Overview and Q&A: Construction and Projects in Qatar
By Pawel Piotrowski, Matthew R. M. Walker and Amjad Hussain
The Q&A is part of the global guide to construction and projects. Areas covered include trends and significant deals, the main parties, procurement arrangements, transaction structures and corporate vehicles, financing projects, security and contractual protections required by funders, standard forms of contract, risk allocation, exclusion of liability, caps and force majeure. Also covered are material delays and variations, appointing and paying contractors, subcontractors, licences and consents, project insurance, labour laws, health and safety, environmental issues, corrupt business practices and bribery, bankruptcy and insolvency, public private partnerships (PPPs), dispute resolution, tax, the main construction organisations, and proposals for reform.
To compare answers across multiple jurisdictions, visit the construction and projects Country Q&A tool. The Q&A is part of the global guide to transfer pricing. For a full list of jurisdictional Q&As visit www.practicallaw.com/construction-guide
Overview of the construction and projects sector
1. What are the main trends in the local construction and projects market? What are the most significant deals?
The main trends affecting the local construction and project markets are:
- Qatar remains the world’s largest exporter of liquefied natural gas and it will run its first budget surplus in three years in 2019 due to higher energy prices (the surplus is expected to reach QAR4.3 billion (about USD1.2bn or EUR1 billion)).
- Qatar’s economy will grow by 3.1% in 2019 (according to the International Monetary Fund (IMF)).
- The state budget for 2019 focuses on developing new housing areas for nationals, enhancing food security projects, and establishing infrastructure and facilities in free zones, special economic zones and industrial and logistics zones.
- The construction and projects market continues to deliver projects despite the supply chain disruption that followed the imposition of trading restrictions by Saudi Arabia, the UAE, Bahrain, and Egypt in June 2017.
- The influence of Turkish construction and engineering firms is expected to grow as Ankara remains one of the key allies for Doha.
- The construction industry’s main focus is on completing the projects for the FIFA 2022 World Cup as well as ongoing projects in healthcare, education, and transportation.
- With many megaprojects on the brink of completion, there is an increased risk of disputes.
- To boost overseas investment in Qatar, the government has announced economic reforms related to labour laws, privatisation, free zones, and higher foreign ownership limits that will make it easier to invest and operate in the country. The main laws are the amended Law No. 34 of 2005 on Investment Free Zones establishing the Free Zone Authority and the new Law No. 1 of 2019 regulating the investment of non-Qatari capital (see Question 37)
Qatari Diar remains the biggest project client in Qatar by value of projects in execution and its USD17 billion mixed-use Lusail City is still considered one of the biggest projects in the country. Msheireb Downtown Doha Regeneration Project (led by Qatar Foundation) and Doha Metro (led by Qatar Rail) are nearing completion. Other major projects include the:
- FIFA World Cup 2022 stadiums.
- Extension of the New Doha Port project.
- Extension of Hamad International Airport.
- Expressways and road drainage projects run by the Public Works Authority (Ashghal).
- Development of the free zones led by the newly-established Free Zone Authority.
2. Which are the most common procurement arrangements if the main parties are local? Are these arrangements different if some or all of the main parties are international contractors or consultants?
Traditional (or split) procurement, where the employer engages a design consultant to design a project and then awards a construction contract to a contractor to construct the project in accordance with that design, is most common for local, small-scale projects.
Design services and construction works procured by local, public sector employers are generally awarded by competitive tender pursuant to Law No. 24 of 2015 on Regulation of Tenders and Auctions (Tenders Law).
Less common in local projects, but more popular in large-scale, international projects, are procurement schemes based on design and build or on an engineering, procurement and construction (EPC)/turnkey approach. In a design and build contract, the contractor will be responsible for both the design of the project and for the construction works to meet the contractual specification. In EPC contracts, a single contractor is responsible for all design (engineering), construction, and procurement of a project on a turnkey basis.
Other procurement arrangements and forms of contracts, including engineering, procurement, construction management (EPCM), partnering/alliancing, New Engineering Contract (NEC) or American Institute of Architects (AIA) contracts, are not popular in Qatar.
