A royal decree was issued last week promulgating a new System of Signing Contracts and Financial Commitments of the State that repeals Royal Decree 48/76 regarding the Signing of Foreign and Domestic Financial Transactions and sets new formalities for signing government contracts.
The new System of Signing Contracts and Financial Commitments of the State sets the formalities by which a government entity can sign a contract or any financial commitment with a foreign government, an international organisation, or a private natural or legal person in Oman or abroad. This new system simplifies the process of signing government contracts as it removes the requirements previously set by Royal Decree 48/76 to have any contract worth more than 500,000 Rial Omani signed by the Ministry of Finance in addition to the ministry responsible for the contract. The signature of the Ministry of Finance is now only required in regard to the signing of government bonds, government guarantees, and investment projects relating to the economic development of the state outside OIA investments.
The new system also codifies some existing practices that were not previously governed by any specific legal text, such as those relating to the issuance of government guarantees. Chapter Three of the system sets the general rules that government guarantees must comply with, imposes an explicit requirement to have such guarantees reviewed by the MJLA, and specifies that the Ministry of Finance has the authority to issue a decision governing the conditions of government guarantees.
Contractors signing contracts with proper government ministries subject to the provision of this system must ensure that the government entities they sign their contracts with comply with the provisions of this system as article 6 of the system stipulates that any contract that does not comply with the provisions of the system will not be enforceable against the government. Article 6 appears to put an unreasonable level of risk on contractors as it also stipulates that a contract will only be enforceable against the government if financial allocations are available for the project in question, which is an internal matter for the government that contractors would not have the ability to verify. However, confusingly enough, article 11 of the system stipulates that signing a government contract in accordance with the provisions of this system is deemed a confirmation that financial allocations are present.
This new system does not apply to government-owned companies, investments made by the OIA, contracts signed by military or security agencies or CBO, contracts signed by public establishments that are not financed or guaranteed by the state, or contracts signed directly by His Majesty or by his written authorisation.
The System of Signing Contracts and Financial Commitments of the State will enter into force after 30 days. You can read it in full in English on the link below: