Tuesday, February 2, 2010

Omanisation for US Companies Under the US-Oman Free Trade Agreement

While the tariff and market access benefits of the US-Oman Free Trade Agreement (“FTA”) are well known, a lesser known aspect of the FTA is the implications on Omanisation for American companies.

While all companies are subject to Omanisation requirements, American companies are subject to a separate regime. The requirements for American companies are set out in Annex 11.12 of Chapter 11 of the FTA. Specifically, Annex 11.12 states that Oman reserves the right to require up to 80% of the employees of a “covered investment” (meaning, in this case, a wholly American owned company in Oman) to be Omani nationals. However, this 80% threshold does not include managers, members of the board of directors, or “specialty personnel.” This means that American companies may employ as many non-Omani nationals for the positions of managers, members of board of directors, and specialty personnel as desired, and the 80% threshold would apply only with respect to the total number of employees outside of these positions.

Annex 11.12 also includes a broad definition for “specialty personnel,” which states that specialty personnel “means natural persons who are employed to use their expert or proprietary knowledge of a covered investment’s services, equipment, techniques, or management and may include, but are not limited to, members of licensed professions.”

Annex 11.12 further states that, regardless of the 80% threshold, a non-Omani national may be employed if the company cannot locate a qualified Omani for the relevant position.

Therefore, the provisions of Annex 11.12 set out a separate, and generally less restrictive, Omanisation regime for American companies that supersedes the Omanisation requirements applicable to non American companies.

While the provisions of the FTA are clear, this is a regime that has been in place for only one year and is therefore largely unfamiliar to the relevant players. Thus, the process for implementing this separate regime for an American company initially may not be entirely smooth.