Construction Arbitration

Last verified on Wednesday 6th July 2022

Construction Arbitration: Qatar

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Legal system

1. Is your jurisdiction primarily a common law, civil law, customary law or theocratic law jurisdiction? Are the laws substantially derived from the laws of another jurisdiction and, if so, which? What instruments have legal force and effect? Who are the lawmaking bodies? How and where are new laws published? Can laws be passed with retrospective effect?

Qatar

Qatar is a civil law jurisdiction that is highly influenced by the Egyptian legal system, which was, in turn, inspired by French law. In the absence of statutory provisions, the Qatari legal system relies on Shari’a law.

The main instruments that have legal force and effect are published laws, ministerial decrees, Emiri decrees and decisions of the Supreme Judiciary Council and the Prime Minister.

The Shura Council is the main legislative authority, responsible for deliberating and making proposals with regard to the law. As provided under articles 105 and 106 of the Qatari Constitution issued in 2004, the relevant committee studies these submissions before passing them to the Shura Council for approval, which then passes the draft onto the Emir for ratification and promulgation.

Pursuant to article 70 of the Constitution, in cases of extreme urgency and when the Shura Council is not in session, the Emir may issue pertinent decrees that have the power of law. All laws are published on the Qatari legal portal (Al Meezan).

The Qatar Financial Center (QFC), established under Law No. 7 of 2005 (the QFC Law), is an onshore and common law jurisdiction that includes the QFC Authority, the QFC Regulatory Authority and the Qatar International Court and Dispute Resolution (QICDRC). The QICDRC comprises the Civil and Commercial Court of the QFC (QFC Court) and the QFC Regulatory Tribunal. The decisions of the QFC Court and Tribunal are published on the QFC website.

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Contract formation

2. What are the requirements for a construction contract to be formed? When is a "letter of intent" from an employer to a contractor given contractual effect?

Qatar

Law No. 22 of 2004 promulgating the Civil Code (the Civil Code) sets out the main elements for binding contracts, which requires that due consideration be given to whether there exists an offer and an acceptance, the underlying causes and whether there is a clear expression of the parties’ intentions to be legally bound. For example, where a letter of award is issued following a tendering process, such letter is deemed an acceptance of the bidder’s offer and produces legal effects as of this date.

The answer to whether a letter of intent is given contractual effect would depend on the terms of the document itself and the rights and obligations therein.  

Qatar’s Public Works Authority (Ashghal) (PWA) has developed its own forms of contract that include general and special conditions, which constitute the basis for any contracts it concludes (PWA contracts). Along with the FIDIC forms of contracts, these are also frequently relied on by private construction parties when concluding their contracts.

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Choice of laws, seat, arbitrator and language

3. Are parties free to choose: (a) the governing law of their contract; (b) the law of the arbitration agreement; (c) the seat of the arbitration; (d) any arbitral rules; (e) anyone to act as arbitrator; and (f) the language of the contract and the arbitration? If not, what are the limitations on choice and what happens if the parties act contrary to them?

Qatar

The parties are free to choose the governing law of their contract, which will be upheld by the courts provided that the provisions of the chosen law do not contravene Qatar’s public policy or morals as per article 28 of the Law No.2 of 2017 Promulgating the Civil and Commercial Arbitration Law (the Arbitration Law). The Arbitration Law applies to any arbitration seated in Qatar. Arbitrations seated in the QFC are governed by the QFC Arbitration Regulations 2005 (the QFC Arbitration Regulations), which gives the parties the right to choose the substantive applicable law, failing which the tribunal would choose the applicable law determined by the conflict of laws rules it considers applicable.

The parties remain free to choose the seat of arbitration whether in Qatar (including the QFC) or abroad. Where QFC is the chosen seat, the QFC Courts retain jurisdiction to rule on any matters in support of the arbitration, including annulment and enforcement of the ensuing awards.

