In the past couple of years, we have seen a rise in disputes in Oman especially relating to the construction field. More often than not, construction and other related contracts include arbitration clauses thereby excluding the jurisdiction of courts on hearing disputes amongst contracting parties. Notwithstanding the fact that arbitration is particularly popular in construction related contracts for a number of reasons, arbitration can be agreed on for a broad range of commercial matters, including amongst others, commercial agencies, investment, development contracts, banking, insurance and transport transactions.
Depending on the particulars of each arbitration, arbitrations may tend to be quite complex involving various procedural and substantive laws. Arbitration clauses must be carefully drafted by experienced lawyers in order to protect contracting parties should a dispute arise amongst them. Moreover, contracting parties should ensure that arbitration clauses are not held to be void by not complying with the procedural requirements. This is particularly important since if arbitration clauses are held to be void, the parties will only have recourse to courts having competent jurisdiction to hear a claim amongst them.
Depending on the identify of the contracting parties, it may not be possible to enforce a judgment issued by a court against the losing party. The contents of the arbitration clause will ultimately depend on the contracting parties’ requirements and particulars. Contracting parties may agree on an institutional administered arbitration or an ad hoc arbitration. Regardless of whether the parties agree on an institutional administered or an ad hoc arbitration, the procedural law of the State in which the arbitration will be seated will apply. It is important that the contracting parties carefully choose the seat of the arbitration to safeguard their interests and to have a smooth arbitration procedure. This article will focus on arbitrations seated in Oman. The procedural law of all arbitrations seated in Oman is Royal Decree No. 47/1997 (as amended) promulgating the Civil and Commercial Disputes Arbitration Law (the Arbitration Law). The Arbitration Law is a detailed law which is substantially based on the UNCITRAL Model Law on International Arbitration (1985). At the outset, the Arbitration Law gives parties a lot of autonomy in terms of agreeing the procedure to be followed. In the absence of party agreement, the Arbitration Law sets out a number of default provisions which apply in Omani seated arbitrations. Below, we summarize important provisions of the Arbitration Law.
As a starting point, arbitration agreements must be in writing or deemed to be in writing. If an agreement to arbitrate a dispute is contained in a record signed by the two parties or contained in messages or telegrams, or other means of written communication exchanged by the two parties, this will constitute an arbitration agreement. Failure to do so will lead to the invalidity of the arbitration agreement. Contracting parties entering into an arbitration agreement must have sufficient capacity to enter into an arbitration agreement. Arbitration clauses are usually agreed amongst the contracting parties in their contract and relate to future disputes. Arbitration clauses are considered as independent agreements and are unaffected by the invalidity, revocation or termination of the main contract. Parties may always enter into a submission agreement for present disputes. Submission agreements are generally more detailed and lengthy as opposed to arbitration clauses.
The existence of an arbitration agreement constitutes a defence on the part of the respondent if a claimant submits a claim before Omani courts. The respondent must raise the existence of the arbitration agreement before it submits its defence. Failure to do so will lead to the Omani courts assuming jurisdiction to hear a dispute amongst the parties, despite the existence of the arbitration agreement.
The Arbitral Tribunal
In their arbitration agreement, the contracting parties must agree whether one arbitrator or more will hear a dispute amongst them. The number of arbitrators must always be an odd number. It is usual for the parties to agree on one or three arbitrators to hear their dispute. One factor that may influence the number of arbitrators is the complexity of the dispute. The Arbitration Law sets the default number of arbitrators to three in the absence of party agreement to the contrary. The Arbitration Law sets out the requirements an arbitrator must possess, including the default procedure for the appointment of an arbitrator in the absence of the parties’ agreement.
Generally, where one arbitrator will hear a dispute, the parties must mutually agree on the appointment of a particular arbitrator. Where three arbitrators will hear a dispute, each party appoints an arbitrator and the two party-appointed arbitrators appoint the Chairman of the Arbitral Tribunal. Failure to agree on the appointment of an arbitrator or failure to comply with the timeframes stipulated in the Arbitration Law may lead to either party approaching Omani Courts for the appointment of an arbitrator.