3. What transaction structures and corporate vehicles are most commonly used in both local and international projects?
Similarly to procurement arrangements (see Question 2), transaction structures usually vary according to the size of the project, rather than its parties. For smaller projects, local contractors and consultants usually transact alone as single legal entities. The most common corporate structure for such local contractors and consultants is a limited liability company (LLC).
For mid-size and large projects, contractors (often a local contractor teaming up with an international contractor) will form a consortium or a joint venture, most commonly incorporated as a single LLC, especially when engaged on publicly-tendered projects. The employer will usually require parent company guarantees from all consortium/joint venture partners.
4. How are projects financed? How do arrangements differ for major international projects?
Local and public sector projects are generally government-funded. It is likely that some of the public sector projects will be increasingly financed by private sector through public private partnerships (PPP), especially after introduction of the long-awaited law on PPPs. Private, small or medium-sized projects, are often financed by local banks, either on a conventional or Islamic financing basis.
For major international projects, particularly in major oil and gas, petrochemical, or integrated power and water projects, project financing is common.
Security and contractual protections
5. What forms of security and contractual protections do funders typically require to protect their investments?
Security typically taken by lenders in Qatar does not differ significantly from other jurisdictions. Under the Qatar Civil Code, the Commercial Companies Law and the Commercial Code, various forms of security interest are available and these cover the lenders’ ability to:
- Mortgage a registered freehold interest in land and transfer leasehold interests in land.
- Assign certain contractual rights to third parties, including the rights to debts and receivables.
- Provide a commercial mortgage over moveable assets.
- Pledge shares in a joint stock company.
- Subject to certain qualifications, pledge a sum held in a bank account.
In a government-funded project, the employer usually requires the contractor to provide performance bonds and advance payment bonds pursuant to the Tenders Law. In addition, some public sector clients (such as Ashghal or Qatar Rail) will often require collateral warranties from sub-contractors (or sub-consultants) in favour of the client, as well as parent company guarantees from main contractors.
In major project financed schemes, the lenders typically require direct agreements, giving them the ability to step into the position of the borrower/sponsor in the event of a default under a project contract which might otherwise entitle the project contractor in question to terminate or suspend that contract.
Standard forms of contracts
6. What standard forms of contracts are used for both local and international projects? Which organisations publish them?
The majority of contracts are bespoke agreements. With regard to small and private sector projects, these are often poorly drafted.
International Federation of Consulting Engineers (FIDIC) forms of contract (typically the 1999 version) are generally the only contract templates recognised countrywide for local projects. These are mainly the:
- Conditions of Contract for Construction (Red Book).
- Conditions of Contract for Plan and Design Build (Yellow Book).
- Conditions of Contract for EPC/Turnkey Projects (Silver Book).
Ashghal uses bespoke forms for various types of their projects (from minor to large). Ashghal has revised its suite of contracts in 2018 to make it more contractor-friendly, drawing on the drafting style of the FIDIC suite of contracts. ASTAD has also recently prepared its suite of contracts (Sanad) and promotes it among the local construction industry.
Other public sector projects often use their own bespoke forms of contracts, which are often heavily amended variations of FIDIC Red or Yellow Books.
FIDIC forms of contracts are common. On major international projects, bespoke forms are often used.
Contractual issues/ Contractors’ risks
7. What risks are typically allocated to the contractor? How are these risks offset or managed?
There is no typical risk allocation for construction contracts in Qatar. However, contracts with the public sector typically involve a heavy transfer of risk from the employer to the contractor, meaning the contractor often has limited grounds on which to seek an extension to the time for completion or increase in the agreed contract price. Typical risks allocated to the contractor include:
- Risk of non-completion on time (see Question 11).
- Risk of volume of resources (in lump sum contracts typically sits with the contractor).
- Risk of errors in information provided by the employer (depends on the project, but quite often information is provided “for information only” meaning that the risk of inaccuracies is assumed by the contractor).
- Risk of unforeseen ground conditions (in EPC contracts this usually sits with the contractor).
- Force majeure (see Question 10).