The parties are also free to choose the rules of arbitration, including those pertaining to any arbitration centres, whether in Qatar or abroad. The Qatar International Centre for Commercial Arbitration was established in 2006 by virtue of a resolution of the Qatar Chamber’s board of directors and has revised its arbitration rules in 2022.

Pursuant to article 11 of the Arbitration Law, any person may be appointed as an arbitrator if he or she has full capacity and has not been convicted in a final judgment of a felony or misdemeanour involving moral turpitude or breach of public trust, even if he or she has been rehabilitated. The Ministry of Justice holds a non-exhaustive registry of arbitrators, which includes individuals that are approved to act as arbitrators.

Furthermore, article 22 of the Arbitration Law gives the parties the right to agree on the language(s) of the arbitration. Failing such an agreement, the arbitral tribunal should determine the language(s).

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Implied terms

4. How might terms be implied into construction contracts? What terms might be implied?

Qatar

Where the language of the contract is clear, article 169 of the Civil Code does not allow interpretation, otherwise, the parties’ intentions should be identified and interpreted. In this case, interpretation should take into consideration the nature of the transaction, the honesty and confidence existing between the parties and industry usage. Article 172 of the Civil Code adds specific requirements generally taken into consideration by judges when assessing the parties’ intentions, including good faith, any implied requirements imposed by the law, the trade customs and justice considering the nature of the transaction.

Qatari law, notably the relevant provisions of the civil and commercial laws, also serves as fall-back provisions and would apply to any matters that were not dealt with by the parties in their contract.

Where a contract is concluded by governmental and state entities, it is also subject to the provisions of Law No. 26 of 2005 promulgating the Tenders and Bids Regulatory Law (the Tender Law) and its subsequent amendments.

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Certifiers

5. When must a certifier under a construction contract act impartially, fairly and honestly? To what extent are the parties bound by certificates (where the contract does not expressly empower a court or arbitral tribunal to open up, review and revise certificates)? Can the contractor bring proceedings directly against the certifier?

Qatar

While the Civil Code does not specifically deal with the obligations of certifiers, there is an implied obligation for contractual parties to act impartially, fairly and honestly under article 172 of the Civil Code. A party may bring proceedings against the certifier as long as it has sufficient grounds based on the underlying agreement concluded between them, if any, and/or in tort in accordance with the applicable Qatari laws. Such grounds include fraud and gross negligence to the extent that damages were suffered by the contractor as a result of a certifier’s acts or omissions. The parties are bound by the certificates provided they have agreed to them expressly or impliedly through the various agreements with the construction stakeholders. The certificates would, otherwise, remain subject to the court’s assessment on a case-by-case basis.

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Competing causes of delay

6. If an employer would cause (eg, by variation) a two-week critical delay to the completion of the works (which by itself would justify an extension of time under the construction contract) but, independently, culpable delay by the contractor (eg, defective work) would cause the same delay, is the contractor entitled to an extension?

Qatar

There are no provisions that govern or define the concept of concurrency under Qatari law. Nonetheless, article 257 of the Civil Code provides that where the court determines that the party suffering damage has contributed to or aggravated the damage, it may reject or decrease the amount of compensation.

Therefore, the court or tribunal may consider the level of involvement of the employer and the terms of the contract in order to assess and determine which party is responsible for the delay and in what proportion.

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Disruption

7. How does the law view "disruption" to the contractor (as distinct from delay or prolongation to the completion of the works) caused by the employer’s breaches of contract and acts of prevention? What must the contractor show for a disruption claim to succeed? If an entitlement in principle can be shown (eg, that a loss has been caused by a breach of contract) must the court or arbitral tribunal do its best to quantify that loss (even if proof of the quantum is lacking or uncertain)?

Qatar

Although there are no specific provisions tailored to disruption claims, article 692 of the Civil Code gives the contractor the right to demand the employer to act within a reasonable time where the performance of the work requires a specific action from the employer that it failed to perform. If, upon expiration of the prescribed period, no action was taken by the employer, the contractor may demand termination of the contract as well as compensation for any losses.

