A detailed look at legislation governing companies and foreign investment practices in Oman

Before 1971 the Sharia Courts had jurisdiction over all civil and criminal matters, as well as personal status matters in the sultanate of Oman. However, after the succession of Sultan Qaboos bin Said Al Said, the judicial system was reformed, and Sharia Courts now govern only those matters relating to family disputes and inheritance law.

The 1996 Basic Statute of the State (promulgated by Royal Decree No. 101 of 1996) and known as the Basic Law reshaped and codified the legal system by creating separate structures for the executive bodies and the judiciary, and outlining the rights and obligations of individuals. The principles of the Basic Law entail that Oman is a free market based on the cooperation between public and private activity. The Basic Law provides that the religion of the state is Islam and that sharia law is the basis of legislation.

LEGISLATION: Oman has two types of legislation: primary and secondary. Primary legislation, also referred to as a royal decree or sultani decree, is promulgated by the Sultan. Secondary legislation, also referred to as ministerial decisions or regulations, are promulgated by ministers and government bodies in accordance with the respective authority given to them by the royal decrees. The Basic Law states that if there is a contradiction between the provisions of a piece of legislation and the Basic Law, then the provisions of the latter shall prevail.

As a civil law jurisdiction, the Omani courts are given great discretion to interpret the legislation, on a case-by-case basis. In cases involving commercial disputes, the Commercial Court judge’s discretion extends to allow him to interpret or amend an agreement in a way that, in his opinion, accurately represents the respective parties’ intentions, when the terms of the relevant agreement are ambiguous or poorly drafted. Judges may use previous judgments recited by the legal representation in their statement of claims as persuasive precedent.

In the commercial and civil courts, Omani judges tend to rely heavily on the statement of claims presented to them, so it is important in such circumstances that the claimant’s legal representation ensure that the statement of claims is comprehensive in arguing each point of its case. However, criminal and sharia courts require the legal representation to play a more interactive role, as they are more likely to require cross-examination of witnesses.

BUSINESS REGISTRATION: Until recently, the process of commercial registration was relatively time-consuming and cumbersome to complete. This was largely due to the number of documents and information that needed to be legalised and registered with different government bodies prior to registration. There have been recent improvements in the commercial registration process whereby law firms can now upload documents online to the Ministry of Commerce and Industry’s (MoCI) e-portal (www.business.gov.om). The remaining documents, licences and capital requirements may be formalised after the online registration.

Whilst streamlining has taken place, the process can still be rather daunting to the uninitiated, which is why we would typically recommend that investors approach a reputable law firm to guide them through the process.

Set up costs for companies with foreign participation (i.e., with non-Omani/non-GCC or non-US shareholders) are relatively high, and the post-registration requirements may take some time to finalise. Typically, straightforward commercial registrations take approximately one to three weeks to incorporate, once all the documentation has been submitted in the correct format.

Additionally, investors must also comply with the Omanisation laws that have been introduced by the Ministry of Manpower (MoM), which require all companies to hire a certain percentage of Omani nationals, depending on the sector or the business the company is involved in.

Meeting the Omanisation rate enables the foreign company to employ non-Omanis. Failing to meet quotas could result in a requirement for a company to file an Omanisation Plan with the MoM, which involves providing details of how the company intends to meet the quotas.

Further persistent failures can result in the company being fined and blocked from being able to obtain visa clearances for its expatriate labour force.

FOREIGN INVESTMENT: Foreign investors and companies in Oman must comply with the Foreign Capital Investment Law (as promulgated by Royal Decree No. 102 of 1994), and the Commercial Companies Law (as promulgated by Royal Decree No. 73 of 1996). They may establish their business in the sultanate through any of the following structures: 1. Limited liability company (LLC);

2. Joint stock company (SAOC and SAOG);

3. Partnership;

4. Commercial agency;

5. Branch office;

6. Commercial representative office; and 7. Merger and acquisition.

1. LIMITED LIABILITY COMPANIES: LLCs are the most commonly used structure to incorporate a business in Oman. Companies that wish to be incorporated in the form of an LLC must have a minimum of two shareholders and a maximum of 40. The liability of the shareholders is limited to the nominal value they have contributed to the LLC’s share capital.

If a non-Omani investor wishes to become a shareholder in an Omani LLC, then at least 30% of the share capital must be owned by either an Omani national or a fully Omani owned corporate entity. Some industry sectors, such as restaurants, and food and beverage outlets, require a higher Omani-shareholding percentage; however, the general minimum is 30%.