Those risks can be mitigated at the tender stage (for example, by way of requests for clarifications, analysis of the employer’s requirement, proper programming of works, and by way of diligent contract administration and record keeping). From the commercial point of view, contractors will price those risks and reflect them in the proposed contract price.
8. How can liability be excluded or restricted under local law?
Limitation of liability clauses are commonly used in construction contracts in Qatar and any terms which either exclude or cap damages will be generally enforceable by Qatar courts (or by extension arbitral tribunals). Some exceptions include:
- Liability resulting from fraud or gross mistake cannot be limited or excluded by the parties to a contract (Article 259, Civil Code).
- Article 711 of the Civil Code, under which contractors and designers give a guarantee for ten years from project completion (decennial liability) which covers “total or partial collapse of fault in the buildings (…) even if the collapse or fault has resulted from a defect in the land itself or the employer accepted the defective buildings”. This strict liability cannot be contractually limited or excluded (Article 715, Civil Code).
- Where damages are pre-agreed, their amount may not be due if the debtor can show that no loss has been suffered, the amount of damages was “exaggerated to a considerable degree” or the obligation has been partially executed (Article 266, Civil Code). In those instances, the court (or by extension, arbitral tribunal) can reduce the compensation due and any agreement to the contrary will be void. This provision is often used by contractors to reduce the amount of liquidated damages agreed in the construction contract. In turn, the employers cannot apply to the court to claim a higher amount of liquidated damages even if they show that their loss is greater than the pre-agreed compensation unless they can show that the debtor (contractor or consultant) committed fraud or gross mistake (Article 267, Civil Code).
Caps on liability
9. Do the parties usually agree a cap on liability? If yes, how is this usually fixed? What liabilities, if any, are typically not capped?
Caps on liability are common in construction contracts. There is no typical cap, but overall caps on liability typically range from 50% up to 200% of the contract price. Liability for liquidated damages for delay is often capped at between 5% to 10% of the contract price.
It is also common to agree on carve-outs from the overall liability cap with liabilities or indemnities for intellectual property rights or property damage being often outside the agreed cap.
Under Qatar law, some liabilities cannot be contractually limited, such as liability for fraud or gross mistake (Article 259, Civil Code) or liability arising from mandatory provisions (such as Article 711 of the Civil Code on “decennial” liability).
Qatar courts retain the discretion to vary any such limitation of liability to make the compensation equal to the actual loss suffered (see Question 8).
10. Are force majeure exclusions available and enforceable?
Force majeure clauses are commonly seen in construction contracts in Qatar and are generally enforceable. Typically, a construction contract defines the force majeure event and provides for various reliefs for parties if such an event occurs, usually subject to additional obligations to notify and minimise delay in performance of obligations.
In the absence of any contractual provisions in this respect, various Civil Code provisions dealing with force majeure will apply, for example under Article 204, which provides that if a party can demonstrate that a loss has arisen due to an external cause that is not of their making, the party is not liable for the damages, unless the parties have contractually agreed otherwise.
Further, under Article 171(2), a debtor can apply to the court (or by extension, arbitration tribunal) to adjust the burdensome obligation to a reasonable level if unforeseen exceptional circumstances occur. Article 258 permits parties to contractually agree to allocate risks for force majeure to the contractor. Under Article 700, the contractor cannot avoid or vary its contractual obligations as a result of an increase in prices in the market for raw materials, labour, or other elements, but subject to a general principle stated in Article 171(2) of the Qatar Civil Code that where fulfilment of the contractual obligation, though not impossible, becomes excessively onerous, a judge can reduce the excessive obligation to a reasonable level.
11. What contractual provisions are typically negotiated to cover material delays to the project?
More sophisticated contracts (especially those based on FIDIC forms) provide for an extensive list of circumstances allowing the contractor to be granted an extension of time. The extent of relief available to the contractor will depend on the risk profile under the contract but, typically, these will involve various failures of the employer causing the works to be delayed, such as, for instance:
- Failure to grant to the contractor access to the site on time.
- Failure to supply to the contractor agreed facilities, information, equipment, or services.
- Failure to obtain approvals within the times prescribed in the contract.
