audit Institution” was renamed as the “State Financial and Administrative Audit Institution” pursuant to Royal Decree 27/2011. (We shall hereafter refer to the State Financial and Administrative Audit Institution as the “Institution”.) While the full significance of this amendment was not apparent at that time, the recent Law regulating the State Financial and Administrative Audit Institution, issued by Royal Decree 111/11 (the “Law”), has redefined the role of the Institution.

The Law has broadened the ambit of the Institution to encompass administrative audit (“toward more accountability, transparency and justice in the government performance”) and has increased the overall emphasis on ensuring transparent behavior by Omani government bodies.

Since its establishment by the State Audit Law (RD 55/2000), the Institution has been the financial watchdog of the government, endowed with broad powers to identify systemic financial weaknesses and to make remedial recommendations, rather than to limit its focus to specific transactional irregularities.

The newly issued Law, while repealing its predecessor, expands the Institution’s audit mandate to reach beyond the financial realm. The Institution’s predominant functions now include the following:

• to secure public funds, provide a framework for efficient management of such funds, and ensure their efficient and optimal utilization;
• to detect financial and administrative irregularities and identify inherent deficiencies in the relevant financial and administrative laws;
• to identify the causes of, and assign responsibility for, any deficient performances; and
• to ensure transparency in financial and administrative transactions, and make recommendations for the avoidance of conflict of interests and for the prevention of financial and/or administrative irregularities.

Entire Agreement Clauses

2012-02-13T10:40:00.003-05:00

Many forms of contracts, particularly commercial contracts, tend to contain a variety of so-called “boilerplate” clauses (i.e., clauses with standard wording that are routinely used). One type of boilerplate clause that is often included in contracts – and frequently plays an important role when contracts gone awry are litigated – is the “entire agreement” clause.

The purpose of an entire agreement clause is to make clear that the agreement between the parties is solely what is stated in the written contract, and to prevent the parties to the contract from subsequently raising claims that statements or representations made during contractual negotiations, and prior to the signing of the written contract, constitute additional terms of the agreement or some form of side agreement. That is, the parties include an entire agreement clause in the contract to prevent those pre-contract statements and representations from having any contractual force.

An entire agreement clause often contains the following elements:
• An entire agreement statement: a statement in the contract that the parties agree that the terms of the contract between them are to be found within the text of the contract document and nowhere else. All entire agreement clauses include this element;

• An exclusion of liability for misrepresentation: most entire agreement clauses include one or more of the following:
1. an acknowledgment by the parties that they have not relied on any representation which is not set out in the contract;
2. a statement excluding liability for misrepresentation; and
3. a statement limiting remedies for misrepresentation to those available for breach of contract; and

• A carve-out for fraud: An express statement that the entire agreement clause is not intended to exclude liability for fraudulent misrepresentation. This carve-out is sometimes not included and some argue it is unnecessary. If it is included, a carve-out for fraud from any other clause that seeks to limit the parties’ liability should be included in the contract, or the courts may draw conclusions from the discrepancy.

When reviewing an entire agreement clause, there are some important pitfalls to be aware of and avoid:
• If the contract includes schedules or other attachments, it is important to check that the definition of the “contract” includes these schedules or other attachments.

• If there are multiple contracts forming part of the same transaction, it is important to include them in the wording of the entire agreement clause, for example: “This agreement and [list other agreements] constitute the entire agreement between the parties….”.

An example of a comprehensive entire agreement clause would be as follows:

“1. This agreement [and [list other relevant agreements, if applicable]] constitutes the entire agreement between the parties and supersedes and extinguishes all previous drafts, agreements, arrangements and understandings between them, whether written or oral, relating to this subject matter.

2. Each party acknowledges that in entering into this agreement it does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) that is not set out in this agreement.

3. No party shall have any claim for innocent or negligent misrepresentation based upon any statement in this agreement.

4. [optional] Nothing in this clause shall limit or exclude any liability for fraud.”

Private Equity Funds – The Prospectus and the Articles of Association

2012-02-06T11:01:00.003-05:00

In recent years Oman’s financial sector has experienced fast-paced growth, including the introduction of new types of investment vehicles. One prominent development, which we have covered in past posts, was the launch of the first Omani private equity fund early in 2011.

Our previous articles on private equity funds focused principally on Oman’s legal framework for the regulation of investment funds. In particular, we cited several key areas in which the government authorities could do well to revisit certain provisions – which appear to have been drafted with traditional mutual funds in mind – and tailor them more closely to the unique characteristics of private equity funds.

This month, we turn to a topic that investors are more likely to encounter first-hand: the prospectus and the articles of association, which are the two key legal documents of an Omani private equity fund (a “Fund”).

The prospectus

The prospectus is an informational booklet about the Fund that the Fund’s sponsors prepare and distribute to potential investors prior to launching the Fund and accepting subscriptions from investors. The purpose of the prospectus is to provide potential investors with all of the relevant information about the Fund that the investors would need in order to make a properly informed decision about whether to invest in the Fund.

The Fund’s sponsors tend to view the prospectus as a marketing tool as well as a disclosure document. As such, prospectuses are sometimes glossy documents with ornate graphics and diagrams that make them resemble a cross between a sales brochure and a legal document. However, whether the prospectus’ format is plain or glitzy, its contents are required under Omani law to be fulsome, accurate and objective. Pursuant to the Executive Regulations of Oman’s Capital Markets Authority (“CMA”), the Fund’s prospectus (and any other promotional materials) must be approved in advance by the CMA. The Executive Regulations also contain an explicit prohibition against false or misleading advertising of a Fund, providing that “any contact or disclosure to market investment units shall disclose all facts and information pertaining thereto without exaggeration.”

The prospectus will typically contain, inter alia, the following key information about the Fund:
• A summary of the Fund’s legal and administrative structure, including the Fund’s legal relationship with the sponsor launching the Fund and the investment manager that will carry out the Fund’s investments;
• Details of Fund’s financial structure, including the framework under which investors will contribute capital to and receive returns back from the Fund; the Fund’s accounting policies and procedures; and the fee structure for the investment manager that runs the Fund;
• A description of the Fund’s investment approach, including its investment strategy, investment policy and investment processes;
• A profile of the investment manager that will operate the Fund, including a profile of the investment manager as an organization and details of the investment manager’s executive team members and their relevant experience; and
• Details of the Fund’s corporate governance structure, including the respective legal rights and responsibilities of the investors, the investment manager, and any relevant parties with respect to the governance of the Fund as a legal entity.

