GLOBAL LEGAL ADVISORS

Oman 2020 | ECONOMY | B2B

Oman's changing legal landscape, thanks to new laws regarding PPPs and FDI, are bringing more opportunities for legal advisors in the country.

Ben Ewing
BEN EWING
Managing Partner
CMS Law – Oman
Andrew Figgins
ANDREW FIGGINS
Managing Partner
Oman Head of Oil & Gas practice, Middle East Dentons

How has the Omani demand for legal services changed?
BEN EWING When the market suffers, typically the demand for litigation services goes up; when the market is in a growth period, we see a great uptake of corporate advisory services. Six years ago, players did not always believe in the benefit of legal services, but that attitude is beginning to change. The Omani market is slowly beginning to recognize that it is much more cost effective and risk reducing to retain lawyers to review and negotiate your contracts up front than it is to attempt the drafting and/or negotiating in-house (without any real proper legal training or expertise) and then ending up having to go through the court system or arbitration, which is time-consuming and expensive. It is interesting to note that the new PPP law has introduced a mandatory requirement for external consultants to advise the process.

ANDREW FIGGINS If we go back five years, there was more corporate advisory work then dispute resolution work. We predominantly saw local litigation in the contentious side of our business, which is handled by our associated law firm, Yaqdhan Al-Busaidi Advocates & Legal Consultants. With the drop in oil prices, we saw problems with payments on infrastructure projects and fewer settlements arranged at the end of a contract. Therefore, some contractors and sub-contractors decided to take legal action, and we saw growth in arbitration under the Omani arbitration law and international rules, be it ICC or LCIA. The corporate advisory side has also seen an expansion in large-scale M&A deals as companies consolidate assets and portfolios. There is also growth in regulatory reform work. For example, the government is privatizing part of its interest in the electricity sector. Another growth area is renewable energy, particularly solar. Overall, there has been growth over the past five years in the complexity of the transactions on both corporate and dispute legal services.

How will the concept of free zones change the ease of doing business in Oman?
BE Free zones allow for trade from or within the free zone itself; when you import the goods or services into Oman (or bring them “onshore"), they are subject to taxes. Many people from outside the region are unfamiliar with how free zones work and think that you can trade onshore in Oman from a free zone in exactly the same manner as through an onshore entity. The new FDI law, which came into force at the beginning of 2020, permits 100% ownership of onshore companies in Oman, so there is some interesting interplay between free zones and onshore companies. Some of the key USPs for free zones are their geographical position, supporting logistics, and current infrastructure. Free zones have certainly been set up well enough to cope with the influx of investors, in terms of infrastructure; however, the availability of free space can often be limited. Meanwhile, there is uncertainty as to whether some areas of industry for onshore Omani companies may be restricted from 100% foreign ownership. Article 14 of the Foreign Capital Investment Law provides that the Ministry of Commerce and Industry can issue a “list of prohibited activities" for which 100% foreign ownership will not be possible. It remains to be seen if the ministry will publish such a list and if so which types of activities will be prohibited.

What will be the legal impact on the energy sector of Oman's efforts to become a regional logistics hub?
AF There is considerable focus on the special economic zone (SEZ) in Duqm. The port there is already bringing in substantial cargo and materials for the oilfields inland and many other projects. For the client, it makes for a shorter journey. Many of our clients are coming to invest in the infrastructure set to grow from the SEZ in Duqm. We have clients wanting to invest in warehousing, the haulage business, and freight forwarding, to name but a few. Anything that facilitates a smooth delivery of what our clients in the energy sector need will be a good thing.