James Harbridge

Omani courts have jurisdiction to hear claims against non-Omani entities where the contract in question relates to the performance of obligations within Oman

Under Oman's Law of Commercial Agencies (CAL) – Royal Decree 26/77 (as amended) – a commercial agency is widely defined, and includes distributorship and franchise arrangements. Article 1 of CAL states that its provisions cover "any agreement whereby a manufacturer or supplier outside Oman appoints one merchant or more, or one commercial company or more, in the sultanate to sell, promote the sale and distribution of products and goods or provide services, whether in his capacity as agent, representative or intermediary of the original manufacturer or supplier who has no legal existence in the sultanate, in return for profit or commission".

Article 10 of CAL continues:
"The following examples, which are not exhaustive, shall be considered an abusive exercise of rights entailing appropriate compensation:
a) the termination by one party of an agency contract of unlimited duration in the absence of any breach of duty…by the other party
b) the principal's not accepting to renew the term of an agency contract after the end of its original period…unless the principal can prove that the agent has committed a breach of duty justifying the non-renewal
c) the agent's relinquishment of the agency at an inappropriate time and without reasonable excuse thus causing damage to the principal."

In consequence, an often asked question is whether the parties can agree to dis-apply Omani law in their agency contracts covering Oman. Article 18 of CAL makes it clear that the Oman courts have jurisdiction in respect of any dispute between principal and agent "unless the two parties have agreed to resort to arbitration".

The Omani case law shows that, yes, arbitral clauses will be upheld, even when those clauses allow for arbitration outside the sultanate and are coupled with a contractual reference to a non-Omani substantive law. In this way, an agency arrangement can cover the sultanate without it being governed by Oman law. This is, perhaps, a surprising scenario, given that in the early 1990s an Oman court judgment determined that the entirety of CAL was mandatory.

Furthermore, Royal Decree 29/2002 – the Oman Court Procedural Law – clearly states at Article 30 that the Oman courts have jurisdiction to hear claims against non-Omani entities where the contract in question relates to the performance of obligations within Oman.

Nonetheless, the most recent Omani case law on the issue shows that the Oman courts have ruled that aggrieved Omani agents are bound by an arbitral clause and a non-Omani governing law, provided both are explicitly stated within the contract in question. In short, CAL can be prima facie circumvented by a contractual agreement to non-Omani substantive law and dispute resolution via arbitration. Conversely, if an agency contract referred to, say, ‘English Courts and English law’, it is perhaps conceivable that the Oman courts would override such a provision, and themselves take jurisdiction and apply Omani law, including CAL.

The next issue which arises is whether an arbitral panel will consider CAL as a mandatory local law which has to be considered, notwithstanding the fact that the parties have agreed to a non-Omani governing law. This aspect is outside the scope of the current article, although it is something which needs to be borne in mind as this issue surfaces from time to time.

Moreover, although Oman is a signatory to the New York Convention on the recognition of foreign arbitral awards, it is noteworthy that Oman's Royal Decree 47/97 – the Arbitration Law – states in its Article 53 that an overseas arbitral judgment can be rendered null and void if it contains something which contravenes Omani public policy.

It is therefore possible that the Oman courts may take jurisdiction, and apply Oman law, if an aggrieved agent provided evidence that it had first complied with a non-Omani arbitration which applied non-Omani law, with the consequence that the agent was ‘deprived’ of the benefits which would have accrued to him if the dispute had been heard under Omani substantive law.

It would also therefore be interesting to see how the Oman Courts would react if an aggrieved Omani agent argued that an arbitral award should be nullified since the award applied agency laws of another country, other than those of Oman. As yet, we have no knowledge of such a scenario occurring is.