The articles of association

The articles of association (“AoA”) are the Fund’s constitutive legal document. The AoA is the ultimate source of legal authority over the governance of the Fund (subject, of course, to Omani law). Often, the AoA will come into play with respect to significant structural and governance issues which the Fund might confront – for example, a change in the Fund’s investment objectives, the Fund’s policies around investor redemption, or even liquidation and dissolution of the Fund.

AoA terms can vary significantly from one fund to another, but all Omani funds are required to include in their AoA certain core terms prescribed by the CMA, such as:
• Name, form, capital, and official currency of the Fund;
• Constitution of the management of the Fund;
• Investment objectives of the Fund;
• Method and frequency of transfer, issue and redemption of Fund units (if applicable);
• Procedures for dissolution and liquidation of the Fund; and
• Commencement and end of the Fund’s financial year.

Types of Bank Loans - Term Loans

2012-02-01T11:50:00.003-05:00

Following on from a previous post on overdrafts, this article focuses on term loans. A term loan essentially provides an agreed lump sum over a set period, usually referred to as the “term”, requiring payment at or by the end of the term. Such loans usually have a term of more than one year and will often be for more than five years.

Common features of term loans

Term loans are usually committed facilities. A “committed” facility is a facility where once the facility agreement has been executed, the lender is under an obligation to advance money when requested by the borrower subject to compliance with certain pre-agreed conditions by the borrower.

With a term loan, a borrower is usually permitted a short period after execution during which it can draw down funds. This is known as the “availability period”. Additional funds may be drawn down in stages or “tranches” as agreed under the loan facility and at the borrower’s discretion. Each tranche has its own pre-agreed conditions which need to be satisfied and its own availability period. If funds are not drawn down during the relevant availability period, such funds cease to be available and the commitment is automatically cancelled. The use of tranches gives the borrower greater flexibility and greater control over the amount of money borrowed and, therefore, the amount of interest paid.

When the borrower decides to exercise its right to draw down during an availability period, it must give notice to the lender (usually two or three days’ notice) so that the lender can get the required funds. The borrower must choose the first interest period. At the end of the interest period, the borrower pays interest on the amount borrowed and chooses the next interest period.

The loan will be repayed according to the repayment schedule in the facility agreement. The most common methods of repayment are:
• Amortisation: repayment, in equal amounts, is spread evenly over the term of the loan;
• Balloon repayment: repayment is made in instalments and the final instalment is the biggest; or
• Bullet repayment: repayment is made in a single instalment at the end of the term of the loan.

In addition, it may be possible for the borrower, on giving sufficient notice, to prepay
all or part of the loan (that is, before the dates specified in the repayment schedule), because, for example, it may no longer need as much money as it first borrowed. It may have to pay a fee to the lender to compensate it for the lost interest the lender would have received had the money still been outstanding; this is known as a “prepayment fee”.

Advantages of a term loan

A term loan provides the borrower with the certainty of a fixed repayment schedule. This contrasts with the on-demand nature of an overdraft.

The use of tranches provides the borrower with some flexibility, which may be further increased if the term loan allows the borrower to draw money in different currencies. Interest on a term loan is likely to be lower than that paid on an overdraft and will either be at a fixed rate or, more commonly, will be set at an amount (known as the “margin”) above the relevant LIBOR (London Interbank Offered Rate).

Disadvantages of a term loan

Commitment fees may be payable on a term loan as they are committed facilities. The commitment fee is calculated as a percentage of the undrawn funds that the lender has to keep committed to the borrower from time to time. The fee covers the costs incurred by the lender in committing funds to this loan which it cannot then lend to anyone else.

One feature of a term loan is that once it has been repaid, it cannot generally be reborrowed, unlike a revolving credit facility (which will be considered next month) or an overdraft.

Premier International Trade Group Joins Curtis

2012-01-30T13:31:00.000-05:00

Curtis, Mallet-Prevost, Colt & Mosle LLP announced the addition of a premier international trade group, including four partners, to its Washington, D.C. office.

Joining Curtis are partners William H. Barringer, Daniel L. Porter, James P. Durling, and Christopher A. Dunn; counsel Matthew P. McCullough; associates Ross E. Bidlingmaier and Yu Li; and trade analysts Michael Ferrier, Anya Naschak and Jonathan Leeman.

Most recently at Winston & Strawn LLP, the group is particularly noted for its work in trade remedies cases and WTO litigation, Including antidumping, countervailing duty, and safeguard investigations. Their extensive WTO experience includes counseling both governments and corporations in disputes, negotiations and various bilateral and regional trade issues.

Each of the four partners has earned recognition from Chambers and other legal industry directories as leaders in their field.

“The fit here was immediately obvious to both the group and us," said George Kahale III, Chairman of Curtis. "We have a longstanding reputation as an elite international firm, and this is an elite international practice group that shares our outlook on the practice. We are excited about the possibilities this move offers for expanding the services we provide to our international clientele."

“For us, the key was Curtis’ international reputation, orientation and vision," said Mr. Barringer. "We are excited to be joining a firm with such a strong international platform.”

• William Barringer, the most senior member of the team, has been a preeminent trade lawyer for decades. He has been involved in some of the most significant international trade disputes of the last quarter-century. He frequently leads multidisciplinary teams to tackle complex and contentious trade disputes. He earned his J.D. and L.L.M. from Georgetown University Law Center and his A.B. in economics from Brown University.

• Daniel Porter has played a leading role in the group’s trade remedy work, expanding its work to represent numerous Chinese and other foreign companies in trade remedy proceedings. He has also been active providing advice to companies confronting trade regulatory issues on their imports. Mr. Porter received his J.D. from Cornell Law School and his B.A. in Political Science from Columbia University.

• James Durling, in addition to his work on trade remedy cases, has been active in several WTO disputes across a range of issues. He also advises companies making submissions to CFIUS, and confronting international trade regulatory issues in their cross border M&A transactions. Mr. Durling graduated from New York University School of Law and Haverford College.

• Christopher Dunn has also played an active role in the group’s trade remedy work, focusing more on Brazil and Latin America. He has additionally worked with many companies on customs regulatory issues. Mr. Dunn earned his J.D. from Georgetown University Law Center and his A.B. in International Business from Brown University.