Whether it is a disruptive or preventive act, the burden would be on the contractor to demonstrate that the act or omission constitutes a breach of contract, that it affected its productivity and caused it to incur additional costs or losses. Article 263 of the Civil Code requires proof that damages were a natural consequence of the employer’s failure or delay to perform the obligation. The contractor should also demonstrate that it exerted reasonable efforts to mitigate its losses as per article 257 of the Civil Code.

While the contractor is required to substantiate and quantify its losses, article 263 of the Civil Court gives the judge the powers to assess the amount of compensation, if not determined in the contract or the law, and to decrease such compensation when deemed exaggerated.

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Acceleration

8. How does the law view "constructive acceleration" (where the contractor incurs costs accelerating its works because an extension of time has not been granted that should have been)? What must the contractor show for such a claim to succeed? Does your answer differ if the employer acted unreasonably or in bad faith?

Qatar

Qatari law does not recognise the concept of “constructive acceleration” per se, therefore, the general principles relating to compensation apply. The contractor should prove that the employer’s refusal to grant an extension constitutes a breach of contract or that the delays requiring an extension of time were solely incumbent on the employer. It should also demonstrate and quantify the claimed losses.

Under article 708 of the Civil Code relating to remeasured contracts, the contractor is required to notify the employer of any substantial increase in the assessed measures and should provide a quantification of such increase, failing which, the contractor is barred from claiming compensation. In the event that acceleration entails an increase in the evaluated measures, the contractor should promptly notify the employer to secure its right to compensation.

The contractor may also rely on article 172 of the Civil Code relating to performance in good faith as well as article 692 of the Civil Code, which gives the contractor the right to request the employer to take any action necessary to ensure good performance, including granting an extension of time.

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Force majeure and hardship

9. What events of force majeure give rise to relief? Must they be unforeseeable and to whom? How far does the express or implied allocation of risk under the contract affect whether an event qualifies? Must the event have a permanent effect? Is impossibility in performing required or does a degree of difficulty suffice? Is relief available where only some obligations (eg, to make a single payment or carry out one aspect of the works) are affected or is a greater impact required? What relief is available and does it apply automatically? Can the rules be excluded by agreement?

Qatar

The Civil Code provides various provisions for events that are beyond the control of a party but does not specifically define what constitutes force majeure. Under article 188 of the Civil Code, when the performance of an obligation by a party becomes impossible for an external cause beyond its control, the corresponding obligation ceases and the contract is automatically terminated. Where the impossibility is partial, the party may either enforce the contract to the extent of such part of the obligation that can be performed or demand its termination.

This is echoed in article 704 of the Civil Code relating to construction contracts, which deems the contract terminated in the event where the performance of agreed works has become impossible for reasons not incumbent on the parties. In this case, the contractor is entitled to claim compensation for the costs it incurred and the fees it earned within the limits of the corresponding profit gained by the employer.

The parties may agree on the events that constitute force majeure and their rights thereunder. They may also agree that the debtor shall bear the risk of force majeure or the sudden event in accordance with article 258 of the Civil Code.

Under article 171 of the Civil Code, the judge may reduce an excessive obligation to a reasonable limit where its performance has become, though not impossible, excessively onerous in such a way as to threaten a party with exorbitant loss, as a result of unforeseen exceptional events, and would take into consideration the circumstances of the case and the interests of both parties.

Articles 690 and 691 of the Civil Code deal with the risk of perishing of materials caused by force majeure or a “sudden event” prior to delivery and allocate such risk to the party having furnished such materials provided that (i) these were not delivered to the other party; and (ii) the other party did not breach its obligations relating to delivery.

In PWA contracts, events of force majeure are labelled as “excepted risks” which include, inter alia, war hostilities, invasion acts by foreign enemies, rebellion, revolution, insurrection, military or usurped power, civil war or riots.

