When two parties sign a commercial contract in Oman, it often says that any dispute "shall be referred to arbitration". What is commercial arbitration, how does it differ from going to court, and which law governs it in Oman? This article explains the meaning of arbitration, its types, the stages of the process and the limits on challenging an award, so you understand what you signed before a dispute arises.
What is commercial arbitration?
Arbitration is a way of resolving disputes in which the parties agree to submit their dispute to one or more people they choose, the arbitrators, instead of the courts, and agree in advance to be bound by their decision. Arbitration is commercial when the dispute arises from an economic relationship, such as supply, construction, agency, investment, transport, insurance or banking contracts.
Arbitration rests on two pillars: consent, because there is no arbitration without the parties' agreement, and binding effect, because the award binds the parties and can be enforced once the legal procedure is followed.
The arbitration law in Oman
Arbitration in Oman is governed by the Law of Arbitration in Civil and Commercial Disputes issued by Royal Decree 47/1997, as amended. Oman joined the New York Convention on the recognition and enforcement of foreign arbitral awards in 1999, which helps Omani awards to be enforced abroad and foreign awards to be enforced in Oman.
In 2018 the Oman Commercial Arbitration Centre was established by Royal Decree 26/2018 under the Oman Chamber of Commerce and Industry, offering arbitration, mediation and other dispute resolution services under institutional rules.
Types of arbitration
- Institutional and ad hoc: institutional arbitration is administered by a centre under its rules; in ad hoc arbitration the parties and tribunal organise the procedure themselves.
- Domestic and international: arbitration is usually international when it concerns international trade, for example where the parties' places of business are in different countries.
- Arbitration clause and submission agreement: a clause is included in the contract before any dispute; a submission agreement is concluded after a dispute arises.
Stages of an arbitration
- Arbitration agreement: it must be in writing, in the contract, a separate document or exchanged correspondence.
- Request for arbitration: the claimant notifies the other party or the centre and sets out its claims.
- Constitution of the tribunal: one or more arbitrators; where there are several, their number must be odd.
- Proceedings: written submissions, documents, witnesses and experts, respecting each party's right to be heard.
- Award: issued in writing and notified to the parties.
- Enforcement: an award is enforced only after the competent court issues an enforcement order under the conditions set by law.
Can an arbitral award be challenged?
Under Omani law arbitral awards cannot be appealed like court judgments. The law does allow an action to annul an award within 90 days of notification, on limited grounds such as an invalid arbitration agreement, breach of the right of defence, the tribunal exceeding its mandate, or conflict with Omani public order. The court does not re-examine the merits; it reviews the integrity of the process.
Advantages and drawbacks
Arbitration offers confidentiality, arbitrators with sector expertise, flexible procedure and language, relative speed and easier international enforcement. Its drawbacks are cost, since the parties pay the arbitrators and the centre, limited grounds of challenge, and difficulty joining parties who did not sign the agreement.
Frequently asked questions
What is the difference between arbitration and mediation?
An arbitrator issues a binding award; a mediator helps the parties reach their own agreement without imposing a solution. See our mediation and settlement service.
Can I go to court if my contract has an arbitration clause?
If a claim is filed despite an arbitration agreement, the defendant must raise the clause in time for the court to decline the case; otherwise the right to arbitrate may be treated as waived.
If your contract contains an arbitration clause or you face a commercial dispute, see our commercial arbitration lawyer service or contact Dr. Abdullah Al Rashdi Office on WhatsApp or +968 92000841.