- Any other breach of the contract by the employer or any delay or act of prevention attributable to the employer.
Parties to contracts with private employers typically negotiate provisions on liquidated damages/compensation for delay, as well as variation clauses (see Question 12). Contractors will want to ensure that they are not obliged to pay liquidated damages in circumstances where delay occurred through no fault of the contractor (such as in the event of force majeure, variations requested by the employer, or defaults of third parties).
The Tenders Law and its regulations impose own liquidated damages regime for delay, which cannot be varied by the contract. For instance, under this regime, liquidated damages for delay must not exceed 10% of the total contract value.
12. What contractual provisions are typically negotiated to cover variations to the works?
On public sector projects of all sizes, contract terms with the client, including provisions on variations, are rarely negotiable.
In medium to large scale contracts with private sector employers, provisions on variation often adopt the FIDIC approach. The parties typically negotiate:
- What constitutes a variation.
- Whether contractor may initiate a variation.
- Pricing of varied works.
- Contractor’s entitlement to relief arising out of the variation and time limits for bringing a claim concerning variations.
Under the Civil Code, in a measurement contract, a contractor is entitled to claim an increase in the costs if the actual costs based on an agreed design exceed the estimated measurements (in turn, the employer can terminate this contract if the difference in costs is significantly high) (Article 708, Civil Code).
In a lump sum contract, a contractor cannot claim any relief for costs, unless amendments or additions to the agreed design were caused by the employer or the employer authorised the changes in design (Article 709, Civil Code).
Other negotiated provisions
13. What other contractual provisions are usually heavily negotiated by the parties?
In addition to the clauses set out in Questions 8 to 12, it is common to negotiate the following terms of the construction contract:
- Payment terms.
- Requirement to provide bonds, parent company guarantees, and collateral warranties.
- Termination and suspension rights.
- Taking-over and completion.
- Intellectual property rights.
- Any back-to-back provisions with other project agreements.
Architects, engineers and construction professionals
14. How are construction professionals usually selected? Following selection, how are they formally appointed?
Construction professionals can be selected in various ways depending on the nature and scope of the project. On public sector projects, they will be usually selected through a public tender process in accordance with the Tenders Law. On private sector commercial projects, competitive tenders are carried out typically only for mid-size to large scale projects. In any selection process, price, personal contacts, recommendations, and contractor’s reputation play and important role. The appointment is under a contract or an engagement/retainer letter.
15. What provisions of construction professionals’ appointments are most heavily negotiated? Are liabilities commonly limited or capped in construction professionals’ appointments?
Consultants often have little or no opportunity to negotiate contract terms with a public sector client bound by the Tenders Law.
In private sector appointments, the most heavily negotiated provisions typically include:
- Payment terms.
- Liquidated damages/compensation for delay.
- Requirement to provide bonds, parent company guarantees and collateral warranties.
- Levels of professional indemnity insurance.
- Standard of skill and care to be adopted by the consultant.
- Intellectual property rights.
- Any back-to-back provisions with the construction contract or other project agreements.
Subject to mandatory provisions of law (see Question 8), the consultant’s liability is commonly capped at 100% to 200% of the consultant’s fee. Liability for indirect or consequential losses is often excluded.
Payment for construction work
16. What are the usual methods of payment for construction work? Are there ways for the contractor and consultants to secure payment or mitigate risks of non-payment under local law?
Methods of payment
Typically, the contractor is paid in arrears, either periodically (for example, monthly) or on achieving certain “milestones.” Construction contracts usually provide for certification of the requested payments by the employer or engineer. Payments to contractors and consultants are usually made directly into a bank account held in Qatar. Late payments are common, both in private and public sector contracts (in public sector contracts often due to employer’s reliance on funds to be obtained from the Ministry of Finance).
Advance payments for construction works of between 10% and 15% of the value of the works are common and the contractor is typically required to provide the employer with the advance payment bond securing the repayment of the advance payment. Under the Tenders Law, advance payment bond is required, with some exceptions to contractors being small and medium sized enterprises.