If the non-Omani investor is a GCC state national, or a company that is fully owned by GCC state national(s), the non-Omani share capital of the Omani LLC may be 100% of the shareholding. This rule also applies if the foreign investor is a national of the US, or if the corporate shareholder is fully owned by a US national, due to the free trade agreement that exists between the US and Oman.

The minimum share capital required for registering a LLC that is subject to the Foreign Capital Investment Law with one or more non-Omani/ non-GCC/non-US shareholders is OR150,000 ($390,000). If the LLC is a financing or a lending company, the share capital requirement is greater.

However, if the non-Omani shareholder is from the GCC or the US, then the share capital requirement is reduced to OR20,000 ($51,900). The MoCI scrutinises the nationalities of the ownership structure for companies wishing to incorporate in Oman to ensure that they are in compliance with the restrictions.

2. JOINT STOCK COMPANIES: Joint stock companies are based on the French société anonyme. They can be structured as either a société anonyme Omanaise close (SAOC) or as a société anonyme Omanaise générale (SAOG). Incorporating a company under this structure is more involved and a more time-consuming process compared to LLC incorporation. This is in part due to the additional information and approvals needed from MCI. Similar to LLCs, at least 30% share of joint stock companies must be owned by an Omani national.

SAOCS: SAOCs are private or closed joint stock companies. As such, they do not publicly offer their shares. At least three entities or individuals may form a SAOC and issue shares. The transfer of shares in an SAOC is subject to shareholders’ pre-emptive rights. A minimum share capital of OR500,000 ($1.3m) is required to form an SAOC, although only a partial payment of the shares is required upon incorporation. It is also necessary to have a board of directors to manage the company, with at least three directors and no more than 12.

SAOGS: SAOGs are public or open joint stock companies and at least 40% of its shares issued must be issued to the public, freely. A minimum share capital of OR2m ($5.2m) is generally required.

Following a recent amendment to the Insurance Companies Law (as promulgated by Royal Decree No. 39 of 2014), any insurance company wishing to be established in Oman must be set up as an SAOG, and will require a minimum paid-up share capital of OR10m ($26m). Insurance companies that existed prior to these amendments were granted a grace period of three years within which to comply with the new requirements. This grace period expired in August 2017.

Over the past year several insurance companies have increased their share capital to at least OR10m ($26m) and converted into an SAOG through an initial public offering. Like other SAOGs, insurance companies must offer at least 40% of their shares to the public. Shares for SAOGs are purchased through the Muscat Securities Market, and are highly regulated by the Capital Market Authority. The Central Bank of Oman governs foreign investments in financial institutions.

It should also be noted that since July 2016 SAOGs are required to comply with the Code of Corporate Governance and the Executive Regulations of the Capital Market Law. The code is a detailed document containing provisions relating to topics such as:

• Board of directors’ formation, roles and responsibilities;

• Board of directors’ authority and competences;

• Chairperson;

• Company secretary;

• Executive management;

• Professional conduct of directors and executives;

• Independent directors;

• Rules for related party transactions;

• Audit committee and internal controls;

• Nomination and remuneration committee;

• External auditors;

• Corporate social responsibility;

• Annual reports;

• Minimum information that must be provided to the board;

• Standards of professional conduct; and

• Items to be covered in the report on corporate governance. Similar to SAOCs, SAOGs must have a board of directors who are responsible for managing the company. However, the minimum number of directors required is five, and the maximum is 12 directors. A third of its directors must be independent. SAOGs also require the appointment of an auditor.

3. PARTNERSHIPS: Partnerships are companies that are formed between at least two individuals. Partnerships can take several forms including general partnerships and limited partnerships.

General Partnerships: A partner in a general partnership has unlimited joint and several liability. General partnerships require registration within one month of the execution of the partnership agreement. A partner requires the consent of its other partner(s) to transfer interest. A partnership may dissolve because of the death, incapacitation or bankruptcy of one of the partners, unless the other partner(s) unanimously agree to continue.

Limited Partnerships: Limited partnerships require at least one of the partners to have unlimited liability and at least one of the partners to have liability limited to the extent of the capital they contributed to the business.

Sole Proprietorships: Omani nationals and GCC nationals are also permitted by the laws of Oman to establish sole proprietorships. The minimum share capital for incorporating this form of business is relatively low at just OR3000 ($7790). In addition, sole proprietorships are permitted have just one shareholder. The sole proprietorship is named after the applicable individual. This sole proprietor is not protected by a corporate veil and, as such, he or she may become personally liable for the debts incurred by the sole proprietorship entity.

