It can be said that the thrust of Decree 47/97 is to encourage and facilitate arbitration. It introduces arbitration as a reliable method of dispute resolution, with binding and enforceable outcomes. It is presented as a regulated procedure that cannot be obstructed with dilatory tactics. For example, a challenge to the appointment of an arbitrator cannot stop the proceedings, unless it is granted either by the arbitration tribunal or the court. The Decree also intends to limit court intervention in arbitration procedures. For instance, an arbitration tribunal decides about its own jurisdiction, without the possibility of court intervention, until the end of the arbitration proceedings.
Institutional and ad hoc Arbitration
Institutional or ad hoc arbitration are both recognised by Omani law. For instance, Article 4 of Decree 47/97 stipulates the possibility of the parties agreeing on various bodies, such as organisations or permanent centres or otherwise, taking charge of the arbitration proceedings. Also, Article 5 of the Decree reads:
In the circumstances under which this law permits the parties to the arbitration to choose the procedure to be adopted in a specific issue, either party may authorise a third party to choose such procedure. In this regard, the third party may be any arbitration organisation or centre based either in the Sultanate of Oman or abroad.
This is inspired by the UNCITRAL Model Law. The difference is that Omani law specifies that the “procedure” can be determined by a third party, if the law allows the disputants to authorise a third party to do so. However, the Model Law does not restrict the issues to be determined by a third party to procedures.3 The reason for the
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specification made by Omani law is that the Model Law has affected Omani law through the Egyptian legal system which does contain a similar limitation. The above provision of the Omani law should not be interpreted as limiting the role of the third party, that is, an arbitration centre, to choosing the arbitration procedure. As it is clear from Article 4 of Decree 47/97, all aspects of arbitration proceedings may be carried out under the auspices of a permanent arbitration centre. The Muscat Stock Exchanges and Omani Chamber of Commerce work as domestic arbitration institutions competent to resolve disputes falling within their jurisdiction. The Arbitration Committee of the Chamber, among other things, decides on the disputes arising between members of the Chamber or between them and non- members.4
Coverage
Decree 47/97 has a broad coverage, and applies to all kinds of arbitration in Oman. As we have already seen, Article 1 of the Decree provides that this law is applicable to any arbitration between persons of public or private law, irrespective of the nature of their legal relationship, provided the arbitration takes place in the Sultanate. In case of international commercial arbitration taking place abroad, the law would be applicable, if the parties have agreed to make their arbitration subject to the jurisdiction of the law. While the UNCITRAL Model Law applies only to international arbitration, Decree 47/97, following the Egyptian Arbitration Law No. 27 of 1994,5 covers not only international arbitration, but also domestic arbitration.
The main focus of Decree 47/97 is commercial arbitration. Hence, it is important to see how commercial arbitration is defined, under Omani law. The term
4
The Officia l Porta l of Oman Cha mber of Co mmerce and Industry, http://www.cha mbero man.co m/service_occi_specialized_Co mmitte_arbitration.asp, (availab le on 23/ 08/ 2007).
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commercial is defined very broadly as any kind of economic activity. Article 2 of the Decree reads:
The arbitration shall be considered as commercial, in the context of this law, provided the dispute is based on the legal relationship arising out o f an economic activity, irrespective of whether it is in the form of a contractual agreement or not. This shall include, as a matter of example, supply of goods or services or commercial agencies, constructio n contracts, contracts relating to engineering or technical expertise, grant of industrial and tourism licenses, etc., transfer of technology, investment, development contracts, bank operations, insurance, transport, exploration and extraction of natural wealth, power supply, laying of gas and petroleum pipe lines, building of roads and tunnels, reclamation o f agricultural lands, environmental protection and establishment of nuclear reactors.
This article is inspired by the definition of “commercial” given by Article 1(1) of the UNCITRAL Model Law, while emphasising issues particular to Oman, such as developing oil resources. While the Model Law provides for the definition of the term “commercial” in a footnote for Article 1; Omani law, following Egyptian legal system that is alien to the above drafting technique,6 defines the term extensively in a separate article. The list of activities mentioned is not exhaustive, but only contains the most important examples. This can help the development of a doctrine of the accessory commercial acts, that is, acts that are not commercial per se, but meet business needs. Such a doctrine has already been pointed to by some Omani judges, as acts like private landlords‟ obligations with regard to leased staff accommodation or personal guarantees given for bankers‟ advances are considered as commercial. The definition of the term commercial in both Omani law and the Model Law is very wide, and includes projects of general interest and the exploitation of natural resources, or what in many jurisdiction falls within the scope of the term „public works‟.