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10. When is a contractor entitled to relief against a construction contract becoming unduly expensive or otherwise hard to perform and what relief is available? Can the rules be excluded by agreement?

Qatar

The contractor may rely on article 171 of the Civil Code to request compensation for additional costs or a reduction of its financial obligations where the performance has become, though not impossible, excessively onerous in such a way as to threaten it with exorbitant loss. This provision cannot be excluded by agreement.

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Impossibility

11. When is a contractor entitled to relief if after the contract is concluded it transpires (but not due to external events) that it is impossible for the contractor to achieve a particular aspect of the contractual specification? What relief is available?

Qatar

The contractor is not, in principle, entitled to any relief where the impossibility to comply with a contractual specification does not result from force majeure, extraneous events beyond its control or the employer’s acts. Exceptionally and if the subject matter of the obligation is impossible to perform, the obligation is deemed null and void under article 148 of the Civil Code and may entail annulment of the contract, if it was fundamental to its performance. Otherwise, the court may grant indemnity as appropriate.

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Clauses that seek to pass risks to the contractor for matters it cannot foresee or control

12. How effective are contractual provisions that seek to pass risks to the contractor for matters it cannot foresee or control, for example, making the contractor liable for: (a) a specified event of force majeure; (b) ground conditions that no reasonably diligent contractor could have foreseen; or (c) errors in documents provided by the employer, such as employer's requirements in design and build forms?

Qatar

Qatari law allows risk allocation even where such risk results from force majeure as stipulated under article 258 of the Civil Code. Article 259 of the Civil Code also recognises exemption of liability clauses, except for fraud, gross negligence and illegitimate acts.

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Duty to warn

13. When must the contractor warn the employer of an error in a design provided by the employer?

Qatar

Article 708 of the Civil Code requires the contractor to notify the employer of any substantial increase in the assessed measures that is necessary to implement the agreed design, failing which, the contractor is barred from claiming compensation for the resulting losses.

Article 686 of the Civil Code sets out a general obligation for contractors to immediately notify employers of any events that are likely to obstruct the performance of the works, failing which, the contractor will be considered negligent and liable for the losses incurred as a result thereof.

Under article 713 of the Civil Code, the contractor is not liable for defects in the works that result from an error in the design unless it could have detected such errors in accordance with the industry practice or the design was within its scope. Therefore, the contractor may be held responsible for defects in the works resulting from design errors that it could have detected but failed to disclose to the employer.

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Good faith

14. Is there a general duty of good faith? If so, how does it impact upon the following (where they are otherwise permitted under the construction contract): (a) the level of intervention in the works that is allowed by the employer; (b) a party’s discretion whether to terminate or suspend the contract; or (c) the employer’s discretion to claim pre-agreed sums under the contract, such as liquidated damages for delay?

Qatar

Article 172 of the Civil Code sets out the duty of good faith in the performance of agreements, which compels employers and contractors to cooperate in order to avoid losses and delays. Based on the same duty, articles 260 and 261 thereof prohibit the employer from claiming compensation unless it had duly notified the contractor of the same.  

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Time bars

15. How do contractual provisions that bar claims if they are not validly notified within a certain period operate (including limitation or prescription laws that cannot be contracted out of, interpretation rules, any good faith principles and laws on unfair contract terms)? What is the scope for bringing claims outside the written terms of the contract under provisions such as sub-clause 20.1 of the FIDIC Red Book 1999 ("otherwise in connection with the contract")? Is there any difference in approach to claims based on matters that the employer caused and matters it did not, such as weather or ground conditions? Is there any difference in approach to claims for (a) extensions of time and relief from liquidated damages for delay and (b) monetary sums?

