The Sultanate of Oman took its first steps in relation to arbitration with the Law of Arbitration in Civil and Commercial Disputes (Royal Decree No. 47/1997) (the Law) which was based on the UNCITRAL Model Law 1985. It applies to all arbitration between persons provided that the parties have agreed to arbitration under this law, irrespective of the legal nature of their relationship from which the dispute stems.
In 2018, the Oman Commercial Arbitration Centre (OCAC) was created by the Establishment of Oman Commercial Arbitration Centre (Royal Decree No. 26/2018). Subsequently in November 2020, the Chairman of the Board of Directors of Oman Commercial Arbitration Centre issued Decision No. 8/2020, on the issuance of the Arbitration Rules of Oman Commercial Arbitration Centre (the OCAC Rules).
This article covers what parties should consider before entering into a contract if arbitration is to be used for dispute resolution and then how to start an arbitration at OCAC and the costs involved.
Before entering into a contract
Each party (a legal entity or an individual) to a contract should ensure each contract it enters into contains, amongst other things, a clause setting out whether disputes should be resolved by reference to arbitration or courts. If the parties agree on arbitration, they can tailor the arbitration clause to suit their requirements and the nature of the contract.
Below are some of the points that should be taken into consideration when drafting an arbitration clause.
Settlements
The parties may include a clause in the contract with a set time frame (for example, 30 days) in which senior members of each party (such as CEOs and CFOs) seek to reach an amicable settlement before referring the dispute to arbitration. Such a clause tends to encourage the parties to resolve the dispute, therefore avoiding any arbitration.
Arbitration Clause
It is crucial that the parties ensure the contract contains a specific clause on arbitration or there is a separate agreement on arbitration applying to that contract. As disputes can arise out of any matter, it is important that any such clause is broad enough to cover all potential matters. This will reduce the risk that a specific dispute is not covered by the arbitration clause. However, it is to be noted that personal and criminal matters cannot be subject to arbitration.
In an arbitration clause, the parties need to select the arbitral institutions, such as OCAC, International Chamber of Commerce (ICC) or London Court of International Arbitration (LCIA). In addition, the place of arbitration must be set out (such as Muscat, Sultanate of Oman). If OCAC has been selected, the place of arbitration will automatically be in Muscat, Sultanate of Oman, unless otherwise agreed by the parties.
The parties also have the discretion to determine the law (such as Omani law or English law) to be applied by the arbitration tribunal to the merits of the dispute. If there is no agreement on the law, the OCAC Rules require the arbitral tribunal to apply the most appropriate law for the parties.
Parties also have the freedom to choose the language of the arbitration. If the language has not been agreed upon, under the OCAC Rules, the arbitral tribunal has the competence to determine the language(s) of arbitration, taking into account any comments from the parties and all the circumstances relevant to the dispute. In Muscat, it is likely to be Arabic and/or English.
The parties should also decide whether they wish to have a sole arbitrator or three arbitrators in the arbitration clause. They may appoint a sole arbitrator as long as they mutually agree on the arbitrator, or each party appoint one arbitrator, with the third arbitrator nominated by the two arbitrators.
In addition, the OCAC Rules can be varied in the contract by the parties, if appropriate.
Model Arbitration Clause
Here is the model arbitration clause set out in the OCAC Rules:
“Any dispute arising out of or in connection with the present contract, and any matter relating to its existence, jurisdiction or termination shall be referred and finally settled by way of arbitration administered by Oman Commercial Arbitration Centre (the “Centre”), in accordance with the Arbitration Rules of Oman Commercial Arbitration Centre (the “Rules of the Centre”), deemed to be incorporated in the reference in this Clause.
The number of arbitrators is [one/three].
The place of arbitration is [--------------------------------].
The substantive law governing the contract is [-------------------------------------] law”.
The OCAC Rules
How to Start an Arbitration
To start an arbitration, the party wishing to initiate the arbitration (the Claimant) needs to send a request for arbitration to the registrar at OCAC, who shall then notify the responding party (the Respondent) of the request.
The request must contain, amongst other things, the following:
- the names and contact details of the parties to the arbitration and their representatives, if any;
- the arbitration agreement relied on by the Claimant;
- the contracts and other documents which relate to the dispute;
- a description of the circumstances and nature of the dispute;
- remarks on any applicable law; and
- proposal on nomination, and number, of arbitrators.
