Brief commentary on arbitration procedure according to the laws of

Oman
By James Harbridge, Partner and Emilie Sarker, Solicitor
Litigation and Dispute Resolution department, Trowers & Hamlins , Muscat branch

A paper read to the Society of Construction Law (UAE), meeting in Muscat Oman on 22 October
2008 (time frame: 15 minutes)

1) INTRODUCTION

This evening's lectures focus on arbitration in the context of construction disputes, and this paper
shall focus on Oman's Arbitration Law as issued by Royal Decree No. 47 of 1997 (“RD 47/97”). RD
47/97 provides Oman’s framework for arbitrations and it is based on the Egyptian version of the
UNCITRAL Model Law.

No doubt project owners and contractors alike will agree that where disputes occur, certainty and
efficiency are of paramount importance, since it is in no-one’s interest to be tied up with any form of
dispute resolution procedure. This is why both parties, even when in a dispute, will often agree that
referring a dispute to arbitration is a better solution than litigating in the Courts. A court case in
Oman almost always goes through all three tiers of justice: the Primary, Appeal and Supreme Courts,
and indeed we are aware of one ongoing case which has gone from Primary to Appeal to Supreme
back to Appeal back to Primary to Appeal and back to the Primary Court.

An advantage of arbitration as against court proceedings is speed: arbitration is like a tie-break in

tennis, you have no alternative but to accept the arbitral panel's award, albeit that in certain rarefied
circumstances you can make a case at Court to try to nullify the award (this is the subject covered by
Mr Peter Mansour in his paper, and so I shall not discuss this here).

So the above being said, is arbitration panacea to all the perceived disadvantages of litigation in the
Courts? It depends. The purpose of this paper is to introduce its readers to some of the hidden
pitfalls of arbitral provisions contained in the laws of Oman. A detailed analysis of all the legal
armour afforded under Oman’s arbitration law is outside the scope of this paper and the reader’s
attention is drawn to the issue of time bar, practical and tactical issues. Whilst strategic practice is
discussed, this paper does not intend to be an exhaustive risk management guide to construction
litigation.

2) TIME BAR

It is sometimes forgotten that RD 47/97 provides that an arbitration begins when one party writes to
another, calling for arbitration. As such, a party should carefully consider when it sends its notice of
intention to refer a matter to arbitration, since this will be a determinant factor in the computation of
the time bar.

RD 47/97 states that the arbitral award (which is rendered by the decision of a sole arbitrator, or
majority decision of a panel of arbitrators) should be issued within 12 months of the start date. This
12 month period may however, be extended. The arbitral panel (also referred to as the arbitration
bench), can unilaterally extend that 12 month period by an extra six months, to 18 months. The
decision whether or not to extend the time to render an award is exercised at the arbitrator/arbitral
panel’s sole discretion. If the time bar period is violated, any party is at liberty to apply to Court for a
decision terminating the arbitration.

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In practice, there can be a significant lapse in time between a claimant first writing to a counter-party
calling for arbitration, and the subsequent stages of the arbitration: i.e. formation of the arbitral panel,
arbitral proceedings and the arbitral award. Whilst the law allows both parties to agree the start date
to be a date other than when the claimant first wrote to the defendant calling for arbitration, the fact
remains that there is no reason why the defendant would want to agree something that will help the
claimant to surmount a time bar hurdle (unless the counter-party is motivated by a counter-claim
which it wishes to keep live).

Similarly, although the law allows the parties to agree that the arbitral panel has more than 12
months and an additional (discretionary) six months to reach its decision, in reality (unless the
counter-party is motivated by a counter-claim which it wishes to keep live) a counter-party has no
incentive to help the claimant to overcome a time bar problem. Also, the claimant faces yet another
obstacle in that, even where the parties are able to mutually agree an extension of time, such
extension would still be subject to the arbitrator/arbitration panel’s approval.

The defendant has a vested interest in seeing the arbitration become time-barred (although, the
situation may be different if the defendant is also a counter-claimant, in which case the defendant
may well be motivated to agree to the extension of time). Tactically therefore, a defendant may
consider that its best option is to maintain that the arbitration commenced when it received the first
letter from the claimant calling for arbitration, and as such the claimant’s case is time-barred 12
months thereafter (or 18 months thereafter if the panel grants itself an additional six months to render
the arbitral award).

There is one more obstacle to mention, that of selecting the arbitrator(s). RD 47/97 provides that the
arbitral panel shall consist of one arbitrator unless the parties cannot agree on the number, in which
case there will be three arbitrators. If the panel is to be a sole arbitrator, the opposition may simply
refuse every person whom the claimant nominates as arbitrator. In the event of a deadlock, either
party is at liberty to apply to court for an arbitrator to be appointed by the head of the Commercial
Court. However applications to Court are time-consuming and a claimant who is ever-conscious of
the time bar issue should carefully weigh up a court application against the likelihood of obtaining the
opposition’s consent to an arbitrator.

As can be seen above, the pressure falls on the claimant to see that plans for the proposed
arbitration progress expeditiously after it writes to the defendant calling for arbitration. It is essential
to act quickly when forming the arbitral panel, agreeing the procedural timetable, terms of reference,
agreeing a list of issues in dispute, and forging ahead with the proceedings such that the arbitral
panel can issue its award within the time bar period.