Qatar

Time-bar clauses are not recognised as such under Qatari law. Article 418 of the Civil Code expressly bans parties from agreeing to a different prescription period than that set out in the law. Under article 403 therein, the general prescription period in civil matters is 15 years. Article 87 of the Law No. 27 of 2006 issuing the Commercial Code (Commercial Code) sets out a decennial limitation period that starts from the date that payment of the commercial obligation becomes due. It should be noted that the prescription relates to the right to claim and does not affect the substantive right itself.

There is no conclusive answer on whether time-bar clauses in construction contracts fall under the ambit of article 418. The answer will, thus, depend on the wording of the clause and the judge or arbitral tribunal’s discretionary interpretation powers.

To counter the effects of article 418 and validate time-bar clauses (such as sub-clause 20.1 of the FIDIC Red Book), it was argued that for this article to operate, the right subject matter of the clause should have already come into existence, while in construction time bar clauses the right to compensation only comes into existence if a notice is issued. It was thus advanced that sub-clause 20.1 sets out a condition precedent to entitlement. As such, it does not fall within the scope of article 418 but relates to the concept of “suspensive” conditions, authorised under articles 284 to 286 of the Civil Code. Another argument advanced in favour of enforcing time-bar clauses is that these clauses bar the right itself and not the right to claim and therefore do not fall within the interdiction of article 418.

Articles 169, 170 and 172 relating to the performance of contracts in good faith, custom and justice may also assist in alleviating the effect of time-bar clauses under Qatari law, especially where the contractor had acted in good faith and believed that it will be compensated based on the employer’s previous compensation for additional costs, despite the contractor’s failure to timely issue the required notice. The same principle would also warrant compensation where the employer has benefitted from the works.

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Suspension

16. What rights does the employer have to suspend paying the contractor or performing other duties under the contract due to the contractor’s (non-)performance, or the contractor have to suspend carrying out the works (or part of the works) due to the employer’s (non-) performance?

Qatar

Under article 191 of the Civil Code, either party may decline to perform its contractual obligations if the other party fails to perform its counter-obligation, unless otherwise agreed. This provision only operates if a party fails to perform a fundamental (rather than ancillary) obligation. In construction contracts, contractors are generally required to proceed with the works even if the employer was in breach of its payment obligations. This is the case in the PWA contracts, which nonetheless allow contractors to refer the matter to the competent Qatari court.

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Omissions and termination for convenience

17. May the employer exercise an express power to omit work, or terminate the contract at will or for convenience, so as to give work to another contractor or to carry out the work itself?

Qatar

Under article 707 of the Civil Code, the employer may terminate the contract and stop the work at any time prior to its completion, provided that it compensates the contractor for all the expenses incurred, the works completed and any lost profit. Under article 707(2), the courts are permitted to reduce the contractor’s lost profit if the circumstances make such reduction fair, taking into consideration (i) the costs saved by the contractor from the employer’s termination; and (ii) the profits earned by the contractor in the time spent on other works.

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Termination

18. What termination rights exist? Can a construction contract be terminated in part? What are the practical and financial consequences?

Qatar

The parties are free to determine the terms governing their contractual relationship and the termination thereof. Under articles 707, 183 and 184 of the Civil Code, a construction contract may be terminated fully or partially for convenience (termination at will), default or impossibility to perform. Under Qatari law and unless expressly stated in the law or in the contract, termination can only be made by way of a court order.

As previously mentioned, in the event of a termination at will, the employer is required to compensate the contractor for costs incurred, works performed and lost profit.

Under bilateral contracts, where one of the parties fails to perform a fundamental obligation, the other party may demand performance of the contract or its termination.

Where the performance of obligation becomes impossible for reasons outside the parties’ control, the contractor is entitled to demand compensation for costs incurred and fees earned within the limit of the employer’s benefit.

Article 688 of the Civil Code gives the employer the right to request the termination of the contractor or its completion at the contractor’s expense if the contractor, despite being notified, has failed to perform the works in compliance with the terms of the contract.