6
M. I. M. Aboul-Enein, “ Re flect ions on the New Egyptian La w on Arbit ration”, Arbitration International, vol.11, no. 1 (1995), at 77.
Article 2 of Decree 47/97 prevails over Article 8 of the Commercial Law 55/90, which states: 'Commercial activities are those undertaken by any person with the intention of taking risk for a profit, even if such a person is not a merchant.'7 The latter provision is grounded on the traditional sense of the term, commercial, as to purchase for the purpose of resale. Under this provision, many economic activities are excluded from the scope of commercial activities. For instance, Article 14 of the Commercial Law provides that the following activities shall not be deemed as commercial: 1. the production of a work of art by an artist himself or by his use of the services of his workers and the sale thereof; 2. the printing and sale by an author of his work. More importantly, under Article 15, the sale by a farmer of crops produced in his own land or in a land which he cultivates, even if such land has been transformed by the methods available to him for the purposes of agricultural exploitation, shall not be deemed a commercial activity. Similarly, the Egyptian legal system, adhering to the traditional definition, before the adoption of Arbitration Law No. 27 of 1994, did not co nsider agriculture, extraction operations and even purchase of real estates for resale as commercial activities.8
It seems that, in the past, both the Egyptian and Omani legislators differentiated between commercial and other economic activities. What distinguished commercial
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On the other hand, Article 175 of the Co mme rc ial Co mpanies La w No. 4/ 1974 in conjunction with Article 5 of the Co mmerc ial Reg ister La w No. 3/74 considered as comme rcia l activ ities such as purchase of movable or immovable property, whether for resale in order to ma ke a profit or otherwise, banking or currency exchange, manufacturing, transportat ion, warehouse services, commission and brokerage, e xp loitation of natural resources including oil and gas, real estate construction and development, and commerc ial agency services. Moreover, the CSCD considered disputes between partners or shareholders, directors, managers, auditors, liquidators and companies as commerc ial (Sa mir Sa leh, Commercial Arbitration in the Arab Middle East: A Study in Sharī’a and Statute Law, (London: Graha m & Trottman, 1984), at 378).
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activities from otherwise was the criterion of risk for a profit.9 Under present Egyptian as well as Omani laws, however, such a distinction has not been made, and it is the concept of enterprise that distinguishes commercial activities from otherwise. In other words, commercial activities entail the existence and exploitation of a business establishment, meaning conducting a number of transactions under a certain structure and forming an economic unit.10 Adhering to the concept of enterprise, current Egyptian and Omani laws overcome difficulties faced by their predecessors; and the prevailing definition of commercial activities covers all kinds of transactions specified under the laws.
Inte rnational Arbitration under Omani Law
It is an important feature of Decree 47/97 that it makes a distinction between domestic and international arbitration. Overlooking such as distinction has been a shortcoming of most legal systems in the region, leading to a uniform treatment of both types of arbitration.11 The parties to an international commercial arbitration are permitted, under Article 1 of Decree of 47/97, to make the arbitration process subject to the Decree. International arbitration is defined by the law as cases of arbitration where the subject- matter of the dispute is related to international trade, in one of the following ways: i) the principal business centre of the parties are located in two different countries. While the wording of the UNCITRAL Model Law revolves around the parties‟ “places of business”,12
Omani law emphasises their “principal business centre”, in order to distinguish between marginal and central business
9 See Article 8 of Omani Co mme rcia l Law 55/90. With regard to Egyptian law, see Mahmoud Samir El-Sharka wy, “ New Trends in Egyptian Arbitration La w”, Journal of International Arbitration, vol. 16, no. 1 (1999), at 7.
10 Id., at 7. 11
See, for instance, Sa mir Saleh, "the Settle ment of Disputes in the Arab World, Arbitrat ion and Other Methods: Trends in Legislation and Case Law", Arab Quarterly Law, vol. 1, no. 2 (Feb 1986).