• Matthew McCullough, in addition to assisting on all aspects of trade remedy work, provides experience with customs matters, issues related to export controls, anti-boycott regulations, and the U.S. sanctions regime. Mr. McCullough received his J.D. from Catholic University Columbus School of Law and his B.A. from Austin College.

Curtis, Mallet-Prevost, Colt & Mosle LLP is a leading international law firm providing a broad range or services to clients around the world. Curtis has offices in the United States, Europe, Central Asia, the Middle East and Latin America. The firm’s international orientation has been a hallmark of its practice for nearly two centuries. For more information about Curtis, please visit www.curtis.com or follow Curtis on Twitter (twitter.com/curtislawfirm) and Facebook.com/Curtis.Careers).

International Law Focus: U.S. Anti-Dumping and Countervailing Duties

2012-01-27T12:13:00.003-05:00

With the rise of international trade, there has also been a movement by national governments to protect their domestic industries against what they deem to be unfair trade practices.

One common way to do this is through anti-dumping duties (ADD) and countervailing duties (CVD). The United States, in particular, has a robust framework for imposing such duties. On November 22, 2011, the U.S. Department of Commerce initiated ADD and CVD investigations in relation to carbon welded steel pipe imports from several countries – including the Sultanate of Oman, as well as the United Arab Emirates. This article summarizes what anti-dumping and countervailing duties are and how the U.S.’s ADD/CVD process works.

What is dumping?

“Dumping”, as defined by WTO Agreement, is when an exporting country sells goods abroad at a price which is lower than that in its home market or below its cost of production.

To combat dumping, authorities in the importing country may seek to charge anti-dumping duties on imports that they determine to be sold at “less than fair value” and which cause material injury or threat of injury to domestic producers. Such anti-dumping duties are levied in addition to normal customs duties to offset the price advantage that the dumped products would otherwise enjoy.

Countervailing duties

Countervailing duties are similar to anti-dumping duties, except that countervailing duties are particularly meant to offset the benefit of subsidies which injure a domestic industry in the importing country.

Pursuant to the WTO Agreement on Subsidies and Countervailing Measures, authorities must determine the following for each alleged subsidy:
• A financial contribution by the government of the exporting country;
• A benefit received by producers in the exporting country; and
• The government program in the exporting country meets the specificity test.

Overview of the U.S. ADD/CVD process

Under U.S. law, U.S. producers are entitled to have anti-dumping and countervailing duties imposed on foreign producers that export to the U.S. if:
• The U.S. Department of Commerce (DOC) finds that foreign exporters are dumping or receiving subsidies; and;
• The U.S. International Trade Commission (ITC) find that targeted imports have caused or threatened material harm to the domestic industry in the U.S..

AD/CVD proceedings typically proceed through the following stages:
• Filing of a petition by representatives of the U.S. domestic industry, and initiation by the U.S. government;
• ITC preliminary injury investigation and determination;
• DOC preliminary investigation of subsidies;
• DOC final investigation of subsidies and final determination;
• ITC final investigation and determination of injury; and
• If order is imposed, annual reviews to calculate specific dumping liability.

The foreign government perspective

These trade cases – particularly CVD cases – often have important implications for the home government of the foreign exporters. In most cases, the primary concern of the foreign government will be the defence of its subsidy programs throughout the U.S. authorities’ investigation process.

It should be noted that it is not possible for a company exporter itself to advance a legitimate defense to a CVD case. Under the law and practice, the Government is a “mandatory respondent” that is required to submit information AND to certify its accuracy. If a defense is to be advanced, it must include active government participation.

Beyond the specific case and products at issue, the government has a broader interest in defending its subsidy programs. The main risk which the Government of Oman should aim to avoid in the instance CVD case is the establishment of adverse precedent on the subsidy determinations which the U.S. authorities would apply in future ADD/CVD cases against that foreign country’s exporters. Naturally, this risk is particularly acute for countries that are newly exposed to ADD/CVD cases, for which precedent has not yet been formed.

New Amendments to Oman’s Labour Law

2012-01-26T11:34:00.002-05:00

The recently promulgated Royal Decree 113/2011 has made key amendments to some provisions of Oman’s Labour Law (the “Labour Law”). In general, the aim of these amendments is to improve working conditions in the Sultanate and to enhance the legal protections afforded to workers.

Weekends and annual leaves

The most significant of the recent amendments concerns providing workers with legally mandated time off. The Labour Law now guarantees workers two days off per week (compared to the previous one day minimum). Workers are also now entitled to annual leave of thirty days fully paid, which may be applied for after completing six months of service. Emergency leave was also increased from four to six days per year.

Special leave and working hours for female employees

Pursuant to the recent amendments, the Labour Law now entitles working women to a maternity leave of 50 days fully paid, to cover the pre- and post-maternity period. In addition, working hours for women have been amended to prohibit employers from requiring female employees to work between 9 p.m. and 6 a.m. (other than in places and on occasions authorized by the Minister of Manpower).

New overtime rules

The recent amendments to the Labour Law set the maximum working hours to be nine hours per day and forty-five hours per week. During Ramadhan, Muslim workers must not work for more than six hours per day and thirty hours per week.

However, workers may be asked to work overtime, if their work so requires, provided that the worker’s total working hours do not exceed 12 hours per day. Any worker who performs overtime work is entitled to either overtime payment equal to his basic salary per hour plus (i) 25% for extra hours during the day, and (ii) 50% for extra hours are during the night, or time off equal to the amount of overtime worked. In either case, the worker must agree in writing to perform overtime work and to the type of compensation he will receive therefor.

Compensation for unfair dismissal

Significantly, the recent amendments to the Labour Law removed the cap on unfair dismissal compensation that had previously been in force. Prior to the amendment, the maximum compensation that a worker could receive for unfair dismissal was 12 months’ salary. The Labour Law now gives the Omani courts the power to award the worker any amount not less than three months’ salary calculated on the basis of the worker’s last full salary, without a cap. The award should take into account the employee’s unique circumstances and the length of his service, and will be in addition to the end of service gratuity and any other entitlements provided for by Labour Law or in the contract of employment, whatever is greater.

