A shifting landscape: recent developments in arbitration enforcement in Oman

In summary

Oman’s arbitration landscape has experienced two major judicial developments that are reshaping the enforcement and review of foreign arbitral awards.

The first development concerns the enforcement of foreign arbitral awards. The Omani Supreme Court upheld a ruling stating that foreign awards should be enforced through the Oman Arbitration Law, bypassing the historically lengthy process under the Civil and Commercial Procedures Law. This ruling is intended to simplify the enforcement process but has also raised concerns about practical implementation and procedural consistency.

The second development involves judicial scrutiny of foreign arbitral awards. In a separate case, the Supreme Court allowed a lower court to review the validity of a London-seated ICC arbitral award, expanding the role of Omani courts in overseeing international arbitration awards. This ruling has broadened the scope of judicial review, and raises important questions about the jurisdiction of Omani courts over foreign-seated arbitrations.

Discussion points

• Foreign arbitral awards are now enforced under the Oman Arbitration Law, replacing the traditional enforcement route under the Civil and Commercial Procedures Law
• The Supreme Court based its ruling on Article 3 of the New York Convention, which prohibits states from imposing stricter enforcement requirements on foreign arbitral awards than on domestic ones
• Omani courts have extended their jurisdiction to review annulment proceedings for foreign arbitral awards, even when the arbitration is seated outside Oman and governed by foreign law
• Businesses must carefully draft arbitration agreements to mitigate enforceability risks and account for potential procedural hurdles when dealing with Omani parties

Referenced in this article

• Civil and Commercial Procedures Law (RD 29/2002), Articles 352 & 353 – previously governed the enforcement of foreign arbitral awards
• The Law of Arbitration in Civil and Commercial Disputes (RD 47/97), ‘Oman Arbitration Law’, Articles 1, 53 and 58 – now applied to enforce foreign awards through a direct petition process
• New York Convention, Article 3 – basis for the court’s decision to align foreign and domestic award enforcement
• Omani Supreme Court Decision (No. 155/8103/2023) – established that foreign awards should be enforced as domestic ones
• Omani Supreme Court Decision (709/8103/2024) – Allowed judicial review of a foreign arbitral award

A Shifting Landscape

Oman has taken significant steps to modernise its arbitration framework and align it with international standards. The country has long been a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and its legal system has been evolving to facilitate the enforcement of arbitral decisions. Recent Supreme Court rulings, however, have introduced key changes that could reshape how foreign arbitral awards are enforced and reviewed in Oman.

Two notable decisions from the Omani Supreme Court have sparked legal debate. The first ruling streamlined the enforcement of foreign arbitral awards, applying the Oman Arbitration Law instead of the Civil and Commercial Procedures Law (1999). The second ruling allowed Omani courts to review a London-seated ICC arbitral award, extending judicial scrutiny to international arbitrations involving Omani parties.

While these decisions aim to clarify arbitration enforcement procedures, they have also raised important questions about judicial oversight and procedural consistency.

Foreign Arbitral Awards: A New Enforcement Route in Oman

The Traditional Approach: A Lengthy and Complex Process

Historically, enforcing a foreign arbitral award in Oman followed Articles 352 and 353 of the Civil and Commercial Procedures Law (1999). This process was more complex than enforcing domestic awards, involving multiple judicial stages that created uncertainty and delay.

Before the recent ruling, a party seeking enforcement of a foreign arbitral award had to file an enforcement case before the competent Omani court. Under Article 352, the court was required to examine jurisdictional and procedural compliance with the Civil and Commercial Procedures Law. The article set out specific conditions for enforcement:

• jurisdiction and finality – the foreign judgment or arbitral award must be issued by a competent judicial authority in accordance with the international jurisdiction rules applicable in the issuing country. The award must be final and binding, and it must not have been obtained by fraud;
• proper notification and representation – the parties in the original case must have been properly notified and represented in the proceedings;
• legal compliance – the award must not be based on a claim that violates Omani law;
• no conflict with Omani judgments or public order – the award must not contradict a previously issued Omani judgment and must not violate public order or morality in Oman; and
• reciprocity – the country where the award was issued must allow the enforcement of Omani court judgments within its jurisdiction.

Because of these stringent requirements, many foreign arbitral awards faced delays, and claimants often had to appeal adverse enforcement decisions, prolonging the process even further.

The Salalah court’s decision: a legal shift in enforcement

A recent case before the Salalah Primary Court challenged this approach. A party sought enforcement of a foreign arbitral award, but instead of following the Civil and Commercial Procedures Law, the court declared that it lacked jurisdiction. It ruled that the correct process was to enforce the award under the Oman Arbitration Law, the same way domestic arbitral awards are enforced.

This decision meant that foreign arbitral awards could now be enforced through a petition to the President of the competent court, eliminating the need for lengthy judicial proceedings. The Appeal Court upheld the ruling, and in October, the Omani Supreme Court confirmed it, marking a significant shift in enforcement procedures.