The Respondent is given 21 days to respond with an answer to the request and provide the same information and details of any counter claim. The Claimant is then also given 21 days from the date of the Respondent’s response to respond to any counter claim.
The arbitral tribunal will establish a procedural timetable for the arbitration after its constitution and invite the parties to express their views on the schedule and steps of the arbitration. The arbitral tribunal may then extend or shorten any time period within the arbitration to tailor the timetable to suit both the parties and the specific dispute.
Failure to respond:
After the request for arbitration has been sent, any failure by either party to respond will be regarded as a waiver of the right to respond and will not pose any limitations or delays on the arbitration.
Multiple Contracts / Parties:
The parties also have the option to settle disputes that have risen from more than one contract under a single request for arbitration as long as (i) the arbitration clauses in such contracts are compatible and (ii) the disputes arise out of the same legal or economic relationship, the contracts consist of one main contract and additional contracts or the disputes arise out of a relevant transaction or series of transactions.
They may also involve other parties in the arbitration provided that they submit a request to the registrar and all other parties involved in the arbitration agree.
All parties have the right to be represented and assisted in the arbitration by one or more authorised representatives who may then attend in person at the OCAC or place of the arbitration tribunal. The arbitration tribunal may refuse to approve any change or addition with respect to the representatives and/or assistants of a party, if such change or addition is likely to cause delays.
Award:
The arbitral award shall be made in writing and is final and binding on the parties, other than the correction of any computational, clerical or material errors requested by a party.
Costs
The costs of an Arbitration include registration fee, administrative fee and the fees of the arbitral tribunal. Details of each fee are set out below.
Registration Fee:
The Claimant must pay a non-refundable fee of 500 OMR upon the deposit of the request for arbitration.
Administrative Fee:
The costs are typically split between both parties. However, if one party refuses to pay, the other party has to pay it for the arbitration to commence.
The administrative fee varies depending on the amount in dispute. The administrative fee starts at OMR 500 for disputes with a value of OMR 25,000 (or less) and increase as the amount in dispute increases. The maximum administrative fee is OMR 18,000 for disputes with a value of over OMR 10,000,001. Disputes with non-monetary claims has an administrative fee of OMR 5,000. These costs are to be paid as soon as practicable after filing the answer to the request for arbitration or after the expiry of the answer filling date.
Fees of the Arbitral Tribunal:
The fees of the arbitral tribunal also vary depending on the amount in dispute. The fees for a dispute with a value of OMR 25,000 (or less) and a sole arbitrator are OMR 1,000 and three arbitrators are 8% of the amount in dispute (the amount will not exceed OMR 2,000). The maximum fee is OMR 51,000 for a sole arbitrator and OMR 110,000 for three arbitrators, for disputes with a value of over OMR 10,000,001. Disputes with a non-monetary claims has a fee of OMR 6,500 for a sole arbitrator and OMR 15,000 for three arbitrators.
These costs are to be paid to the arbitration tribunal upon the rendering of the arbitral award. In addition, all reasonable travel expenses (if any) and any other expenses incurred by the arbitrators shall be paid by the parties.
Responsibility for Costs:
The arbitral tribunal shall determine the arbitration costs in the arbitral award which settles the dispute. The arbitration costs shall be borne by the losing party, but the arbitral tribunal may distribute the costs among the parties as it deems reasonable in the light of the circumstances of the claim.
The arbitral tribunal shall have the power to order any party in the arbitral award to pay legal costs (or any part thereof) to another party.
Conclusion
The Oman Commercial Arbitration Centre and its new rules provides all contracting parties with an alternative to resolving disputes in the Omani courts. Arbitration tends to be faster and an arbitrator, with the right expertise, may be better placed to resolve the dispute. It also allows the dispute to be dealt with confidentially. However, it can be more expensive than bringing a dispute through the courts, where the maximum court fee payable at the Primary Court is OMR 3,000. On the other hand, many court cases are then appealed to the Appeal Court and the Supreme Court which can take several years.
Therefore, we suggest considering arbitration under the OCAC Rules, as an alternative to the Omani courts, when entering into a contract, taking into account the value and nature of the contract.
If you have any questions relating to arbitration, please get in touch with us.