Retention of Omani project workers

Another significant aspect of the recent amendments to the Labour Law relates to Omani workers on projects that change ownership. When a project, or part of one, is transferred to a new owner, the new owner will be required to retain all of the project’s Omani workers and to maintain their prior benefits and incentives for as long as such project remains ongoing.

Mechanic’s Lien

2012-01-24T13:15:00.001-05:00

Conceptually, a mechanic's lien is a security interest granted in a property by the owner of the property to the persons who have supplied labour, materials or services for the improvement or development of the underlying property. Based on the nature of the service supplied, the lien is variously characterised as a construction lien, design professional’s lien or supplier’s lien.

In the jurisdictions where a mechanic's lien is legally recognised, it is a legislative device to protect contractors, subcontractors, architects, civil engineers, labourers, carpenters, electricians, plumbers and any others contributing to the improvement of a property from non-payment for their work as a lien on the title to property is created automatically in their favour by the operation of law.

The statutory creation of a lien clearly offers a more effective remedy for contractors and suppliers than a mere right to sue after the work is completed, especially in the construction industry where the economics of the business could be heavily loaded against them.

A mechanic’s lien also would give the subcontractors and suppliers a direct right to claim against the owner of the property. Typically, the owner of a property contracts only with the prime contractor who, in turn, engages the subcontractors and the suppliers pursuant to various subcontract agreements. In the absence of a statutory lien, the subcontractors and the suppliers would essentially have a contractual right under the relevant subcontract agreement that would be enforceable only against the prime contractor.

Further, a pari passu statutory lien would remove the unequal competition among the contractors and suppliers of materials and services in the event that a construction project fails. As all claimants would have an equal right to payment, the aggrieved parties will not have to race each other to file a payment claim in order to claim priority for their payment.

In countries where a mechanic's lien exists, the procedure might simply be to file a claim in the competent court within a stipulated time from the triggering event. Additionally, the lien holder may have to comply with certain legal prerequisites for maintaining and enforcing the lien such as serving a notice of the lien on the owner.

Considering the recent upsurge in construction activity in Oman, the introduction of appropriate legislation for the statutory creation of a mechanic’s lien would go a long way to avoid unnecessary and often onerous construction litigation.

Hotel Management Agreements - Owner Approvals

2012-01-23T16:47:00.001-05:00

As discussed in previous posts, a common model for hotel development transactions in the Middle East is for the hotel to have a separate owner and a separate operator.

The owner is the investor or group of investors that provides (i) funding necessary for the construction, maintenance and operation of the hotel, and (ii) high-level (usually financial) oversight of the hotel's performance as a business. The owner typically hails from the country in which the hotel is located, or from elsewhere in the Middle East.

The operator, in turn, is a company that specialises in the planning, design and day-to-day management of hotels, and runs the hotel on the owner's behalf in exchange for fee-based compensation that is typically a percentage of the hotel's gross revenues and operating profits. Most major hotel operators are international companies based in North America, Europe or East Asia.

The owner and operator typically enter into a hotel management agreement that provides a framework to govern their working relationship, detailing their respective rights and responsibilities. One important aspect of this relationship is the owner's right to approve certain key actions by the operator. Such approval rights are obviously important to the owner as a way to help protect its investment in the hotel. However, the operator will resist owner approval rights that would hinder its ability to run the hotel in accordance with its own best judgment.

Typically, the owner will have approval rights with respect to items such as:
• The yearly budget for the hotel as projected by the operator;
• Capital improvements or renovations to the hotel over a certain dollar amount;
• Leases of concessions to third parties (e.g., retailers or spa operators) within the hotel over a certain dollar amount; and
• The appointment of key hotel personnel such as the general manager and financial controller.

Confidentiality Agreements

2012-01-19T13:50:00.000-05:00

A confidentiality agreement, also known as a non-disclosure agreement, is a legal contract between at least two parties that is designed to protect confidential information provided by one party to one or more parties.

Confidential agreements are commonly signed when two parties, individuals or other entities are contemplating doing business together and disclosure of confidential information by at least one of the parties is required in order to evaluate the potential business relationship.

A confidentiality agreement can protect almost any type of information that is not generally known. Examples of this include:
• financial information;
• customer lists and identities;
• know-how;
• business plans, strategies and methods;
• new inventions while the filing of a patent is pending;
• technical information;
• trade secrets; and
• statistical information.

Under the terms of a confidentiality agreement, the recipient of the confidential information undertakes not to use the information except for the specified purpose (e.g., to evaluate a business proposal) and not to disclose it to third parties, subject to certain exceptions. These exceptions are typically where the information:
• is already in the public domain;
• is already known to the recipient and has been reduced to writing by the recipient prior to the date of the confidentiality agreement;
• has been received from a third party under circumstances which involve no breach of the confidentiality agreement; or
• has been independently developed by the recipient, again, in circumstances which involve no breach of the confidentiality agreement.

If one of the exceptions applies, then the recipient is free to use the confidential information as it chooses.

Confidentiality agreements often include a term that the recipient can disclose the information to certain parties such as their employees or professional advisers, subject to those parties agreeing to be bound by a confidentiality agreement on similar terms.

Confidentiality agreements can be mutual, where both parties will supply information they wish to keep confidential, or one-way, where only one party is providing information they wish the other party to keep secret.

The term of a confidentiality agreement can be extremely important and such agreements often include a provision that the information remains confidential for a period after the expiration or termination of the agreement.

Types of Bank Loans – Overdraft

2012-01-12T14:45:00.000-05:00

A bank loan should be drafted in a form that is specifically tailored to the borrower’s needs. This article considers the first type of bank loan which could be used, namely an overdraft. Other types of bank loans will be considered in subsequent articles, namely term loans and revolving facilities.

Overdraft Explained

The basic function of an overdraft is to solve short-term cash flow problems. It is sometimes referred to as a "working capital facility" as it provides access to cash to meet any temporary shortfalls in working capital.

An overdraft will generally be an uncommitted facility. (An uncommitted facility is one that allows the lender discretion for advancing money to the borrower or the lender can refuse to lend at all.)

An overdraft is repaid on demand, i.e., the lender can demand repayment at any time. This makes it an unsuitable form of borrowing for some transactions, for example, it would be inappropriate to use an overdraft to fund a major acquisition. One effect of the "on demand" nature of an overdraft is that it is a current liability for the purpose of the borrower’s balance sheet. The on demand nature of an overdraft is not as onerous as it may suggest as there generally will be an understanding that the lender will not demand repayment of the overdraft unless and until the borrower’s financial position or activities give it cause for concern.