Generally, arbitral parties have the freedom to agree on the procedure(s) to be adopted by the Arbitral Tribunal. Natural justice principles, such as the right to a fair hearing and the rule against bias must be applied. Arbitral parties must be treated equally and each one of them must be given an equal and full opportunity to present its claim.
The arbitration process is deemed to have commenced on the date the respondent receives the notice of arbitration from the claimant, unless the parties agree on a different commencement date. The default language of the arbitral procedure is Arabic, unless the parties agree on a different language. It is international good practice for the parties and the arbitrator(s) to hold a procedural hearing at the outset of the arbitration to agree on all procedural matters relating to the arbitral procedure, including the timetable for the submission of pleadings, hearing dates, etc. It is important for the parties to agree on the procedure otherwise the default provisions of the Arbitration Law will apply which may not be in the best interests of the parties.
The default timeframe under the Arbitration Law for the Arbitral Tribunal to issue a final award is twelve months from the date the arbitration procedure commenced, unless the parties agree otherwise. Failure to comply with the timeframes, whether agreed between the parties or under the default provisions of the Arbitration Law, entitles either party to approach Omani courts to either extend the timeframe for rendering a final award or terminating the arbitral process.
Arbitral awards are passed by majority of votes if the dispute is heard by more than one arbitrator. During the arbitral process, Arbitral Tribunals may issue a number of awards all of which are considered as final on the issues each award determines. Alternatively, a final award may be issued resolving all claims (and counterclaims, if any) submitted to arbitration. Issued awards must satisfy the formalities set out in the Arbitration Law. The Arbitral Tribunal’s mandate terminates upon the conclusion of the arbitration process subject to there not being a request for the interpretation of ambiguities in the award, correction of pure material, clerical or mathematical errors or issuance of additional award for claims presented in the arbitration but omitted in the award.
Risk of invalidity of an award and enforcement
Unlike in litigation procedures, the losing party has limited recourse on challenging an award. The grounds for a potentially successful application for the invalidity of an award are limited and are set out in Article 53 of the Arbitration Law. The losing party may submit an application to the court for the setting aside of the award within ninety days following the date the award was notified to the losing party.
The winning party may commence enforcement procedures of an award after the period of ninety days mentioned above has expired, subject to the winning party satisfying the formalities set out in the Arbitration Law. It must be noted that an award issued in Oman may be enforced in any country which is a signatory of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) and in which the losing party has assets. Similarly, foreign awards may be enforced in Oman if the losing party has assets within Oman. The enforcement of a foreign award is not subject to the provisions of the Arbitration Law. The enforcement of a foreign award will be done in the same manner as the enforcement of judgments issued in Oman.
The role of Omani Courts in Omani seated arbitrations is limited and it is mostly supportive and supervisory. Omani Courts may interfere in Omani seated arbitrations in the following instances:
Royal Decree no. 26/2018 established the Oman Commercial Arbitration Centre which will be affiliated to the Oman Chamber of Commerce and Industry. This is undoubtedly a positive step forward in promoting and conducting institutional arbitrations in Oman. This will further educate professionals and arbitrators which will lead to better conducted arbitrations seated in Oman. Additionally, the availability of administrative assistance from the centre in ongoing arbitrations administered by the centre as well as the list of qualified arbitrators to choose from and rules for the conduct of the arbitrators will most likely increase efficiency and better management of arbitrations seated in Oman.
Disputes submitted to arbitration are on the rise. Arbitrations have increased advantages over litigations and if commenced and conducted appropriately, including having been carefully planned at the time when the parties entered into the arbitration agreement, can lead to a better way of resolving disputes than traditional litigation.
At SASLO, we have an experienced dispute resolution team dealing with disputes from beginning to end, including drafting arbitration agreements and preparing legal assessments of potential disputes.
Written by: Maria Mariam Rabeaa Petrou
Published in SASLO Legal Updates Newsletter (February 2019)
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