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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Oman Commercial Agencies Law: A snapshot

HASSAN-SHAD
HASSAN-SHAD
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HASSAN SHAD -


hassan.shad@arab-law.om -


Agency law is a subset or part of commercial law (law dealing with commercial transactions and business relationships). Broadly defined, agency law is the contractual relationship that transpires when a person known as an agent or distributor is appointed by, and authorized to act for and on behalf of, another person known as the principal. The principal and the agent can be both natural or juridical persons eg companies.


Agency law forms the basis of various forms of business collaboration around the world.


In common parlance, the term agent is understood to signify a person who represents a foreign individual, company or entity that does not have a registered business presence in that country.


The Oman Commercial Agencies Law is principally set out in Royal Decree 26/77 (OCAL).


Over the years, more specifically in 2014, OCAL underwent certain amendments that resulted in Omani agents losing certain statutory protections that were previously guaranteed to them by law.


It is therefore important for Omani commercial agents to appreciate the nature and scope of OCAL and thus leverage maximum protection of their business interests.


This, and the next in the series of articles, shall delve in some detail on the OCAL by providing an overview of the scope and application of OCAL, the statutory protections that are no longer available to local agents and possible ways in which Omani agents can safeguard their business interests.


OCAL is, by design, a comprehensive legislation that encompasses all kinds of representative relationships.


OCAL defines a commercial agency as any agreement whereby a manufacturer or supplier outside the Sultanate assigns one or more merchants or commercial companies in the Sultanate to sell, promote or distribute goods and products or provide services whether in its capacity as an agent, representative or intermediary for the product or the original supplier who has no legal presence in the Sultanate, against a profit or commission.


In the above definition of commercial agency, adjectives: Agent, intermediary or representative signify the broad scope of OCAL.


Going by this definition, a commercial agency would include an expressly appointed agent as well as all kinds of representative relationships that manifest themselves in various forms either for a temporary period or for the long-term.


It is to be noted that Oman does not have a separate law on franchising (generally, a relationship wherein a business in exchange for a fee, allows another business, to operate under the former’s intellectual property and offer its products or services), therefore all kinds of franchising relationships in Oman are also covered under the OCAL.


OCAL requires that if an individual merchant wishes to practice commercial agency, then he/she must be an Omani citizen of a minimum 18 years of age, be a member of the Oman Chamber of Commerce and Industry, not have been convicted of certain crimes and be registered in the Commercial Register at the Ministry of Commerce and Industry (MoCI).


For companies to act as agents in Oman, it is required that they must have a minimum Omani shareholding of not less than 51 per cent, the objects of the company must include undertaking commercial agencies business and import, and the company should have a registered principal office in Oman.


A person that intends to practice commercial agency in Oman is required to register the agency in the Commercial Register at the MoCI.


For the purposes of OCAL, an agency is considered to come into existence from the date of its registration and an unregistered agency is neither recognized by law nor any case concerning it heard by Omani Courts.


It is therefore important that a commercial agency is registered so that the agent can avail the benefits accorded to agents under OCAL.


OCAL sets out certain minimum requirements with respect to a commercial agency contract. Firstly, it must be in writing and attested by the Oman Chamber of Commerce and Industry. Secondly, the agency contract must contain certain basic elements, namely (a) the commercial names of the agency; (b) the names of the principal and agent and their nationalities; (c) assets, goods and services which are the subject-matter of the agency; (d) the rights and obligations of the principal and the agent; (e) the term of the agency, and; (f) the territory of the agency. The commercial agency contract — as is the case with the commercial agency — is required to be registered in the Commercial Register at the MoCI.


In addition to the above mandatory terms, OCAL makes provision for parties to a commercial agency to execute additional terms and conditions which form part of the commercial agency agreement once registered.


It is advised that commercial agency agreements should be as detailed and comprehensive as possible so that the rights and obligations of the parties towards one another are clear from the outset. (This is a first part of a series of articles on Oman Commercial Agencies Law)


Hassan Shad is General Manager of ARAB Advocates and Legal Consultants, Muscat


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