Advantages of an Overdraft

An overdraft is usually available from a company’s existing lender. Interest rates on an overdraft are generally higher than those on a term loan but overall may be cheaper as interest is calculated on the basis of the overdraft at the end of each day rather than the maximum of the overdraft limit.

As it is an uncommitted facility, there is no commitment fee to pay. (A commitment fee may be required on “committed” facilities where once the facility agreement has been executed, the lender is under an obligation to advance money when requested by the borrower subject to compliance with certain pre-agreed conditions by the borrower. The commitment fee is calculated as a percentage of the undrawn funds that the lender has to keep committed to the borrower from time to time. The fee covers the costs incurred by the lender in committing funds to this loan which it cannot then lend to anyone else.)
An overdraft is usually evidenced by documents in the lender’s standard form.

Disadvantages of an Overdraft

The disadvantage of using the lender’s standard form documents is that there is little scope for amendment by the borrower. The basic flexibility of an overdraft is limited in that an overdraft will always have an upper limit.

In some cases, an overdraft facility may include a "clean-up" provision which requires the borrower to bring the overdraft down to an agreed sum at a specified time of year for a specified period (usually a number of consecutive days). The purpose of a clean-up provision is to ensure that the overdraft is used as intended, namely, to solve short-term cash flow problems.

The main disadvantages of an overdraft are that the lender’s charges are relatively high to reflect the administrative burden of an overdraft and that it is repayable on demand.

The Basic Law

2012-01-10T12:07:00.003-05:00

On 20 October 2011, His Majesty Sultan Qaboos issued Royal Decree 99/2011 introducing historical amendments to the Basic Law of the State. These amendments, which are seen as a significant milestone in the country’s legal and political development, include amending the succession process and expanding the role and duties of the Council of Oman.

Background to the Basic Law

The Basic Law is Oman’s first formal constitution which was introduced by His Majesty Sultan Qaboos in November 1996 to mark a new phase in the development of Oman’s system of government and to strengthen the State’s legal foundations.

The Basic Law consists of 81 Articles establishing the legal and political framework within which the State operates. It defines the roles and responsibilities of the State and provides for the political, economic and social principles guiding its policies. It also guarantees fundamental rights and freedoms, protects property rights and upholds the independence of the judiciary.

Among the main topics covered under the Basic Law are succession and the Council of Oman, which were the focus of the recent amendments.

Succession

Prior to the amendment of the Basic Law, the Ruling Family Council (RFC) was responsible for selecting a successor to the throne, within three days of the position of Sultan becoming vacant.

If the RFC does not agree upon a successor within three days, the Defence Council, composed of the highest ranking military officers, shall take over the process and confirm the appointment of the person designated by His Majesty the Sultan in his letter to the RFC.

According to Royal Decree 105/96, the Defence Council is headed by the Sultan, and composed of the Minister of Royal Office, the General Inspector of Police and Customs, the Head of Internal Security Services, the Commander of the Royal Navy, the Commander of the Royal Air Force, the Commander of the Royal Guards, the Commander of the Royal Army and the Commander of the Sultan’s Armed Forces. The composition of the RFC, on the other hand, is not known publicly.

This process was amended by Royal Decree 99/2011 to include the presidents of the State Council, the Shura Council, the Supreme Court and two of its oldest deputies, together with the Defence Council in taking over the process and appointing the person nominated by His Majesty the Sultan in his letter.

By including the presidents of the State Council and the Shura Council, this amendment allows some degree of public participation in the succession process, making it more transparent and enhancing its legitimacy. In addition, the presence of the president of the Supreme Court and two of its oldest deputies brings the process under judicial supervision, ensuring that due process is followed and preventing any potential manipulation or undue influence by one party.

The Council of Oman

The most significant changes introduced by Royal Decree 99/2011 are in relation to the Council of Oman.

Prior to the amendments, the Basic Law had only one Article on the Council of Oman establishing its two chambers: the appointed State Council and the publicly elected Shura Council. Power was given to the legislature to specify the powers of each of the Councils, the length of their terms, the frequency of their sessions, the number of members of each Council, the method of their selection and appointment, the reasons for their dismissal, and other regulatory provisions.

The recent amendments, however, introduced 45 new Articles outlining in detail the composition, membership, and responsibilities of the Council of Oman.

The powers of the Shura Council were expanded to include legislative powers and the authority to scrutinise the government’s performance. Under the new provisions, any draft law prepared by the Government must be referred to both the Shura and the State Councils for their approval or amendment. It will then be submitted directly to the Sultan to be endorsed and promulgated. The Council also may propose draft laws and refer them to the Government for consideration.

Remarkably, the Shura Council may, at the request of at least 15 of its members, question any of the ‘public service’ ministers in relation to exceeding their powers and violating the law, and refer its conclusions to the Sultan. The ‘public service’ ministers also will have to submit an annual report to the Shura Council on the performance of their ministries.

Furthermore, the recent amendments give the Council of Oman the power to review and provide its recommendations in relation to development plans, annual budget and any proposal to accede to or conclude an economic or social agreement.

This clearly means that the status and significance of the Council of Oman has changed dramatically from being a mere consultative body to become a legislative power.

Contractual Set-off Clauses in Loan Agreements

2012-01-05T11:03:00.002-05:00

Where two parties owe each other money, it often makes sense for one of the parties to employ the concept of ‘set-off’ to reduce or eliminate its liability to the other party.

For example, assume that Party A owes RO 100 to Party B under a loan agreement; but that Party B also owes RO 60 to Party A under a separate (and perhaps unrelated) arrangement. In this scenario, Party A could in theory ‘set-off’ the RO 60 that Party B owes to him against the RO 100 that he owes to Party B – with the result that Party A now owes RO 40 to Party A (original debt of RO 100 minus set off of RO60 equals remaining debt of RO 40) and Party B no longer owes anything to Party A (original debt of RO 60 minus set-off of RO 60 equals zero).

Of course, for this to work in practice, Party A also must have the legal right to employ such a set-off mechanism. Such a right can arise by force of law, or by contract.