Article 689 of the Civil Code gives the employer the right to terminate the contract if the contractor was late in the performance of its obligations such that it has become impossible to complete work within the agreed time limit or if the contractor acted in a way that shows its intention not to perform.

Finally, article 692 of the Civil Code gives the contractor the right to terminate the contract and demand compensation if the employer failed to take an action, despite being so notified, which was necessary to proceed with the works.

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19. If the construction contract provides for the circumstances in which each party may terminate the contract but does not expressly or impliedly state that those rights are exhaustive, are other rights to terminate available? If so, what are they and what are the practical and financial consequences?

Qatar

Where a party to a contract wishes to terminate the contract and the contract is silent on the termination rights or does not expressly indicate that these are exhaustive, the relevant provisions of the Civil Code will apply.

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20. What limits apply to exercising termination rights?

Qatar

The termination of a contract can only take effect by court order unless otherwise specified in the law or the contract. However, the parties may expressly agree on the termination having effect without the need to have recourse to the judge provided this is clearly and expressly stipulated.

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Completion

21. Does the law of your jurisdiction deem the works to be completed (irrespective of what the contract says) if, say, the employer takes beneficial possession of the works and starts using them?

Qatar

Article 696 (1) of the Civil Code expressly refers to practical taking over of the works and provides that once the works have been taken over by the employer, whether practically or contractually, the contractor’s liability for apparent defects and breaches ceases. The practical completion also triggers the time limit for latent defects, which should be notified to the contractor within a reasonable period as per the applicable trade customs.

Under the same 693 of the Civil Code, the employer is required to take possession of the works following a formal notice from the contractor to this effect. The employer’s refusal to take possession of the works without just cause amounts to an acceptance of the works.

The parties remain, however, free to contract out of the above-mentioned provisions or agree to different terms and effects for the completion of the works.

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22. Does approval or acceptance of work by or on behalf of the employer bar a subsequent complaint? What constitutes acceptance? Does taking over the work by the employer constitute acceptance? Does this bar subsequent complaint?

Qatar

The law does not expressly define what constitutes an acceptance by the employer. However, article 696 of the Civil Code states that the contractor’s liability for apparent defects ceases from the date of “practical” taking over of the works by the employer. Article 696 (2) of the Civil Code also bars liability for latent defects and breaches if the employer does not notify the contractor of such defects within a reasonable period as per the industry trades.

The employer’s failure to timely send the notice is deemed to be an acceptance of the works under the same article.

The legal consequences given to practical taking over of the works show the lawmaker’s intention to consider that practical taking over is tantamount to acceptance of the works by the employer.

Consequently, the unconditional taking over of the works bars the employer from claiming compensation for defects and breaches that were apparent and thus could have been identified at the time of acceptance.

The acceptance of the works does not, however, exempt the contractor from the decennial warranty for structural defects (such as a collapse), whether total or partial, for constructed buildings or other establishments even if the works were unconditionally accepted by the employer. Structural defects relate to those that would compromise the buildings’ safety or stability. The legal claim for decennial warranty is time-barred following three years from the date of occurrence of the structural defect or collapse.

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Liquidated damages and similar pre-agreed sums ('liquidated damages')

23. To what extent are liquidated damages for delay to the completion of the works treated as an exhaustive remedy for all of the employer’s losses due to (a) delay to the completion of the works by the contractual completion date; and (b) delays prior to the contractual completion date (in the absence of, say, interim milestone dates with liquidated damages for delay attaching to them)? What difference does it make if any critical delay is caused by the contractor’s fraud, wilful misconduct, recklessness or gross negligence? If so, what constitutes such behaviour and can it be excluded by agreement?

Qatar

Liquidated damages are specific to common law systems. As such, they are not typically found in civil law countries. Nonetheless, Qatari law permits the parties to agree in advance on a monetary compensation in the event of non-performance or delays in the performance of contractual obligations (articles 265 to 267 of the Civil Code). Article 265 allows agreed compensation for non or delayed performance provided the subject matter of the underlying obligation is not monetary.

