Commercial Agencies Law

In Oman an overseas arbitral judgment can be rendered null and void if it contains something which contravenes Omani public policy.

In the October issue, I explained that the Omani Courts are very likely to decline jurisdiction to hear an agency dispute if the contract in question refers to arbitration. This means that if an agency refers to arbitration and a foreign law, the likely outcome is that the arbitral panel will apply that foreign law and exclude Omani law.

However, there remains the possibility that an arbitral panel may be persuaded by the agent that Oman’s Commercial Agencies Law (“CAL”) is a mandatory local law which has to be considered, notwithstanding the fact that the parties have agreed to a non-Omani governing law.

Furthermore, 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 potentially 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, I have no knowledge of such a scenario occurring.

According to Article 11(b) of CAL, every agency contract in respect of Oman must be registered at Oman’s Ministry of Commerce & Industry (and any contractual agreement trying to avoid this obligation would be unenforceable under Omanilaw). Moreover, Article 19 of CAL criminalises any violation in this regard, imposing fines and ultimately granting the ability for the authorities to shut down that part of the agent’s business relating to the subject agency. To the best of my knowledge, the reality is that the Article 19 sanctions have never actually been imposed in Oman.

In practice, many agency contracts are actually unregistered, or else they begin life as registered agencies, but in later years the registration expires and there is a failure to renew the registration.

The significance of registration lies primarily in the fact that Article 11(d) of CAL states, “Any agency which is not registered shall not be recognised and any case concerning it shall not be heard.”

Accordingly, many foreign principals who are defendants in Omani Court cases brought by agents will argue that the Court should dismiss the case owing to lack of registration.
However, this line of argument is unlikely to succeed where the agent can prove that registration failed to take place owing to the foreign principal’s failure/refusal to put the agency agreement through the notarisation, legalisation, endorsement and authentication procedures requested by the Ministry.

Equally, an agent who is a defendant in an Omani case is unlikely to escape liability by running the argument that it has no obligations to the foreign principal because the agency was unregistered. The Supreme Court – Oman’s third and final tier of justice – recently ruled that an agent who failed to pay for goods delivered by the foreign principal must of course still pay for those goods, regardless of the fact that the relevant agency had never been registered.

On the other hand, in a different case where the Claimant was a former Omani agent, Oman’s Primary Court ruled that the agency was registered even though it had in fact been unregistered for at least five consecutive years prior to the agent receiving notice of non-renewal. This case was never appealed so it may not be followed by Oman’s judiciary in future cases. The Primary Court in that case appeared to be saying that it would treat the agency as registered since at some time in the past it had indeed been the subject of a valid registration certificate.

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