The Supreme Court’s reasoning was based on Article 3 of the New York Convention, which prohibits states from imposing stricter enforcement requirements on foreign arbitral awards than they do on domestic ones. The court interpreted this provision as requiring Oman to apply the same procedural framework for enforcing both foreign and domestic arbitral awards.

Expanding on the Use of Article 3 of the New York Convention

Article 3 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) states:

“Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”

By relying on Article 3, the Omani courts effectively aligned the enforcement process for foreign and domestic awards, ensuring that foreign awards are not subjected to additional procedural hurdles beyond those applicable to domestic arbitration. This interpretation reflects a pro-enforcement approach, aiming to facilitate the recognition of foreign arbitral decisions in Oman.

Potential Concerns

While the ruling simplifies enforcement, it also raises some concerns. First, in practice, some applications made to enforce foreign arbitral awards following this decision have been met with a requirement to wait for 90 days, the period during which annulment proceedings are permissible under Article 58 of the Oman Arbitration Law.

Article 58 states:

“An arbitral award shall not be enforced if the period for filing an annulment action has not expired.”

However, foreign arbitral awards should not be subject to annulment proceedings in Oman, as annulment is typically only available for awards rendered in the seated jurisdiction. This procedural requirement contradicts the intent behind the Supreme Court’s ruling, as it could expose foreign awards to new risks of challenge, even though they should be treated as final.

The second concern is potential judicial inconsistency. The ruling is recent and does not yet form part of an established body of consistent precedents making it possible that future judgments my adopt a different approach creating uncertainty for legal practitioners.

Another legal issue is whether, as long as Articles 352 and 353 of the Civil and Commercial Procedures Law remain valid and have not been repealed, parties should have the option to follow either enforcement route, ie, the older procedure or the new approach under the Oman Arbitration Law.

Comparative Legal Perspective: A Parallel Debate in Egypt

Similar questions have arisen in other jurisdictions. In a recent decision by the Egyptian Supreme Court (Case No. 9500 of 77 Judicial Year, ruling issued 15 January 2024), the court ruled that parties seeking enforcement of a foreign arbitral award in Egypt have the option to:

• follow the simplified process, by filing a direct application for enforcement before the President of the competent court, treating the foreign award like a domestic arbitration award under the Egyptian Arbitration Law; or
• use the traditional process, by filing a case before the competent court under the standard civil procedure rules, as set out in Article 297 of the Egyptian Code of Civil Procedure.

The Egyptian Supreme Court ruled that as long as both procedures remain valid under Egyptian law, a party should have the choice of which process to follow. The court annulled a lower court ruling that denied enforcement based on the claimant’s chosen procedure, concluding that forcing parties into one enforcement route when the law allows both is legally incorrect.

From a legal consistency perspective, the Egyptian Supreme Court’s approach appears more balanced, as it respects both procedural options until clear legislative reform takes place. A similar issue may arise in Oman, unless there is a legislative amendment clarifying that foreign arbitral awards should only be enforced under the Oman Arbitration Law and that Articles 352 and 353 should no longer apply to arbitration cases.

Implications for Legal Practice in Oman

This ruling has significant consequences for businesses and legal professionals. If consistently applied, the new enforcement process has the potential to make enforcement faster by removing unnecessary procedural delays. However, the possibility of different Supreme Court circuits taking divergent approaches raises concerns for arbitration practitioners and investors who may face unpredictability in enforcement proceedings.

To ensure clarity and predictability, legislative intervention may be required to settle the issue. A clear statutory amendment could eliminate the uncertainty and confirm that foreign arbitral awards should be exclusively enforced under the Oman Arbitration Law, ensuring consistency across all courts.

Moreover, any legislative reform should explicitly clarify that the requirement to wait for the annulment period to expire (as set out in Article 58 of the Arbitration Law) should not apply to foreign arbitral awards. Since annulment proceedings should only be available in the seat of arbitration, enforcing a foreign award in Oman should not be delayed based on procedural timelines that were never intended to apply to non-Omani arbitral awards. Addressing this issue through legislation would prevent unnecessary challenges and ensure that Oman remains a reliable jurisdiction for international arbitration enforcement.

Judicial Scrutiny of Foreign Arbitral Awards: A New Reality?

The London-Seated ICC Award: A Landmark Case

In a significant development, the Omani Supreme Court allowed a lower court to review the validity of a London-seated ICC arbitral award, marking a shift in Oman’s approach to the enforcement of foreign-seated arbitration.

The case arose from a dispute between a Qatar-based entity and an Omani entity under an arbitration agreement that referred disputes to the ICC Court of Arbitration, with the seat of arbitration in London. The contract was governed by Qatari law and related to a project in Qatar. The only connection to Oman was the nationality of the respondent, an Omani company.