It is common practice for a sole proprietor to convert their business into an LLC in order to provide the founder with limited liability. The conversion process is relatively easy.

4. COMMERCIAL AGENCIES: If a non-Omani supplier wishes to sell its goods in Oman without incorporating a company, then one possible alternative is to create an agency arrangement by appointing one or more commercial agents for distribution and marketing of the goods. An agency agreement that is compatible with the Commercial Agency Law (Royal Decree No. 26 of 1977, as amended by Royal Decree No. 34 of 2014) should be drafted and registered with the Commercial Agencies and Agent Department at the MoCI. Failure to register the agency agreement at the MoCI can result in it being rendered unenforceable before the appropriate authorities and fines being imposed.

Prior to the amendment in 2014, agency agreements in Oman could not be terminated without cause. If the foreign principal attempted to terminate the agency agreement without justifiable cause, it would be required to pay substantial compensation to the agent (typically an average of the commissions or profits received by the agent over the last three to five years. This has since been repealed; however, it is important to obtain legal advice in reviewing and/or preparing the draft form agency agreement so as to ensure that your rights are adequately protected.

5. BRANCH OFFICES: For non-Omani entities, a branch office may only be established if the foreign entity has a contract with either a government body or a quasi-government body. A branch office may also be established by royal decree, or if it is considered necessary, by the Cabinet of Ministers, although this is rarely used.

The registration of the branch remains valid for the duration of the contract with the government body or quasi-government body, after which the registration will lapse. Although its scope is limited, a branch may be an attractive option for a foreign investor as it allows the foreign company to keep 100% of the business without diluting control of its operations or assets.

6. COMMERCIAL REPRESENTATIVE OFFICE: This type of business may only be used for the purposes of marketing and promotion of company products or services to retailers, not to trade directly with consumers. A commercial representative office may not sell products or services, or engage in other commercial activities. A representative office may, however, hire and/or sponsor employees.

7. JOINT VENTURES: In Oman a joint venture is generally regarded as an unincorporated contractual arrangement to do business that does not have separate legal personality. It is formed by way of contract between two or more investors with the intention of working together in a common business venture. Although it is not treated as a separate legal entity as it cannot independently form agreements, joint ventures must keep their own audited accounts and are taxed as a separate legal entity. Investors tend to prefer incorporating their business in other forms to this, as the shareholders of the joint venture may be subject to unlimited joint and several liability.

TAXATION: In February 2017 a new tax law was published pursuant to Royal Decree No. 9 of 2017 (the New Tax Law), to be effective for all tax years starting from January 2017. This law applies to companies and permanent establishments that are operating and registered in the sultanate. It requires companies to pay an annual income tax of 15% on the net profits of the company or permanent establishment. The change in laws also means that entities are no longer exempt from paying income tax for the first OR30,000 ($77,900) earned in their net profit. In addition, sole proprietorships are now required to pay a 3% income tax if they meet the following requirements:

• Registered capital not exceeding OR50,000 ($130,000);

• Gross income of no more than OR100,000 ($260,000):

• An annual average number of employees not exceeding 15; and

• The trade activity of the proprietorship qualifies for this reduced tax rate according to the Ministry of Finance (MoF). Different limitation periods apply for the Secretariat General for Taxation to bring claims for historical tax liabilities, depending on the relevant tax years in question.

Provisions for penalties have also been enhanced under the New Tax Law. The New Tax Law provides that a failure to file tax returns on their due date can now lead to a company or permanent establishment being fined a minimum of OR100 ($260) and up to a maximum of OR2000 ($5190).

Additionally, failure to submit information requested by the tax authority or to attend scheduled hearings could result in a fine of at least OR200 ($519), and no more than OR5000 ($13,000).

FREE ZONES & SPECIAL ECONOMIC ZONES: undefined Although income tax has increased, companies incorporated in the sultanate’s free zones and special economic zones (SEZs) still benefit from certain specific tax exemptions in addition to other commercial incentives such as allowing 100% foreign ownership. The sultanate currently has three functioning free zones: Salalah, Sohar and Al Mazunah and two SEZs: Duqm and Knowledge Oasis Muscat. The intention of these zones is to attract different types of business into Oman. Each zone has its own set of specific incentives.

