By Amel Abdallah (Assistant professor at College of Law –Sultan Qaboos University-Oman)
Sultanate of Oman has shown an increased willingness to attract foreign investment by updating its legal environment. In particular, Omani courts have recognized that public entities can validly enter arbitration agreements with private entities. In doing so, any disputes arising out of a contract underlying the arbitration agreement will be subject to arbitration rather than to the Omani courts.
The first step in changing the legal landscape was in 1994, with the adoption of Article 14 of the Omani Foreign Capital Investment Law (“OFCIL”). This law permitted disputing parties to settle their disputes by arbitration (Art. 14 Royal Decree No. 102/1994: “It may be agreed to refer any dispute between the foreign investment projects and third parties to a local or international arbitration tribunal.”). Moreover, the new law was an exception to Omani civil and commercial procedure law OCCPL, which required all disputes with Omani nationals to be resolved by Omani courts (see Art. 29 Omani civil and commercial procedure law –Royal Decree 29/2002).
The second step taken was in 1997, when Oman issued both the Omani Arbitration Law and adopted the UNCITRAL Model law 1985 (Royal Decree No. 47/1997). Article 1 of the Omani Arbitration Law states that this Law will apply to any arbitration between persons under public or private law, irrespective of the legal relationship on which the dispute is based. Article 14 of OFCIL and Article 1 of the Arbitration Law asserted the validity of arbitration clauses in any contract whether public or private law applied to that contract, and irrespective to the nature of disputing parties.
The third step occurred in 1999, when Oman ratified both the ICSID (Convention of International Centre for Settlement of Investment Disputes of 1965.) and New York conventions (New York Convention of recognition and enforcement of international arbitral award of 1958). These ratifications satisfied foreign investors and entitled them to settle their disputes with the Omani government by international arbitration.
By 2009 the Omani judiciary began to play an important role in avoiding contradictions between Omani laws concerning the validity of arbitral clauses in administrative contracts concluded with state owned entities. For example, the validity of arbitral clauses in contracts between investors and state owned entities was a question due to Article 6 of the Law of Administrative Courts and Article 1 of Omani Arbitration Law (Royal degree No. 91/1999). In particular, Article 6 of the Administrative Court’s law (Royal degree No. 91/1999) gave conclusive jurisdiction to the Administrative Court in disputes involving administrative contracts. Conversely, Article 1 of the Omani Arbitration Law (Royal Decree No. 47/1997) permits disputing parties to settle their dispute by arbitration, irrespective of the legal relationship on which the dispute is based.
In settling this issue, the Appeals chamber in the Omani Administrative Court asserted the validity of an arbitral clause in a contract between a private company and the Omani Public Authority of Electricity and Water (Administrative court – Appeals chamber – 05-01-2009).The Court based its decision on the broad meaning of Article 1 of the Omani Arbitration Law. Also, the Court interpreted that, when Article 6 of the Law of Administrative Courts stated “the conclusive jurisdiction of Administrative Courts, in disputes related to administrative contracts,” it referred to the distinction between the scope of jurisdiction of administrative courts and of civil courts, but it did not to prevent disputing parties in administrative contracts from settling their dispute by arbitration (see Journal of arbitration (in Arabic) – No. 2 – p. 282:289 – April 2009).
That decision was not the first one. The administrative court asserted the validity of arbitral clause and dismissed a suit in a dispute between the Ministry of oil and gas and a construction company in 2006 (Administrative court, dated 25 June 2006).
Disputes concerning the validity of arbitration clauses in administrative contracts compelled Omani legislators to modify the law of administrative courts in 2009 (Royal Decree No. /2009). This extended the scope of the Omani Arbitration Law’s application to disputes arising out of administrative contracts. Accordingly, any arbitral clause in administrative contract will be valid as long as it complies with the requirements of the Omani Arbitration Law.
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