The ICC tribunal issued an award against the Omani entity, which subsequently sought annulment proceedings before the Omani Court of Appeal. The Court of Appeal ruled to dismiss the case on the grounds that the arbitral award in question was issued in the United Kingdom by a sole arbitrator of British nationality, with English law as the governing law. Additionally, the arbitration related to a contract concerning a project executed in Qatar.

The Court further reasoned that Article 29 of the Civil and Commercial Procedures Law establishes the jurisdiction of Omani courts based on the Omani nationality of the defendant or, in the case of a non-Omani, the presence of a domicile or place of residence in Oman. Since these conditions were not met in this case, the court concluded that it lacked jurisdiction to hear the annulment request.

However, when the case was appealed to the Omani Supreme Court, it overturned the Appeal Court’s ruling. The Supreme Court held that Omani courts do have jurisdiction to hear annulment proceedings initiated by Omani entities against arbitral awards issued against them, even if the arbitration was international and conducted under a foreign seat and foreign governing law.

This decision extends the applicability of the Omani Arbitration Law beyond its intended scope, suggesting that any arbitration in which an Omani party is involved may now be subject to annulment proceedings in Oman. However, this interpretation directly contradicts Article 1 of the Omani Arbitration Law, which states that the law only applies to international arbitration if both parties have explicitly agreed to submit to it:

“Without prejudice to the provisions of applicable international treaties in Oman, this law shall apply to all arbitration between public or private legal persons, regardless of the nature of the legal relationship at issue, if the arbitration is conducted in Oman or if it is an international commercial arbitration conducted abroad and the parties have agreed to subject it to this law.”

The Supreme Court’s ruling therefore creates a clear inconsistency between the text of the Arbitration Law and judicial interpretation, significantly expanding the jurisdiction of Omani courts in international arbitration matters.

Grounds for Scrutiny

While the Omani Supreme Court’s ruling does not explicitly reference Article 53 of the Arbitration Law, its reasoning suggests that the court would naturally rely on it when considering annulment proceedings. This effectively expands the scope of judicial review, allowing Omani courts to examine foreign awards under Article 53, which sets out specific grounds for annulment, including:

• lack of a valid arbitration agreement or an agreement that is void or unenforceable;
• a party lacking legal capacity at the time of entering into the arbitration agreement;
• failure to provide proper notice of the arbitration proceedings to one of the parties, preventing them from presenting their case;
• exclusion of the agreed governing law in deciding the dispute;
• improper constitution of the arbitral tribunal or a violation of the agreed appointment procedure;
• decisions on matters beyond the scope of the arbitration agreement or exceeding the tribunal’s jurisdiction; and
• procedural irregularities or fundamental defects in the arbitration process affecting the validity of the award.

Additionally, under Article 53(2), an arbitral award must be annulled if it violates public order in Oman:

“The court hearing the annulment request shall, on its own initiative, annul an arbitral award if it contains provisions that contradict public order in the Sultanate of Oman.”

Implications for Arbitration Agreements

This ruling raises significant concerns for legal practitioners drafting arbitration agreements involving Omani parties. It fundamentally alters enforceability risks and introduces new challenges for foreign arbitral awards.

One of the most notable consequences is the increased risk of enforcement challenges in Oman, even when parties have chosen a foreign seat, foreign governing law, and international arbitration institution. Under the new judicial approach, an Omani entity could attempt to annul a foreign-seated award in Oman, despite previously agreeing to arbitrate outside Omani jurisdiction.

Moreover, in practice, courts are now requiring enforcement applicants to wait for 90 days – the annulment period under Article 58 of the Arbitration Law – before proceeding with enforcement. However, this waiting period should only apply to awards issued under Omani-seated arbitration, not foreign arbitral awards.

Clearly, this ruling, combined with the shift in enforcement procedures, expands the application of the Omani Arbitration Law and underscores the need for ongoing careful assessment to navigate its potential implications.

Conclusion

These recent judicial developments mark a pivotal shift in how arbitration is treated in Oman. By aligning foreign arbitral award enforcement with the Oman Arbitration Law, the Supreme Court has taken a step toward simplifying the process. However, practical challenges remain, particularly concerning procedural delays and potential inconsistencies in judicial interpretation.

The ruling allowing judicial review of foreign arbitral awards has raised fundamental questions about the role of Omani courts in international arbitration. Expanding judicial scrutiny to foreign-seated arbitrations where one party is Omani has significant implications for businesses contracting with Omani entities.

To enhance legal clarity and investor confidence, a legislative reform may be required. Any such reform should expressly confirm that annulment proceedings should only take place in the seat of arbitration and that the 90-day annulment waiting period under Article 58 should not apply to foreign arbitral awards.

Oman’s commitment to arbitration remains strong, and these judicial developments reflect an ongoing effort to refine its arbitration framework. However, ensuring legal certainty and maintaining international best practices will be key to reinforcing Oman’s position as an arbitration-friendly jurisdiction.