In the United Kingdom and certain other jurisdictions, there is detailed legislation and case law specifying various types of set-off available, for example:
• Legal set-off – a defence to a court action where more than at least one claim and cross-claim is being contested;
• Banker’s set-off – where a customer has more than one account with a bank, at least one of which is in debit and one in credit;
• Equitable set-off – available to a debtor where his cross-claim arises from the same or a closely related transaction;
• Insolvency set-off – often triggered by a party’s entry into liquidation; and
• Contractual set-off – where set-off is included as a provision of a contract.

In Oman, while the Law of Commerce (Royal Decree 55/90) does contemplate the set-off concept, as a practical matter set-off rights frequently arise as contractual rights – e.g., via set-off clauses in loan agreements governed by English law, or by the laws of another foreign jurisdiction.

The contractual set-off rights often found in loan agreements typically will allow the lender to set off a matured obligation due from a borrower against any matured obligation owed by the lender to that borrower, regardless of the place of payment or currency of either obligation. If the obligations are in different currencies, the lender often may negotiate the right to convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

The result of exercising a contractual right of set-off is similar to enforcing security. However, set-off is a personal right rather than a proprietary right; unlike a security right, it does not grant an interest in the counterparty’s property.

It should also be noted the Omani Courts are unlikely to apply a set-off unless a contractual set-off scenario exists.

Finally, it is important to note that set-off provisions in loan agreements often favor the lender over the borrower. While set-off clauses in commercial contracts often will apply symmetrically (e.g., permit or prohibit set-off altogether), in many loan agreements the right of set-off is accorded only the lender, with the borrower prohibited from setting off any amounts owed to it by the lender.

Focus on Litigation: Burden of Proof in Omani Court Cases

2012-01-04T10:58:00.001-05:00

We often are asked by clients what the burden of proof is in the Omani Courts. For example, some clients may be accustomed to the U.S. court system where the “preponderance of the evidence” standard commonly applies to civil cases, and the “beyond a reasonable doubt” standard typically applies to criminal cases.

However, the truth is that burden of proof is an undeveloped area of Omani law.

The general premise is that, in a civil or commercial case, the claimant has the burden of proof; but the reality is that defendants have to prove their lines of defence to the Court’s satisfaction.

Ultimately, each Omani case turns on its own idiosyncratic facts. The key to success is to be the most persuasive litigant in any given case. The Courts have to believe that your arguments are both legally sound and supported by the evidence.

Similarly, there is no codification regarding the burden of proof in Omani criminal cases. However, the reality is that the burden of proof is very high in a criminal matter – the case has to be proven beyond any reasonable doubt.

Oman’s Law of Engineering Consultancies – Part II

2012-01-03T13:18:00.002-05:00

In a previous post, we provided an overview of the role that engineering consultancies play in Oman’s many large-scale construction projects, as well as the Omani statute which governs the profession, the Law Regulating the Work of Engineering Consultancies (Royal Decree 120/94, as amended) (the “Engineering Consultancy Law”). This month, we discuss special requirements under the Engineering Consultancy Law that apply to foreign engineering consultancies.

While the Engineering Consultancy Law exempts foreign engineering consultancies from certain provisions of the Foreign Capital Investment Law, it stipulates several onerous conditions for foreign engineering consultancies.

Experience Requirements for Foreign Engineering Consultants

Foreign consultancy companies seeking to form an engineering consultancy in Oman are required to have at least ten years of experience in engineering consulting projects. This condition can pose difficulties for newer engineering consultancy companies, particularly those in cutting-edge sub-fields of engineering where length or experience is unavailable and expertise is in any case more crucial. As a practical matter, this condition can potentially restrict a newer foreign engineering consultancy’s ability to work for private-sector clients in Oman.

Setting up an Engineering Consultancy

The registration and licensing process for foreign engineering consultancy companies in Oman is often lengthy. Pursuant to the Engineering Consultancy Law, such registration and licensing must be approved by a committee headed by the Director-General of Commerce and comprised of representatives from nine distinct government departments. While this committee structure may provide the benefit of bringing together a broad base of expertise to decide on license applications, it often comes at the logistical cost that the time required to constitute the committee can lengthen the period necessary to establish the branch.

Although it theoretically may be possible for foreign entities with government or quasi-government contracts to bypass all or part of the above-described registration process based on protections implied in the Foreign Capital Investment Law, our recent experience suggests that a foreign engineering consultancy which has contracted with the government is also required to go through the licensing process in order to form a branch.

Omani Shareholding Requirement

Finally, we note that, for foreign engineering consultancies formed as companies (e.g., limited liability company or joint-stock company, as opposed to branches), at least 35% of the shares must be held by an Omani national authorized to carry on a similar type of engineering consultancy. Also, an Omani national cannot partner with more than one foreign consultant partner to form a local consultancy.

The GCC Railway Network – Opportunities and Challenges

2011-12-28T16:34:00.005-05:00

Even in a region where larger-than-life infrastructure projects have become almost commonplace, the proposed pan-GCC Railway network evokes a grandeur that stirs the imagination. Scheduled to be completed in 2019 at a cost of US$ 25 billion, the GCC Railway will connect the six GCC nations of Oman, Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates, helping to forge deeper economic and political ties within the Gulf as it transports people and goods across borders.

This article provides an overview of the GCC Railway scheme, and discusses some key legal issues which are likely to arise thereunder.

Initial Stages

The GCC Railway, will be created by the interconnection of each GCC country’s national rail network. These national railways are still in their early stages. Two countries, Saudi Arabia and the United Arab Emirates, already have a head start. The former operates a rail line between Riyadh and the Persian Gulf port city of Dammam, and has commenced construction on the North-South Rail which will connect Riyadh with the northwestern city of Al Hadeetha. The latter boasts the Dubai metro, and has begun building the Union Railway which will link the seven Emirates.

The other GCC countries, currently in the planning and design phases, are quickly getting up to speed. In the Sultanate of Oman, the current plan calls for the national railway to be designed in three phases. The first phase would be a 230-kilometer rail line from the northern industrial city of Sohar to the capital Muscat. The second phase would be a 560-kilometer line from Muscat to the port city of Duqm, and the third phase would involve extending the Duqm line to Salalah in southern Oman.

The Omani press has reported that the Ministry of Transport and Communications recently floated a tender for a design and project supervision consultancy contract, with the goal of completing the design phase by 2013 and completing construction by 2018.

