The recent amendments to Oman’s Commercial Agencies Law are the first of three complementary legislative measures aimed at increasing competition in the Omani market and curbing price rises.
To boost expansion, liberalise international trade, restrict monopoly and promote healthy competition in the market, Oman’s Commercial Agencies Law was recently amended at the end of July 2014. The amendment aims to eliminate a number of restrictive statutory protections that were available for agents selling or distributing products or services of foreign companies/principals in Oman.
The Commercial Agencies Law (CAL) governs the relationship between foreign principals and their local Omani agents. One of the provisions of CAL which was viewed negatively was the provision which entitled an Omani agent to claim compensation from the foreign principal in case of an ‘unjustified’ termination of an agency agreement of an indefinite duration or on account of the failure of the foreign principal to renew a fixed term agency agreement upon its expiry (“Compensation on Termination”). As a result, a foreign principal intending to terminate an agency agreement without the consent of the agent often faced protracted negotiations and compensatory payments on account of termination/non-renewal. In view of the existence of this provision of Compensation on Termination, foreign principals often chose not to register their agency agreements with the Ministry of Commerce and Industry in Oman (MOCI). This is because CAL cannot be made applicable to unregistered commercial agency agreements and Omani courts do not assume jurisdiction in cases of unregistered agency agreements.
The Compensation on Termination provision of CCL, common to most of the GCC, is considered as a restrictive practice by the World Trade Organization (WTO) and therefore, pursuant to Oman’s accession to the World Trade Organization and towards fulfilling its international obligations and commitments, the new amendments were passed. As a result of the amendments:
- Powers previously granted to the MOCI to ban the imports of foreign principal’s goods in the event of an ‘unjustified’ termination of the agency have been removed
- The prohibition against direct sales of foreign principal’s goods or services or sale through an intermediary other than the registered agent has been removed. Omani agents no longer have a statutory right to claim damages for commission or profits earned from such sales
- The right of an Omani agent to statutory compensation upon termination of the agency agreement has been removed
- The Council of Ministers, acting on the recommendation of the competition and anti-monopoly authorities, has the power to break up monopolies over specific types of goods and services which have a negative impact on supply and demand and lead to unjustified price increases
Industry experts are viewing these amendments as a benefit to all, including the agents, foreign principals and the customers. These amendments are the first of three complementary legislative measures aimed at increasing competition in the Omani market and curbing price rises. A draft competition and anti-monopoly law and new consumer protection law are reportedly close to being finalized. These measures signal the government’s determination to develop a competitive private sector as part of Oman’s economic diversification strategy, a main pillar of which is to create a level playing-field for small and medium scale enterprises.
The author is Senior Associate, Al Busaidy, Mansoor Jamal & Co.