Project spending in Qatar, which was QR43.68 billion ($12 billion) in 2012, is expected to be around QR123.76 billion ($34 billion) in 2014, and this is likely to increase as Qatar’s National Development Strategy is planning to invest an estimated QR666.12 billion ($183 billion) for key infrastructure projects between 2011 and 2016.
However, along with the increase in project spending expenditure, litigations are also likely to climb, resulting in delays in the execution of projects, thus pushing up their costs. While the parties involved in disputes prefer to seek legal recourse to find a solution, arbitration is increasingly displacing litigation as the most common method of finding a solution.
Companies like Qatar Rail, the New Doha Port and Hamad International Airport have arbitration clauses in their contracts, and most of them have adopted the International Chamber of Commerce (ICC) Rules, with Doha as the seat of arbitration.
Where arbitration is provided for in a contract, it is usually handled by the Qatar International Centre for Conciliation and Arbitration (QICCA), the Qatar International Court and Dispute Resolution Centre (QICDRC) or the International Chamber of Commerce (ICC).
Disputes can be due to various reasons, such as escalation in the project cost over a period of time, disagreement among the litigants (if more than two parties are involved) following some development locally, or failure of either party to fulfil the contractual obligations. Since court cases can take a long time, arbitration is viewed as a God-sent opportunity for the parties in litigation, as it not only saves time and money but also resolves issues in an amicable manner.
“Mediation and arbitration are two examples which can be extremely useful in this effort, while early neutral evaluation is another tool which has been employed with success in several countries and can be adapted to assist the parties in focusing their efforts on the real issues in a dispute and in achieving settlement if they wish to do so.”
Dr Minas Khatchadourian
Qatar International Centre for Conciliation and Arbitration
Alternative dispute resolution (ADR) methods such as conciliation, mediation and adjudication have yet to gain currency in Qatar, but there has been considerable increase in these methods, as most major projects are now being tendered and awarded with suitable arbitration clauses.
Detailing the various options to settle disputes, QICCA Executive Director Dr Minas Khatchadourian says there are numerous methods available to avoid the time and expense of litigation before a judge if the parties to a dispute wish to do so but are unable to resolve their differences by direct negotiation.
“Mediation and arbitration are two examples which can be very useful in this effort, while early neutral evaluation is another tool that has been employed with success in certain areas and can be adapted to assist the parties in focusing their efforts on the real issues in a dispute and in achieving settlement if they wish to do so,” he says.
Sometimes the parties may request a neutral evaluation of one issue that is impeding the resolution of their dispute. Foreign investors generally prefer to have their disputes resolved through arbitration instead of the local courts.
“In fact, early neutral evaluation is a confidential process in which each party presents the factual and legal basis for its claims and defences to a trusted neutral with expertise in the substantive area of the dispute. The neutral then renders a non-binding written evaluation of the positions of the parties in the dispute. The parties can then proceed to negotiate a resolution of the dispute on their own or with the assistance of the neutral as a mediator,” he adds.
Though litigation in the Qatari courts is a common formal dispute resolution method on public sector contracts, the parties in disputes are looking at arbitration to settle the issues at the earliest. If either party does not agree on the outcome, they can always approach the Qatari courts. Even the Tender Law of Qatar says that the disputing parties can go for arbitration if it is mentioned in the contract.
“Unless specific circumstances demand otherwise, we would always recommend alternative forms of dispute resolution to our clients. Not only do they offer cost and timing advantages, but they can also provide risk mitigation benefits, in particular for international clients.”
Partner and Head of Intellectual Property Group,
Charles Russell Middle East
Saves time and cost
Patrick Gearon, who is a partner and head of the intellectual property group of law firm Charles Russell Middle East (which opened an office in Qatar recently), says that they always suggest to the parties that they opt for arbitration to resolve differences among the litigants, for obvious reasons.
“Unless specific circumstances demand otherwise, we would always recommend alternative forms of dispute resolution to our clients. Not only do they offer cost and timing advantages, but they can also provide risk mitigation benefits, in particular for international clients,” he says.
According to Gearon, dispute resolution clauses in contracts require meticulous drafting to ensure that they function as intended, including careful consideration of the method, process, rules and supporting legislation. These clauses usually adopt a multistage process commencing with amicable negotiation for a predetermined period, failing which the parties move on to the next preferred method.
“While the intended project will often dictate the preferred method, arbitration is the most prevalent alternative method used in the Middle East for construction disputes. Formal mediation is not uncommon, and notably the Qatar International Court and Dispute Resolution Centre is currently developing an adjudication process,” he says.
There could be thousands of such cases, but the majority will have been dealt with by arbitration because of the prevalence of arbitration clauses in construction contracts, Gearon adds.
More comfort and security
Dispute resolution by arbitration is likely to give international companies greater comfort and security, and actively encourage them to do business in Qatar.
Doha-based partner in the international law firm Pinsent Masons LLP James Elwen says experienced companies doing business around the globe expect arbitration as the preferred method of resolving disputes, especially on high-value commercial transactions. Companies run the risk of increased time and cost pressures if a dispute is not resolved quickly, and this can effectively damage business relations.
“Cases in the courts in Qatar take time for resolving disputes, and this may put off certain companies from doing business in Qatar if they have to go to the local court to have a dispute resolved. This can often take years,” he says.
The types of dispute they frequently see relate to commercial arrangements and agency agreements. “We anticipate a lot more disputes relating to the construction sector, although in our experience parties tend to use alternative dispute resolution techniques to resolve these kinds of dispute where possible,” Elwen says.
The parties involved in large-scale infrastructure projects seem to be more open to negotiation and commercial settlement than is often the case in other sectors, where disputes may be less common.
“Experienced companies doing business around the globe expect arbitration as the preferred method of resolving disputes, especially on high-value commercial transactions. Companies run the risk of increased time and cost pressures if a dispute is not resolved quickly, and this can effectively damage business relations.”
Partner, Pinsent Masons
Elwen feels that the Civil and Commercial Procedure Law – Law No. 13 of 1990 (“the 1990 law”), which underpins the court process and covers arbitration, needs a major overhaul to update it in order to allow cases to be dealt with in a cost-effective way. The most important anticipated change is to recognise that arbitral awards will be final and binding, with limited grounds for
overturning or appealing an arbitral award.
“Currently, under the 1990 law, arbitral awards may be challenged in Qatar on questions of fact or law in the local courts. Due to this, arbitration in Qatar has become less appealing when compared with other international arbitration centres, as the losing party effectively has a ‘second bite of the cherry’ to challenge the finality of an arbitral award,” he points out.
Elwen hopes that this shortcoming in the 1990 law will be removed by the new arbitration law, thus giving greater comfort and certainty to international companies looking to do business in Qatar
World Bank report
In its report on Ease of Doing Business in 2013, The World Bank placed Qatar in 48th position among 189 countries, and ranked the country 93rd as far as enforcing contracts is concerned. However, what should bring cheers is that Qatar occupies the top position in the GCC region and is ranked sixth on enforcing contracts among countries in the Middle East and North Africa (MENA) region, ahead of the UAE (7th), Oman (8th), Kuwait (9th), Bahrain (10th) and Saudi Arabia (13th), according to the World Bank report. This means the chances of foreign investors preferring Qatar as their destination in the GCC is high compared with other member-nations in the region. Source: Qatar Today