Agreed compensation under Qatari law does not become due and payable if the debtor manages to prove that the debtor has not suffered losses. The burden of proof is thus shifted to the debtor, which will be required to prove that no damages were suffered in order to circumvent the application of the agreed compensation. The judge retains the power to reduce the agreed compensation if deemed “substantially excessive” or if the obligation was partially performed.

For its part, the employer is prohibited under article 267 of the Civil Code from requesting a higher compensation if the actual damages exceed the agreed amount. In this sense, the agreed compensation constitutes the exhaustive remedy available to the creditor for damages resulting from non or delayed performance. This ceases to be the case if the creditor proves fraud or gross mistake on the part of the debtor.

To the extent that liquidated damages are considered to set out a maximum compensation for liability resulting from delays in execution, article 259 of the Civil Code also applies and authorises clauses that limit or exclude liability provided it that it does not result from gross fault or fraud.

While liquidated damages may be the exhaustive remedy for losses suffered as a result of delay, they do not prevent the employer from requesting compensation under the provisions of the Civil Code for losses and damages suffered from other breaches, unless the contract expressly excludes it.

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24. If the employer causes critical delay to the completion of the works and the construction contract does not provide for an extension of time to the contractual completion date (there being no "sweep up" provision such as that in sub-clause 8.4(c) of the FIDIC Silver Book 1999) is the employer still entitled to liquidated damages due to the late completion of works provided for under the contract?

Qatar

The general principle according to which the judge may reduce an agreed compensation where the creditor has contributed to breach of contract or delays in performance would equally apply here. Hence, the judge may reduce or forego liquidated damages under article 257 of the Civil Code if the delays were caused by the employer.

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25. When might a court or arbitral tribunal award less than the liquidated damages specified in the contract for delay or other matters (eg, substandard work)? What factors are taken into account?

Qatar

Under article 257 of the Civil Code, the employer does not have the right to claim amounts in excess of the liquidated damages even where the actual damages have exceeded the agreed amount, unless the employer proves gross fault or fraud on the part of the contractor.

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26. When might a court or arbitral tribunal award more than the liquidated damages specified in the contract for delay or other matters (eg, work that does not achieve a specified standard)? What factors are taken into account?

Qatar

As provided under article 267 of the Civil Code, the court or arbitral tribunal cannot award more than the liquidated damages specified in the contract unless there is fraud or gross negligence on the part of the contractor, in which case a higher amount can be claimed and hence awarded. 

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Assessing damages and limitations and exclusions of liability

27. How is monetary compensation for breach of contract assessed? For instance, if the contractor is liable for a defect in its works is the employer entitled to its lost profits? What if the lost profits are exceptionally high?

Qatar

Monetary compensation for breach of contract is generally determined by the court if no evaluation is made by the law or in the contract (article 263 of the Civil Code). It includes damages incurred, lost profit and moral damages, provided that such damages (i) are a natural consequence of a party’s failure or delay to perform its obligation (damages are considered as such if the debtor could not have prevented them by exerting reasonable efforts); and (ii) could have normally been foreseen at the time of contracting, except where the debtor has acted fraudulently or committed a gross fault.

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28. If the contractor’s work is technically non-compliant, is the contractor liable for remedying it if the rectification cost is disproportionate to the benefit of the remedy? Can the parties agree on a regime that is stricter for the contractor than under the law of your jurisdiction?

Qatar

In principle, contractors are bound to specific performance, including rectifying any technical non-compliance (article 245 (1) of the Civil Code). In cases where the rectification would be extremely onerous to a party, the court may, at the request of that party, order indemnity instead, provided that this does not result in substantial harm to the creditor. The parties may agree on a regime that is stricter, which would not apply in cases of fraud or gross fault on the part of the employer and which would remain subject to the mandatory provisions relating to compensation.