Salalah Free Zone: Salalah Free Zone is located in the south of Oman. It has been established for investors involved in industrial estate, logistics, tourism and other mixed-use developments. In addition to allowing full foreign ownership, this free zone allows for a relaxed Omanisation rate of 10%, a 30-year tax holiday and no Customs duties. Additionally, investors do not need to meet any capital requirements to be able to incorporate in the zone.

Sohar Port & Free Zone: This free zone is situated near the Port of Sohar and the Sohar Industrial Estate. Principally, it seeks to attract investors in steel and metal, logistics and food sectors. However, it also welcomes investors interested in incorporating companies with other trade activities and has recently launched a general trading licence. Companies incorporated in the Sohar Free Zone enjoy full exemptions from Customs duties on imports and low minimum capital requirements. However, the share capital declared to the Sohar Free Zone in the investor’s application must be deposited in the company’s bank prior to incorporation. The Omanisation requirement is reduced to 15% for the first 10 years, and companies are given a 25-year tax holiday.

Al Mazunah Free Zone: This free zone is in the south of Oman, bordering Yemen. It is designed for investments in the warehousing, food processing and industrial sectors and principally relates to trade between Oman and Yemen. Companies incorporated in this zone enjoy full exemptions from Customs duties on imports and no minimum capital requirements. Investors may also be granted a 30-year tax holiday and relaxed Omanisation rates of 10%. Yemeni nationals are able to work in this free zone without having to obtain a visa or work permit.

Duqm SEZ: Duqm is seen internationally as a key hub and a gateway for the Middle East, South Asia, and North and East Africa. This zone includes a port and dry dock as well as a fishing port, fisheries industries, industrial estates, logistics, tourism and other mixed-use developments. Incentives for investors include a relaxed Omanisation rate of 25%, as well as no minimum capital requirements, and an exemption from Customs duties and income tax for 30 years. Investors operating in this SEZ are also offered competitive land-lease rates.

Knowledge Oasis Muscat Economic Zone: This economic zone was established to attract investors wishing to incorporate IT service companies in Oman. These investors enjoy reduced Omanisation rates of 25%. This SEZ requires a minimum capital investment of OR20,000 ($51,900).

LABOUR LAW & OMANISATION: Foreign employees must obtain a labour clearance from the MoM before being able to start employment. The clearance must be applied for by the employer of the foreign employee. The cost of labour clearance has recently been increased from OR201 ($522) to OR301 ($782).

The majority of employees working in the private sector are non-Omani and they represent around 88% of all employees. In 1988 the government started an Omanisation programme to increase the number of nationals in the public and private sector. The government has focused more on Omanisation in the private sector since 2002. The MoM has classified certain jobs as reserved for Omani manpower and Omanisation percentages that must be met vary by sector.

Companies are rewarded for their compliance with the Omanisation percentage in several ways, including obtaining a “green card”, which prioritises that company when dealing with ministerial approvals – processes which could otherwise be lengthy and bureaucratic. Meeting the Omanisation requirements also promotes the goodwill of the compliant company, as it becomes recognised for its high Omanisation rates through publications of the national press.

Critics of Omanisation argue it may have an adverse effect, because it diminishes the potential of non-Omani specialists from transferring skills onto the Omani workforce. In 2017 the MoM and the National Training Fund commenced the formation of various training programmes to train and prepare Omani nationals prior to private sector employment. The cost of training is covered by the government. Such training will ensure that the employees hired in any given company participating in this programme will be properly prepared and skilled for the job.

The minimum monthly salary for Omani nationals working in the private sector is currently OR325 ($844). The salary comprises OR225 ($584) for the basic salary and OR100 ($260) as allowances. All Omani employees who have been working for at least six months with their current employer as of January 1st of each year shall be entitled to a salary increase of at least 3% as long as they do not receive a poor performance review.

All Omani employees must register with the Public Authority for Social Insurance (PASI). This scheme, akin to national insurance, provides a centralised fund so that employees are insured against the costs of old age, disability, death and/or occupational injury and disease. Under the Social Security Law, the employer must contribute 11.5 % of the employee’s gross salary, which includes 1% for occupational injuries and disease, to PASI. The employee must contribute the remaining 7%.

Under the Labour Law (as promulgated by Royal Decree No. 35 of 2003, as amended), non-Omani employees are entitled to an end-of-service gratuity payment. Employees who have been working for less than one year do not qualify for this gratuity.