From a commercial point of view, to minimise the risk of loss, contractors often expect payments to be heavily “front-loaded” (by substantial advance payments or otherwise). This is often not achievable in relation to public sector contracts. Payment guarantees from the employer are not very common, but letters of credit are sometimes used, especially in small to medium projects.
Contractually, sophisticated contractors want to ensure that payment certification provisions are unambiguous and that any variations are precisely dealt with in the contract. As always, meticulous contract administration helps in managing this risk.
“Pay when paid” clauses are common and enforceable in subcontracts. However, sub-contractors have a right to claim payments directly from the employer for the work that is due to be paid by the main contractor (Article 702, Civil Code).
Contractors also usually want to expressly incorporate a right to interest for late payment within their contracts. Courts (or by extension, arbitral tribunals) can nullify such provision where they consider the interest rate exorbitant. In many public works contracts, if that payment is delayed, the contractor has the right to receive “additional allowance for the cost of financing on such delayed payment” usually at a fixed rate referenced to the Qatar Central Bank annual minimum lending rate.
17. How do the parties typically manage their relationships with subcontractors?
Sub-contracts and sub-consultancy agreements usually incorporate provisions from the main contract with the employer to ensure that the risks and liabilities that are relevant to the sub-contract are “back-to-back” with the main agreement. Typically, sub-contractors and sub-consultants are required to comply with the main agreement.
Under the main contract, the contractor is often obliged to deliver to the employer (or engineer) a collateral warranty signed by the (key) sub-contractor, allowing the employer direct recourse against the sub-contractor. Further, the main contract often requires that the:
- Contractor obtains prior consent from the employer to any sub-contract.
- Subcontract incorporates certain provisions listed in the main contract.
- Contractor not terminate the sub-contract without the employer’s (or engineer’s) consent.
- Contractor provides the employer (or engineer) with details of any dispute under the sub-contract which may delay the project.
18. What licences and other consents must contractors and construction professionals have to carry out local construction work? Are there any specific licensing requirements for international contractors and construction professionals?
Unless registered in Qatar Financial Centre or any of the free zones, all entities carrying on business in Qatar must be properly registered with the Ministry of Commerce and Industry.
Each individual or each office performing engineering works in Qatar must obtain a licence from the licensing committee in accordance with the Law No. 19 of 2005 on Engineering Profession. The requirements for obtaining an engineering licence are extensive, and the definition of “engineering” is also very broadly construed, for example, architects and other designers usually fall into the definition of “engineer” for these purposes.
The licence takes time to obtain and has many fixed criteria, such as the requirement for numbers of professionals on the ground in Qatar, Arabic language skills and locally-procured insurance.
As a rule, international engineering offices need to be registered as well, however, there are certain exceptions, for instance, if they are contracted to provide certain technical services required in the public interest.
19. What licences and other consents must a project obtain?
This will vary according to the nature of the project and its location. Typically, before the project commences the following licences and consents must be obtained:
- Planning permission from the Ministry of Municipality and Environment and approval of file opening.
- Fire safety clearance from the Civil Defence.
- Clearance for power and water service from Qatar General Electricity and Water Corporation (Kahramaa).
- Building permits from the Ministry of Municipality and Environment.
During the project, various authorities have a right to inspect the project. In addition, some consents are required depending on the nature of the works or tasks concerned. For instance, consents are needed when transporting special, hazardous, or heavy goods.
On completion, typically, the following are required:
- Fire safety approval from the Civil Defence.
- Certificate of completion from the Ministry of Municipality and Environment.
- Registration of the building with the municipality.
- Utilities supply and connections.
20. What types of insurance must be maintained by law? Are other non-compulsory types of insurance maintained under contract?
Architects and engineering offices are required to have certain insurances, particularly professional indemnity (PI) insurance, while registered in Qatar. Vehicles must also be insured.
Generally, it is up to the parties to the contract to agree on any insurance programme required for the given project. Typically, contractors are required to take out and maintain “all risks” insurance.
21. What are the main requirements for hiring local and foreign workers?
In line with the Qatarisation policy (governmental initiative devised to increase the number of Qatari citizens employed in public and private sectors), the Labour Law gives priority to Qatari nationals over non-Qataris when an employer is seeking to fill a role. Qatari nationals seeking jobs can register with the Ministry of Labour for potential job placements.