Inter-Country Coordination – Challenges, Opportunities and Legal Issues

Building the GCC rail network will naturally require an abundance of engineering skill and manual labor – but it will also require more: a common framework that will enable the six national rail networks to integrate and operate together as a single, unified GCC rail system. Such coordination should consider a number of issues, including the following:
• Technical issues – the various GCC national railways will need to have uniform standards for the gauge size of tracks and the locomotives which can run on these tracks, particularly along cross-border rail segments;
• Safety issues – of crucial importance, each railway’s signal and communication systems must be compatible and integrated;
• Commercial issues – for example, agreeing to a common fare structure across the GCC; and
• Legal and regulatory issues – implement a joint customs system to allow a single point of entry into the GCC and a uniform custom tariff for imported goods.

The Need for a Coordinated GCC-Level Regulatory Approach

Moreover, the six member nations would do well to provide a GCC-level regulatory and legal framework under which the respective national authorities could deliberate and agree on technical, safety, commercial and legal issues. Thus, the GCC Railway project will require not just capital and manpower, but also a large measure of political unity and skillful diplomacy over the coming years. But if the region’s successful development of large-scale air and sea transportation in recent years is any indication, the prospect of a pan-GCC Railway network is a goal that should be realized.

Oman’s Consumer Protection Law

2011-12-22T11:54:00.002-05:00

This article provides an introduction to the basic principles of Oman’s Consumer Protection Law, which was promulgated as Royal Decree 81/02 (with executive regulations issued by Ministerial Decision 49/07) (the “Consumer Protection Law”). It is particularly useful for tourists, business travelers and expatriates alike to be aware of the laws available to protect the consumer of goods or services, as it is possible for anyone to find themselves a victim of a rapacious supplier.

What is the Consumer Protection Law?

Fundamentally, the Consumer Protection Law is legislation intended to ensure that suppliers and advertisers abide by the principles of fair dealing and credibility when dealing with consumers. The law does not apply to ‘business-to-business’ commercial dealings between merchants. The Consumer Protection Law requires that every commercial establishment upholds the principle of protecting their consumers’ interests through providing quality services or products. Violations of this law include, but are not restricted to:
• knowingly supplying unsafe products without suitable warning to consumers;
• refusing to accept return of goods (excluding perishable products) that are within the minimum return period of 10 days from the purchase date;
• refusing to uphold an existing maintenance agreement with the consumer;
• intentionally misleading consumers with false advertising;
• refusing to provide compensation for an injury that the consumer sustained from normal use of the product or service;
• charging a higher price than advertised; and
• refusing to provide the consumer with proof of purchase (or a receipt) that at a minimum shows the date and value of the purchase.

It would be easy to believe that the Consumer Protection Law only applies to the purchase of products, i.e., a car or a mobile phone. However, it is important to understand that the law applies to all aspects of the commercial world, including where a commercial establishment provides a service to a consumer – for example, a dentist providing a filling or a mechanic servicing a car. Whenever a service or product is provided to a consumer by a supplier, the customer is protected by the Consumer Protection Law (provided that the consumer has not misused the service or product) and, should the supplier be found guilty of violating this law, the establishment can be fined up to RO 5,000.

Why is there a Consumer Protection Law?

The Consumer Protection Law is intended to promote a level playing field of fairness and equality between the supplier and the consumer, and to protect consumers against monopolistic companies and deceitful business practices. The Consumer Protection Law ensures that consumers are supplied with correct information about the products and services that they buy, prevents the companies from gaining unlawful profit through dishonest practices, and maintains a fertile market for new companies to enter by restricting the scope for dishonest or monopolistic business practices.

Career Corner: How to Become an Omani Lawyer

2011-12-15T12:23:00.004-05:00

With the Sultanate’s rapid economic development proceeding apace, Oman provides an abundance of opportunities for law firms and lawyers. Recognizing this trend, the Omani government has taken steps to increase the ability of young Omanis to participate in the legal field, by providing scholarships for the study of law domestically and abroad, and by tilting the legal system in ways to raise Omani participation in the legal field. For example, the Ministry of Justice took the decision in 2010 to reserve to Omanis the exclusive capacity to appear and present cases before the Primary Court.

However, in order to ensure that new Omani lawyers will have the requisite experience and expertise to carry out their duties, the Omani government has put in place certain restrictions on entry into the legal profession and qualification as an Omani lawyer. This article provides an overview of the process for becoming an Omani lawyer.

The registration process

The starting point for an Omani aspiring to become a lawyer is to obtain a university degree. Once they have their degree in hand, Omanis wishing to qualify as a lawyer in the Sultanate must go through several steps, the first of which is registration as a trainee with the Ministry of Justice. The applicant will need to present evidence that he or she meets the necessary criteria for registration, such as evidence of a University degree in law or a related discipline, as well as evidence of good conduct
from the Royal Omani Police.

Becoming a trainee

Once registered, the next step is to work in a local law firm as a trainee. A university graduate with an undergraduate degree is required to work a minimum of two years as a trainee, while those who hold a masters degree must work at least one year as a trainee. During this training period, the trainee may not open a law firm in his own name.

It is important to note that experience in an international law firm will not suffice to fulfill the Omani government’s training period requirement. As a practical matter, Omanis who work in international firms do essentially the same type of work, and often get exposed to a much broader range of experiences, than their counterparts at local firms. However, the current position of the Omani government is that only work performed at a local firm counts toward fulfilling the requisite two years of training to become an Omani-qualified lawyer.

Professional obligations and restrictions for qualified Omani lawyers

After completing the training period and qualifying as an Omani lawyer, every Omani lawyer must continue to heed the rules set out in the Advocates Law, promulgated by Royal Decree 108/96 (as amended). In particular, Article 6 of the Advocates Law requires that an Omani lawyer may not work as a minister or other government official, and may not start a business of his own or work for a company, bank or any other person or entity while working in the legal profession (subject to certain exceptions, for example that lawyers may serve in the Majlis al Shura or on the boards of directors of joint stock companies).

Islamic Insurance Comes to Oman

2011-12-14T10:43:00.005-05:00

Several months ago, in a ground breaking development, His Majesty Sultan Qaboos bin Said approved the establishment of Oman’s first Islamic bank. As the government authorities continue to work through the implementation of His Majesty’s instructions, it is becoming clear that changes and new opportunities are in store not only for the banking sector, but also for related financial sectors such as insurance.