MERGERS & ACQUISITIONS: As an alternative to incorporating a new entity in Oman, some foreign companies may choose to acquire or invest in an existing Omani company. Acquisitions can be made through either share or asset purchases. As in many jurisdictions, acquisitions can be challenging for several reasons. Primarily, it can be difficult to gather sufficient information about the target company from a due diligence perspective, since the amount of information publicly available in Oman is relatively limited when compared to other jurisdictions. For example, at the time of writing, there is no centralised database of litigation cases, so ascertaining whether a company is the subject of ongoing litigation, can be problematic. Moreover, foreign companies in the sultanate require a minimum of 30% ownership by either an Omani individual or a fully Omani-owned company, so outright acquisition of 100% of the share capital is typically not possible.

Advice should be sought as to how best to structure commercial arrangements with Omani partners to ensure that business interests are adequately protected. In addition, it should also be noted that as part of an asset deal, if the assets are to remain in Oman and are to be used to trade, a company or other permanent establishment would need to be created so that the entity is not inadvertently deemed to be performing a commercial activity without a proper commercial registration.

REAL ESTATE: The law restricts foreign ownership of land in Oman. It is regulated by the Land Law (Royal Decree No. 5 of 1980). While GCC nationals are given similar, but more limited, rights to land ownership as Omanis, non-GCC nationals and companies with non-GCC shareholders are limited to owning property only in designated areas called integrated tourism complexes (ITCs).

Omani law imposes further restrictions on corporate ownership of land. It is only permissible for companies that are incorporated as LLCs fully owned by Omanis and/or GCC nationals, and for joint stock companies with a minimum of 30% Omani shareholding to own real estate in Oman. Additionally, companies may only own property for the purposes of using it as a warehouse space, staff accommodation and office space, or for the purposes of meeting the company’s trade objectives.

Real estate development companies are given fewer restrictions to their use of land, as they are also able to (re)construct and resell the property as residential and commercial units. However, this is also conditional upon the real estate development company stating in its commercial registration documents at the MoCI that one of its objectives is real estate development.

Although non-Omani GCC nationals and non-Omani GCC-owned companies are treated similarly to Omanis with respect to land ownership, they are also subject to some restrictions that Omanis and wholly Omani-owned companies do not face. The law requires GCC entities that own a vacant plot of land to develop the plot within four years from the date that they purchase the property. The law also limits their use of the land to investment purposes only.

Corporate entities that are unable to own land have the option of entering into a usufruct agreement for the use of the land they need to carry out a particular project. These are typically projects that the Omani government considers a contribution to the national economy and/or social development.

USUFRUCT: The usufruct right allows the usufruct holder, or usufructuary, to use and exploit the plot for the purposes of the project. The usufructuary’s rights extend to the ability to mortgage the land. A usufruct agreement essentially gives the usufructuary the capacity to act as the owner of the land, without having the freehold over it.

The usufruct agreement must have an expiry date, on which the holder is obliged to return the land to its original owner. The duration of the usufruct agreement must not exceed 50 years, but it may be renewed upon expiry.

FOREIGN OWNERSHIP: ITCs are governed by the ITC Laws (promulgated by Royal Decree No. 12 of 2006) and Ministerial Decision No. 191 of 2007, which outlines the principles relating to the rights and obligations of ITC developers and purchasers. The purpose of developing ITCs is to market and encourage tourism in Oman. This enables non-Omani companies to own real estate and/or develop units for investment or for residential purposes within the ITC areas. ITCs usually consist of commercial, residential and tourism components, and typically the granting of ITC status is dependent upon the developer meeting certain minimum build obligations in respect of each industry component.

Non-Omani individuals and foreign companies are permitted to purchase residential and non-residential property in ITCs. The purchasers of such properties must register their freehold interest with the Ministry of Housing.

The recent Ministerial Decision No. 45 of 2017 (issuing the regulation of real estate development in the SEZ at Duqm) allows non-Omani investors to obtain usufruct rights over land in Duqm’s SEZ. This legislation has attracted numerous investors to develop various projects worth several billion rials.

CONSTRUCTION: Although it is not legally required to do so for private sector projects, most large-scale construction projects in Oman are based on the Omani standard documents for building and civil engineering works (the standard contract), issued by the MoF. This is based on the Fédération Internationale des Ingénieurs-Conseils (FIDIC) standard contract, an internationally renowned organisation that forms contract templates for construction and engineering projects.

At the time of writing the two forms of standard contract used are the English-language third edition (which was issued in July 1981) and the Fourth Edition (issued in 1999) in both the Arabic language and English.

The standard contract has been recently reviewed by the government, and it is anticipated that the new form will be based upon a more up-to-date version of the FIDIC standard forms. Before coming into effect for public sector projects, the form of the contract to be used must be approved by the MoF and the Ministry of Legal Affairs (MLA).

In addition, for public sector projects, any amendments or modifications to the general conditions of the standard contract must be approved by the MoF and the MLA prior to being executed.

Article 628 of the Civil Code (as promulgated by Royal Decree No. 29 of 2013), states that the following are essential components for the formation of a legally binding muqawala (a contract to build):

• The location where the work will be performed;

• The type of development that will be made;

• The method of performance;

• The time it will take for the performance to complete; and

• Consideration for the works being done. The crucial component of the standard contract – and the item that causes the most difficulty – is the scope of work to be performed by the contractor. Most disputes occur because the scope of work is inadequately detailed, incorrect and/or requires substantial variation or modification after it has been executed, or there is contention regarding the contractor’s liabilities and scope. It is therefore essential for the contracting parties to ensure the scope of work is well drafted, so that it provides certainty for the contractor and meets the expectations of the employer.

Since it is not always possible to accurately and inclusively define the scope of work at the outset of a project, any variations should be carefully documented, requested and approved as the project proceeds. Variations are addressed under Article 640 of the Civil Code which requires a contractor to immediately notify the employer of any changes that are necessary to complete the project, and specify the additional costs of such variation. If the contractor fails to notify the employer, then the contractor shall bare the additional costs of those changes.

All too often, because of the time pressures placed upon the contractor to complete the project, the approval of variations is put on hold whilst the works continue to be executed. This typically results in substantial claims being filed at the end of the contract, which forms the basis for a greater litigation potential than had each change been sorted and approved during the currency of the contract.

Part of the difficulty with the current form of the standard contract is that the engineer, who is intended to be an impartial party or intermediator between the contractor and the employer, is appointed by, and paid for by, the employer. This often gives rise to allegations of bias or partiality. Any orders made by the engineer to the contractor, which may increase the contract price, will require the express consent of the employer (although typically the employer often argues that any such change was included in the original scope of work and should therefore be included as part of the agreed contractual price).

The standard contract gives the engineer the right to make the following variations:

• Increase or decrease the amount of any work included in the agreement.

• Omit any such work.

• Change the style or quality of any such work.

• Change the levels, line positions and dimensions of any part of the works.

• Carry out any necessary additional work for the completion of the project.

ENERGY SECTOR: Although Oman has made efforts to diversify its economy beyond oil and gas amidst the current oil crisis, it continues to be the country’s main source of income, contributing approximately 78% of its economy annually. The oil and gas sector is governed by the laws administered through the Ministry of Oil and Gas (MOG) and the Ministry of Environmental and Climate Affairs, with the consent of the Sultan.

The main law that regulates oil and gas-related activities in the sultanate is the Oil and Gas Law (promulgated by Royal Decree No. 8 of 2011). To date, the MOG has not passed any regulations for the implementation of the Oil and Gas Law, and the host granting agreements have not yet been standardised, although the terms and conditions of each do tend to follow similar forms.

Oil and gas concession agreements are granted though exploration and production-sharing agreements (EPSA). The terms of each EPSA are bespoke and negotiated between the parties, namely the MOG and the respective concession holder.

Following its execution, the EPSA requires ratification and endorsement by way of a royal decree in order to be enforceable. This royal decree does not disclose the actual terms of the agreement, however, it merely announces the execution of the EPSA in the Official Gazette.

Any amendments to the EPSA are subject to the written consent of both the concession holder and the MOG. The Oil and Gas Law prohibits the concession holder from waiving or transferring its rights and obligations under the EPSA without prior consent of the ministry.

EPSAs are governed by the laws of the sultanate and typically drafted in English. Although this is negotiable between the parties, most EPSAs have arbitration listed as their dispute resolution forum. This tends to be held in a third-party internationally renowned arbitration centre, so as to provide a neutral forum for the resolution of potential disputes.

Companies operating in the upstream oil and gas sector are subject to different tax regimes from other firms. The calculation of the taxable income is subject to the terms of an EPSA, and it may be deductible from the MOG’s production share rather than the concession holder’s oil-production share.