Employers are given a quota of different nationalities from which they can hire and which must not be exceeded. Employers seeking to hire non-Qataris will have to first obtain permission from the government and, once obtained, they will need to apply for a work visa so that the employee can enter Qatar. To work and reside in Qatar, employees need to obtain a residence permit.
22. Which employment laws are relevant to projects?
Construction employees are subject to the Labour Law No. 14 of 2004, as amended (Labour Law). Employees of governmental entities are subject to Law No. 15 of 2016 on Civil Human Resources (Human Resources Law). Apart from these laws, some employment affairs are regulated by special laws and/or project specific employment rules.
23. Must an employer pay statutory redundancy or other payments at the end of a project? Are all employees eligible?
There is no requirement to pay statutory redundancy at the end of a project. However, employees who were employed for more than one continuous year are entitled to an end of service gratuity benefit for each complete year of their service. The amount of the gratuity is as agreed on by the parties, provided that it is not less than a three-week basic salary (excluding any allowances or benefits) for every year of employment. Any partial year of service is calculated on a pro-rata basis. The end of service gratuity is not payable when the employee has been dismissed without notice in circumstances provided for in the Labour Law (for instance, when the employee violates more than once the written instructions of the employer concerning safety at work).
Health and safety
24. Which health and safety laws apply to projects?
There are several laws setting out health and safety requirements relevant to projects in Qatar. The key provisions governing health and safety are found in Part 10 the Labour Law and in ministerial decisions implementing it. In addition to the provisions under the Labour Law, the government established the National Committee of Occupational Health and Safety within the Ministry of Administrative Development, Labour and Social Affairs which is responsible for high level policy and enforcement.
25. Which local laws regulate projects’ effects on the environment?
There is a range of environmental laws in Qatar, but Law No. 30 of 2002 on Environment Protection (Environment Law) regulates the most relevant aspects of protection of air and water and waste treatment. As a rule, the project owner must take all necessary precautions and measures to prevent air or water pollution.
In major projects, contractors are typically required to submit to the employer (engineer) a construction environmental management system which ensures compliance with any environmental requirements. It is common for employers to impose penalties for environmental infringements.
Environmental impact assessments (EIAs)
The Environment Law and the Executive bye-law provides for the procedural framework of obtaining clearance through submission and approval of EIAs. The Supreme Council for the Environment and Natural Reserves (SCENR) decides whether the project is approved, whether to grant the environmental permission with conditions [or] to reject the application. The decision of SCENR must be taken within ten days and the project proponent will have 30 days to appeal in case of rejection of the application.
Sustainable development practices are used and have increased in popularity in the Qatar construction sector (see Question 26).
26. Do new buildings need to meet carbon emissions or climate change targets?
New buildings do not need to meet specific carbon emissions or climate change targets, however, Qatar actively promotes the concept of “green buildings” and encourages following green building practices especially in public sector projects. Qatar has established its own building certification system called Global Sustainability Assessment System (GSAS) (formerly Qatar Sustainability Assessment System (QSAS)) and has incorporated QSAS into the Qatar Construction Specifications (QCS), making the implementation of certain criteria mandatory for buildings developed in Qatar.
Most of the buildings developed by Ashghal and the Ministry of Municipality and Environment are GSAS-certified. In addition, many new developments are under the Leadership in Environmental Energy and Design (LEED) certification system (for example, most of the buildings in Msheireb Downtown Doha and Education City).
Prohibiting corrupt practices
27. Are there any rules prohibiting corrupt business practices and bribery (particularly any rules targeting the projects sector)? What are the applicable civil or criminal penalties?
The State of Qatar has ratified several international and regional conventions relevant to combating corruption, which have the force of law at national level in accordance with the Constitution of Qatar.
Amiri Decree No. 6 of 2015 mandated the Administrative Control and Transparency Authority to implement the United Nations Convention against Corruption, which was ratified by Qatar in 2007.
In Qatar, it is punishable, among other things:
- For public officers to ask or accept a bribe for him/herself or another party or to seek a bribe after the event.