Following His Majesty’s broad-based royal directive, many of the details of implementation have been carried out by government authorities such as the Capital Market Authority (CMA) and the Central Bank of Oman (CBO). For example, the local press recently reported that the CMA had issued important guidance in respect of Islamic insurance, or takaful. The CMA stipulated that conventional insurance companies would not be permitted to run takaful operations in the Sultanate alongside their conventional insurance businesses; any company wishing to offer takaful would be required to convert to a dedicated takaful company, or to open a new dedicated takaful entity.

This article provides a brief overview of takaful, as a basic primer on the Islamic insurance sector.

Insurance with Islamic principles

Essentially, takaful is designed to provide the same benefits to subscribers as conventional insurance –coverage against unexpected or catastrophic losses – while scrupulously adhering to the principles of Sharia (i.e., Islamic religious law). In particular, takaful is structured to comply with the core Sharia tenets prohibiting interest or unjust enrichment (riba), discouraging ambiguity in contractual terms (gharar), and minimizing the speculative nature of transactions (maysair).

Application of these principles to ‘takaful’ structures

In practice, there are two main ways that a takaful insurance scheme follows Islamic principles.

First, the takaful structures itself as a mudaraba (i.e., profit-sharing venture). The policy contract between the takaful operator (i.e., the insurance company) and the subscribers would specify how any operating surpluses that the takaful runs (e.g., excess of subscriber contributions received over monies paid out on claims) shall be divided between the operator and the subscribers. For example, the contract may state that any surpluses shall go 70 percent to the subscribers, as the providers of capital, and 30 percent to the operator, as the provider of services. This structure helps the takaful scheme avoid falling afoul of the prohibition on unjust enrichment.

Second, the takaful will seek to avoid prohibited elements of uncertainty by structuring its subscriber contributions as tabarru (from the Arabic “to donate, contribute or give away”). Under this concept, payments that the takaful makes on claims by a subscriber would be considered a partial donation by the other subscribers of the capital that they have contributed to the takaful.

Focus on Litigation: Settlements

2011-12-13T11:26:00.002-05:00

In the Sultanate of Oman, as in other jurisdictions, not every litigation matter proceeds all the way to a decision by the Court. What happens if the parties to an Omani court case reach a settlement in the middle of the litigation process?

Sadly, this rarely happens in Oman, primarily because the Omani system has no concept of “without prejudice” negotiations. Furthermore, the fact that the losing party does not have to pay the winner’s legal fees is another reason why Omani court cases often go the full distance to a Supreme Court judgment.

However, settlements can and do occur. The settlement is normally recorded in full detail in a settlement agreement which is in Arabic and signed by the parties. The respective lawyers of the litigant parties normally present the settlement agreement to the Court, and ask the latter to adopt the agreement as the terms of a “settlement judgment” between the parties. This means that the Court gives a judgment, stating that the parties have settled the dispute on the terms stated in the settlement agreement.

In this way, the terms of the settlement agreement become part of the actual text of the Court judgment. The result is that, if one party then breaches the settlement agreement, the innocent party can apply to the Enforcement Department to enforce the terms of the settlement agreement.

It also should be noted that the above mechanism requires that the advocates for both sides be in possession of powers of attorney from their respective clients which empower them to settle the dispute. This is necessary in order to make the request to the Court to adopt the agreement as the terms of a “settlement judgment.”

Transfers by Lenders under Syndicated Loan Agreements

2011-12-08T13:29:00.003-05:00

With the recent volatility in European financial markets, the importance of liquidity and flexibility within the banking sector has been the subject of renewed focus. During such times, some lenders may look to restructure their balance sheets by reducing exposure to certain sectors, countries and/or currencies under various existing transactions. The transfer provisions in a syndicated loan agreement provide a simple mechanism by which lenders can buy or sell interests in a syndicated loan agreement.

By way of background, a syndicated loan is one for which the funds are provided by a syndicate, or group, of lenders. A syndicated loan is often a useful way for the lenders to spread risk or to extend a larger loan than they would be able to do individually. In Oman, large syndicated loan agreements are typically governed by English law, or by the laws of another foreign jurisdiction as lenders tend to prefer the predictability of how such an agreement and the offshore security would be enforced in such a jurisdiction.

This article considers three ways in which a lender may sell all or part of its interests in a syndicated loan agreement, namely through novation, assignment or sub-participation.

Novation

Novation is the most effective way of transferring rights and obligations under a syndicated loan agreement from an original lender to a new lender. The existing agreement (including all outstanding commitments) between the original lender and the borrower is dissolved and replaced by a new agreement between the new lender and the borrower.

The new lender enters into a direct relationship with the borrower and other parties to the syndicated loan agreement. The loan agreement should include the form of transfer certificate used to effect the novation and a provision stating the borrower has no objections to the original lender selling his interest in the loan agreement to a new lender. Novation is typically used for revolving credit facilities in which the original lender still has outstanding obligations such as the obligation to make future loans.

The drawback of this method is that, if the loan is secured, the security is discharged and needs to be renewed each time a novation is executed and the priority of the security may be affected adversely. This, however, can be resolved by appointing a security trustee to hold the security granted under the loan for the benefit of all the lenders.

Assignment

Unlike novation, assignment involves the transfer of rights, but not obligations. For a legal assignment under English law, the assignment must be:
• absolute (i.e., the whole of the debt outstanding to the existing lender);
• in writing and signed by the existing lender; and
• notified in writing to the borrower.

A legal assignment will transfer all of the original lender's rights under the loan agreement, but none of the obligations. New security is not required on each assignment as the original lender retains his obligations under the loan agreement.

An assignment is not an appropriate option if there are outstanding lending obligations, since the original lender’s obligations are not transferred.

Sub-Participation

The distinguishing feature of a sub-participation arrangement is that the original lender remains the "lender of record" to the borrower, and there is no direct contractual relationship between the sub-participant and the borrower. No borrower consent is required, so this process can be confidential.

A funded sub-participation creates new contractual rights between the existing lender and the sub-participant on the same terms as the contract between the existing lender and borrower. The existing lender becomes an intermediary between the borrower and the sub-participant. The sub-participant puts up funds which the existing lender loans to the borrower. The sub-participant is only repaid by the existing lender when the borrower repays the existing lender. Unlike novation, there is no transfer of existing rights and the borrower is often unaware of the contract between the existing lender and the sub-participant.