In reality, it is difficult to make an arbitration progress swiftly, especially if the other party, and/or the
arbitral panel, are not moving along helpfully with you.

3) PRACTICAL ISSUES

It is useful to refer to an example which illustrates the importance of the attention to detail which is
required to avoid an arbitral panel reaching an erroneous conclusion. This is particularly important as
the Courts are loathe to nullify an arbitral award.

In Oman, all court proceedings are in Arabic. Accordingly, documents originally prepared in a
language other than Arabic must be translated into Arabic before presentation to a Court. Such a
process can result in difficulties due to differences between the original language version and the
Arabic translation. Great care should be taken to check that the opposition has translated documents

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accurately into Arabic. Failure to check that documents are correctly translated could mean that the
Court (and the expert appointed by the Court where relevant) may reach the wrong conclusion as
regards what is stated in vital exhibits.

As distinct from court proceedings, in an arbitration parties will usually agree on English as the
language of arbitration when the majority of the documents in the transaction were English language
documents. This saves time and cost since translating exhibits from English into Arabic will not be
required. It also leaves both parties free to focus on the substantive merits of the case as opposed to
expending resources on translation matters.

In arbitration proceedings, where translation is required, the importance of ensuring that translated
documents say what the original documents mean cannot be overstated. This is illustrated by the
example of an arbitration in Oman where a claimant stated that a letter of a particular date proved
that construction works had reached a given stage. The defendant to the arbitration did not take
issue with this argument, partly because the claimant did not exhibit the letter in question. However,
in the subsequent arbitral award, the arbitral panel stated that the letter was proof of what stage the
construction works had reached, and the arbitral panel relied upon the fact that the defendant had
never seen fit to deny or rebut the claimant's argument (albeit that the claimant’s argument was
unsubstantiated, in that the letter in question had not been exhibited to its case). The defendant took
the matter to Court, seeking nullity of the award, on the grounds that the arbitral panel had placed
reliance upon a document they had never ever seen. The defendant maintained that the right to
properly defend oneself would be violated if a panel simply accepted a claimant's argument which
was based on what a non-disclosed document may or may not have said. The Courts, however,
refused to nullify the award.

This begs the question, why did the defendant not simply refute the claimant’s comment? The
situation appears to have come about because the defendant agreed that the language of arbitration
would be Arabic, even though the defendant entity lacked skilled Arabic personnel at that time, and
as a result, the defendant relied on reading English translations of Arabic submissions. In this way,
the reference to the letter which had not been exhibited somehow seemed more innocuous and not
worthy of a response.

Given the thorny issues canvassed above, it is advisable to give due consideration to the choice of
language in the arbitration. Where translation is required, again, the importance of ensuring that
translated documents say what the original documents mean cannot be overstated.

4) STRATEGY

RD 47/97 contains certain small but high-impact provisions which can make or break a case. As
such, there are situations to avoid, and situations to watch out for, which are briefly listed below:

Avoid wasting time

Often parties in Oman inexplicably lodge Court proceedings, even when the contract in question
explicitly states that any dispute will be settled by arbitration. This can waste months and involve a
number of hearings before the Courts do what they always do – decline jurisdiction and dismiss the
case, adding that it should have been referred to arbitration.

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Avoid unwittingly agreeing to a change in the terms of reference

A vital provision of RD 47/97 is the rarely used Article 8, which states that if a party fails to object to
any violation of the arbitration agreement within 60 days, then that party is considered to have
relinquished its right to raise any objection. The arbitration agreement is the framework document
referred to above, i.e. the document setting out the procedural timetable and the terms of reference.

Avoid losing your chance to reject an arbitrator who fails the impartiality/independence test

It is important to know that RD 47/97 states that (once an arbitrator has been selected by the parties,
i.e. once the hurdle as to choosing the arbitrator had been surmounted) an arbitrator can only be
rejected if there are serious doubts over his/her impartiality or independence. In practice, a good
arbitrator will (regardless of any obvious impartiality and/or independence) disclose in advance any
background details which should be known by the parties.

Remember to refer to your contract

For example, Oman’s commonly used standard form construction contract, entitled Standard
Documents for Building and Civil Engineering Works (third edition July 1981, and fourth edition
1999), contains a dispute resolution procedure in its clause 67. In the throes of a crisis or dispute, it
is sometimes forgotten that:

• Clause 67 requires that an aggrieved party must first state in writing to the Engineer and the
counter-party that it is demanding arbitration, and

• the time frame for doing this is within 90 days of the Engineer's decision, and

• failure to follow these requirements will result in delays and could be fatal to your case.

5) CONCLUSION

Whilst knowledge of the facts, figures and the legal grounds for one’s case is vital, it is also important
to have a solid grasp of the procedural armour which can make or break one’s case. The devil is in
the detail. A letter, a short sentence, an act, or even an omission, can expose a party who is not fully
versed on procedure to a waiver of its rights and remedies.

James Harbridge, Partner and Emilie Sarker, Solicitor

Litigation and Dispute Resolution department, Trowers & Hamlins , Muscat branch

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