- To offer a bribe to a public officer (even if the bribe is declined).
- For any employee to ask for a bribe, for his/her benefit or for that of another party, for money or a benefit or a promise of something in return without the knowledge of his employer and his consent, to undertake any of the duties assigned to him or abstain from so doing.(Articles 140 to 147 of the Qatar Penal Code.)
In addition, under the Tenders Law, the public works contract is deemed terminated if it is proved that the contractor has attempted directly or indirectly to bribe a public official.
Under the Labour Law and the Human Resources Law, employees (including ministry, governmental and public authority employees) are prohibited from accepting gifts or payments in the course of their employment.
The offence of bribing a public officer carries a penalty of five years’ imprisonment and a fine of up to QAR15,000 applies to:
- Any person who receives money or a benefit pretending that it is bribery for an officer, while he/she intends to keep it or part of it.
- Any person who receives money or profit while knowing its purpose, even if the officer intended to receive the bribery did not appoint him/her or did not know about him, provided that he/she is not an intermediary in the bribery.
With respect to offences relating to being bribed, the penalties are:
- Up toten years’ imprisonment and a fine of what was received or promised (but not less than QR5,000) for a public official.
- Seven years’ imprisonment and a fine of up to QAR15,000 applies to a public officer who accepts money or benefit from a person for doing/not doing something relating to his/her office, or seeks to obtain such a reward.
- Up to three years’ imprisonment and/or a fine of up to QAR15,000 for an employee who asks for a bribe.
- Dismissal from office and confiscation of the bribe.
Bankruptcy or insolvency
28. What rights do the client and funder have on the contractor’s bankruptcy or insolvency?
All insolvency proceedings are conducted under the supervision of the court under Chapter 6 of the Qatar Commercial Code. Article 653 of the Commercial Code provides for the court to consent to any distribution of assets of an insolvent entity. In contracts, an employer often has a right to terminate the contract for the contractor’s default in the event of the contractor’s insolvency.
Public private partnerships
29. Are public private partnerships (PPPs) common in local construction projects? If so, which sectors commonly use PPPs?
Historically high revenues from liquefied natural gas have meant that the Qatar government has been able to fund its energy and infrastructure needs without private sector involvement. Notable exceptions were the independent power and water project in Ras Laffan procured by Kahramaa in 2015 (Qatar’s first true PPP), various concession projects for workers’ accommodation facilities, and build-operate-transfer projects(BOTs) in the real estate sector.
However, interest in PPP projects is increasing and Qatar is currently working on legislation to facilitate PPPs. The adoption of the new law is expected to be followed by a government-supported list of PPP projects to be implemented in various sectors, including transport, healthcare, and education.
30. What local laws apply to public private partnerships (PPPs)?
There is currently no statutory or regulatory framework which specifically applies to PPPs in Qatar (see Question 29). PPPs in Qatar (including various concessions and BOT projects) are implemented on the basis of general legislation, including the Civil Code and the Tenders Law.
31. What is the typical procurement or tender process in a public private partnership (PPP) transaction? Does the government or another body publish standard forms of PPP project agreements and related contracts?
There is no typical procurement or tender process in a PPP transaction in Qatar and there are no standard forms of PPP project agreements or related contracts. It is expected that once the PPP market matures, some of the government entities will develop their standard form of a PPP contract, similar to standard forms of construction contracts and other project agreements that have been developed by them in the past.
32. Which are the most common formal dispute resolution methods used? Which courts and arbitration organisations deal with construction disputes?
Formal dispute resolution methods
Litigation in the Qatar courts is the most common formal dispute resolution method for small and medium size projects and the majority of disputes with public sector entities. All proceedings in local courts are carried out in Arabic and all documents must be translated into Arabic. During the proceedings, the court often appoints a construction expert to provide an expert report and this report is often heavily relied upon by the judge.