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activities. If a party has several business centres, the centre that is more relevant to the dispute is regarded as his business centre. If a party does not have a business centre, his place of domicile is considered as his business centre. ii) Arbitration is considered as international, if both parties have opted to have recourse to a permanent arbitration organisation or arbitration centre either in, or outside, Oman. iii) It is also international, when the subject- matter of the dispute is linked to more than one country. iv) Further, arbitration is international, if the place of arbitration, as designated in the agreement or referred to in the mode of its choosing, or the place where the substantial part of the obligations arising from the commercial relationships between the parties is carried out, or the place very much relevant to the dispute, is in another country. This is so, despite the fact that the main business centres of both parties may be in one country.13
As can be seen, following the Model Law, Omani law uses two criteria for determining whether an arbitration is international or not: first, whether or not the interest of international trade is involved, and second, the geographical criteria of whether the relevant places in the arbitration case are situated in one or more countries. A difference between Omani law and the Model Law is that while the former states that recourse to permanent arbitration organisations or centres in and outside Oman is regarded as international arbitration, there is no such provision in the latter. The rationale for such a provision, however, is not clear. Omani law, in this regard, follows Egyptian Arbitration Law, which contains an identical provision,14 at which El- Ahdab expresses his surprise.15 On the other hand, under the Model Law, the parties must expressly agree that the subject- matter of the dispute is
13
Article 3, Decree 47/ 97. 14
Article 3(2), the Egyptian Arbitrat ion La w No. 27 of 1994 15
See Abdul Ha mid El-Ahdab, “The New Egyptian Arbitration Act in Civil and Co mmerc ia l Matters”, Journal of International Arbitration, vol. 12, no. 2 (1995), at 66.
related to more than one country, if the arbitration is to be considered as international. However, Omani law does not provide for a criterion to determine that the subject- matter of a dispute is related to more than one country.
If definitions of “commercial” and “international” are combined, it can be seen that Omani law provides for a wide definition of international commercial arbitration which covers arbitration in disputes concerning imports, foreign investment and contracts for construction, development or technology transfer, as well as Omani investment abroad, and the like. The wide definition of international commercial arbitration indicates the intention of the Omani legislator to encourage foreign investment and international trade through facilitating arbitration.
Omani law treats international arbitration, to a limited extent, differently from domestic arbitration. For instance, when a court involvement is necessary, domestic arbitration cases are dealt with by the court that has original jurisdiction, under Decree 90/99 on the Judicial System Law, while the cases of international arbitration, regardless of whether the arbitration proceedings take place in Oman or outside it, are considered by the Muscat Court of Appeal.16
Waive r of the Right to Object
Under Article 8 of Decree 47/97, if a party to a dispute that is under consideration by an arbitral tribunal knowingly continues to proceed with the arbitration, despite the breach of any condition stipulated in the arbitration agreement or provided for in Omani law where non-compliance is permitted by agreement, and fails to raise an objection, it shall be deemed to have waived his right to objection. The objection must be raised within the period agreed upon or, if there
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is no such agreement, within sixty days from the date that he becomes aware of it.17 This means that no such objection may be raised in later stages of arbitration or in setting aside or enforcement proceedings. This is a reflection of a principle of good faith or the bona fides principle.18 The legislator by devising this provision has intended to protect the arbitration from abuse, and to consolidate the arbitral award, while providing the parties with the right to object to any breach of the arbitration agreement or the law.
This is, however, a contested issue, particularly when a right guaranteed by the law is breached. An Egyptian lawyer, with regard to the identical provision in the Egyptian arbitration law argues that it unduly widens the possibility of a waiver, contrary to the provisions of general rules.19 The question is whether a party‟s silence regarding a violation of the law results in the waiver of his right of objection, no matter how gross is the violation. The above provision of Omani law, however, specifies that the right to object can only be waived with regard to the rules from which the parties may derogate, if they agree so. In other words, such a waiver does not cover a violation of mandatory rules of law.20 Moreover, it can be argued that if the delay in raising an objection was justified, the party maintains his right to object. Also, if an objection has been raised, but not accepted by the tribunal, or if a party has not taken part in the arbitration proceedings, or could not do so, he may raise an objection in later stages, such as in vacation or enforcement proceedings.21
17
This is simila r to Artic le 4, the UNCITRAL Model La w on International Co mme rcia l A rbitration. 18
See Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, (London: Sweet and Ma xwell, 1999), at 223-224.
19 Abdul Ha mid El-Ahdab, “The New Oman i Act in Civ il and Commerc ial Matters”, Journal of International Arbitration, vol. 14, no. 4 (1997), at 11-12.
20 Abdul Hamid El-Ahdab, Arbitration in Arab Countries, 2nd ed., (London and Boston: Klu wer La w International, 1998), at 492-493.
21
M. I. M. Aboul-Ene in ma kes these points about Egyptian Arbitration Law, which inspired Oman i law (M. I. M. Aboul-Ene in, “ Egypt”, in J. Paulsson (ed.), International Handbook on Commercial Arbitration, Supplement 36 (The Hague: Kluwe r, Nove mber 2002)).