Precautionary restraint in Oman

AS a country with a strong seafaring heritage, Oman has a developed maritime law, contained primarily in Royal Decree 35/81, which is generally based on familiar shipping law principles. Two forms of ship arrest exist under Oman law – a precautionary restraint and an executory restraint. The precautionary restraint, in particular, can be used even where the substantive case is taking place outside Oman.

The precautionary restraint is an interlocutory remedy, but its procedures can ultimately culminate in the sale of the vessel by auction once the substantive issues of the case have been heard. Vessels, which are capable of being mortgaged, may only be arrested by holders of ‘maritime debts’, as defined in wide terms in the maritime law.

A properly authenticated power of attorney is required in order to instruct local legal counsel to act. Authentication is a three-step process consisting of notarisation by a notary public in the country of origin, legalisation by the foreign ministry in the country of origin, and endorsement by the Oman Embassy in the country of origin or, if there isn’t one, by the consular representative of any other Gulf Co-operation Council country or Arab League state.

The application of precautionary restraint is ex-parte, requesting an order for arrest with regard to the vessel, and will be made to the Oman Court (Commercial Court). The courts are aware that, in such matters, time is of the essence. If the application is successful, the order will normally be issued without delay. In any event, pressure via local counsel should be maintained on the court at this stage to ensure prompt issue.

Prior to the Oman court accepting jurisdiction in an arrest matter, and ultimately making an order to effect precautionary restraint, confirmation is required that the vessel is located in the territorial waters of Oman. Recent experience has shown that a high burden of proof falls upon the plaintiff, with the exact location and berthing details being required by the courts. The court filing fee for the precautionary application is $80 and the application must include full details of the debt, exhibiting all relevant loan agreements and confirmation that a crystallisation event has occurred.

Once the precautionary restraint order has been made, a minute of the order is made by the court, with a copy being provided to the master of the vessel, or the person assuming the responsibilities of the master. In the event of the substantive case being heard in the Oman court, the court will then appoint a date for the substantive hearing. This date should not be more than thirty days after the date of the precautionary restraint order. If the arrest is confirmed at this hearing, the vessel owner has fifteen days in which to appeal the decision. In the majority of cases, the substantive hearing is held in a foreign forum, so these dates are not normally applicable.

Following the precautionary restraint order, and while awaiting the outcome of the substantive hearing or settlement discussions, it is common for the defendant party to try to have the restraint order struck out by way of a further application to the Oman court.

Oman law is silent as to whether a party requesting a precautionary, or executory, restraint of a vessel is required to provide security to meet a potential claim of damages for wrongful arrest. Although some case law and practice illustrates that the court will require security from the plaintiff in the form of a local bank guarantee in the court’s favour, a court may grant restraint with either reduced or no security.

Oman’s maritime law provides that, where the debtor itself, or a guarantor on its behalf, provides sufficient security to cover the debt, the Oman court may release the vessel from arrest. The form of security required by the court is commonly a bank guarantee to the value of the vessel.

On progressing from a precautionary to an executory arrest, for the purposes of sale, the court will require a notice of the sale to be published in a newspaper of ‘wide circulation’ and the sale conditions to be posted in the shipping register. At least fifteen days must elapse between the publication of the details, pursuant to the order for sale, and the sale of the asset. Plaintiffs should allow up to eight months from lodging the initial precautionary arrest application until the sale and disposition of the vessel, not accounting for unforeseen difficulties or administrative issues.

A number of non-Omani entities have relied upon a ship arrest in Omani waters in order to protect their rights. In some cases, the debt may be settled by virtue of the ship under arrest being sold to a third party, enabling the newly owned vessel to leave Oman.