Arbitration is less popular in public sector contracts. This is because under the Tenders Law, the parties to a publicly tendered contract may resort to arbitration to settle a dispute only upon the approval of the Minister of Finance. This law does not apply, among others, to Qatar Petroleum (QP), and QP regularly provides for arbitration in its contracts. Some other major employers, such as Qatar Rail, as well as many private sector entities engaging in medium to large projects, have arbitration clauses in their contracts. Most adopt the International Chamber of Commerce (ICC) Rules, with Doha as the seat of the arbitration and English as the language of the proceedings.
Courts and arbitration organisations
There are no specialised construction courts in Qatar and any construction disputes can be heard initially before the Court of First Instance, then on appeal before the Court of Appeal, and finally before the Court of Cessation.
Where a construction contract provides for arbitration, the relevant local institutions are:
- Qatar International Court and Dispute Resolution Centre (QICDRC). This was established by QFC Law No. 2 of 2009 (Amending Certain Provisions of the Qatar Financial Centre (QFC)) and consists of a first instance circuit and an appellate circuit. QICDRC covers civil and commercial disputes that arise between QFC-registered companies, the QFC itself, or entities which the QFC or a QFC-registered company has contracted with.
- Qatar International Centre for Conciliation and Arbitration (QICCA). QICCA was established within the Qatar Chamber of Commerce and Industry by Decision No. 5/8 of 2006. The QICCA is located in Doha and has its own arbitration rules where the parties have chosen the QICCA as the forum for their arbitration. The rules are modelled on the UNCITRAL Arbitration Rules.
33. What are the most commonly used alternative dispute resolution (ADR) methods?
Sophisticated construction contracts will usually provide for a multi-tier dispute resolution procedure, which requires a dispute to be referred in the first instance to an engineer, a mutually appointed expert, or to senior management of the parties before the parties resort to the court or arbitral tribunal. Dispute adjudication boards are not common, although one developer (Barwa) has used DABs on several of its projects, obtaining positive feedback from all stakeholders. Informal negotiation aimed at resolving the dispute amicably is often used, especially before initiating any court proceedings or arbitration. Other ADR methods, including mediation, are not yet popular.
34. What are the main tax issues arising on projects?
There are no taxes particular to the construction sector.
Generally, apart from customs duties on imports of certain construction materials, 10% corporate tax is applicable to all construction companies unless they are fully owned by Qatari nationals. Further, a withholding tax of 7% is applicable on non-resident income, commissions, brokerage fees, and other payments made to non-residents for services carried out partly or wholly in Qatar. There are currently no plans to introduce value added tax (VAT) in 2019.
In construction contracts, the contractor is typically liable for the payment of all taxes levied by authorities in relation to the construction works, and the employer (especially if government-related) often reserves the right to withhold the payment to the contractor pending demonstration of compliance with applicable tax regulations in Qatar.
35. Are any methods commonly used to mitigate tax liability on projects? Are there any tax incentives to carry out regeneration projects?
The industry is expected to explore tax mitigation methods once the VAT law is introduced (see Question 34).
Tax exemptions can be granted to certain projects supporting critical areas of economy (such as agriculture or tourism) but presently there are no tax incentives applicable specifically to carrying out regeneration projects. Under new Law No. 1 of 2019, raw materials and semi-manufactured items for production which are not available in the local market will be exempted from custom duties on their imports.
Other requirements for international contractors
36. Are there any specific requirements that international contractors or construction professionals must comply with?
See Question 18.
37. Are there any proposals to reform construction and projects law?
A few new laws and regulations, either recently enacted (such as new Law No. 1 of 2019 regulating the investment of the non-Qatari capital in economic activity, (see below)) or planned to be adopted in near future (such as the new Law on PPPs, (see Question 29), will inevitably have an impact on the construction and projects market in Qatar.
The new law on non-Qatari investments is aimed at opening the way for foreign investors to have 100% ownership in all sectors and support investors’ entry into the Qatari market. The law offers investment incentives, including allocation of land to non-Qatari investors to establish investment and certain import and tax reliefs. It remains to be seen how this law will be implemented in practice, yet it is widely perceived as a major step to further open up the Qatari economy.
Qatar has delayed plans to introduce VAT, initially anticipated for 2019.
To our knowledge, there are currently no other proposals specifically related to the reform of construction law.