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Oman’s Commercial Agencies Law was amended by royal decree at the end of July to remove a number of statutory protections for Omani agents selling or distributing products or services of foreign companies. The Commercial Agencies Law, originally issued in 1977, governs the relationship between foreign principals and their local agents. The law has long been viewed as unfavourable to the foreign principal largely due to provisions which entitle an agent to claim compensation in the event of the ‘without cause’ termination of an agency agreement of indefinite duration or failure to renew a fixed term agreement upon expiry.  As a result, a foreign principal wishing to terminate an agency agreement without the consent of the agent often faces protracted negotiations and high compensatory payments. These provisions, common to most GCC agency arrangements, are viewed as restrictive practice by the World Trade Organization (WTO). As a result of the new changes:-

• Powers previously granted to the Ministry of Commerce and Industry (MOCI) to ban the imports of a foreign principal’s goods in the event of its ‘without cause’ termination of the agency have been removed.
• The prohibition against direct sales of a foreign principal’s goods or services or sale through an intermediary other than the registered agent has been removed. Agents no longer have a statutory right to claim damages for commission or profits earned from such sales.
• The right of an agent to statutory compensation upon termination of the agency agreement has been removed.
• The Council of Ministers, acting on the recommendation of the competition and anti-monopoly authorities, has the power to break up monopolies over specific types of goods and services which have a negative impact on supply and demand and lead to unjustified price increases.

These amendments to the Commercial Agencies Law are the first of three complementary legislative measures aimed at increasing competition and curbing price rises.  A draft competition and anti-monopoly law and new consumer protection law are reportedly close to being finalised. These measures signal the government’s determination to develop a competitive private sector as part of Oman’s economic diversification strategy a main pillar of which is to create a level playing-field for small and medium scale enterprises.  They are also in line with Oman’s commitments as a member of WTO to liberalise trade and eliminate restrictive practices. For more information on the changes, contact Reetika Walia or your usual focal point at AMJ.