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29. If there is a defects notification period (DNP) during which the contractor must or may remedy any defect in its works that appears during a certain period after their completion, if the construction contract is otherwise silent, does it affect the employer’s rights to claim for any defects appearing after the DNP expires?

Qatar

Courts will generally uphold the express terms of the contract, including a contractually agreed DNP. However, such an agreement does not affect the decennial warranty for structural defects set out at articles 711 to 714 of the Civil Code, which is mandatory and cannot be waived or reduced.

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30. What is the effect of a construction contract excluding liability for “indirect or consequential loss”?

Qatar

These clauses are valid and enforceable under article 259 of the Civil Code to the extent they do not cover losses resulting from fraudulent acts or gross fault.

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31. Are contractually agreed limits on – or exclusions of – liability effective and how readily do claims in tort or delict avoid them? Do they not apply if there is fraud, wilful misconduct, recklessness or gross negligence: (a) if the contract is silent as to such behaviour; or (b) if the contract states that they apply notwithstanding such behaviour? If so, what causation is required between the behaviour and the loss?

Qatar

Contractual limits and exclusions of liability are enforceable under Qatari law except for cases of fraud or gross fault. Exclusions of liability clauses are not enforceable where they relate to tortuous acts, unless such exclusion was agreed after the occurrence of such acts (and the underlying liability) in accordance with article 259 (3) of the Civil Code.

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Liens

32. What right does a contractor have to claim a lien (or similar) in the works it has carried out? If so, what are the limits of the right if, for example, the employer has no interest in the site for the permanent works? How is the right recognised and enforced?

Qatar

Article 1184 of Civil Code gives the contractors and engineers preferential rights on the buildings and establishments they were instructed to construct, reconstruct, repair or maintain in relation to any amounts due and payable to them as a result of such works within the limits of the extra value of the real property at the time of its sale due to such works.

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Subcontractors

33. How do conditional payment (such as pay-when-paid) provisions operate under the law of your jurisdiction (including interpretation rules, any good faith principles and laws on unfair contract terms)?

Qatar

The courts will generally uphold conditional payment terms expressed in the contract. However, the implementation of such clauses remains subject to article 172 of the Civil Code. Thus, when dealing with such clauses, careful consideration should be given to the parties’ practice, justice as well as the parties’ good faith performance of their respective obligations.

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34. May a subcontractor claim against the employer for sums due to the subcontractor from the contractor? How are difficulties with the merits and proof of the subcontractor’s claim addressed, including any rights the contractor has to withhold payment? What if aspects of the project suggest that the law of your jurisdiction should not apply (eg, the parties to both the main contract and the subcontract have chosen a foreign law as the governing law)?

Qatar

Article 702(1) of the Civil Code gives the subcontractor and the contractor’s employees the direct recourse against the employer to claim the sums owed to them by the contractor to the extent the same is owed by the employer to the contractor at the time of the claim. Article 702(2) of the Civil Code also gives the subcontractor a preferential right to seize any amounts owed by the employer to the contractor to pay the contractor’s debts towards it. As such, subcontractors have a priority over such amounts vis-à-vis other creditors. Such priority extends over any other persons to whom the contractor transfers its rights towards the employer.

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35. May an employer hold its contractor to their arbitration agreement if their dispute concerns a subcontractor (there being no arbitration agreement between the contractor and the subcontractor or no scope for joining two sets of arbitral proceedings) or can the contractor, for example, require litigation between itself, the employer and the subcontractor? Does it matter if the arbitration agreement does not have its seat in your jurisdiction?

Qatar

Under Qatari law, an arbitration agreement cannot in principle be enforced against a party that has not agreed to it. The employer’s contractual relationship being solely with the contractor, any disputes it may have against a subcontractor should be brought against the contractor, subject to the contractor then having recourse against the subcontractor.

Exceptionally and depending on the applicable arbitration rules, the employer may, where the subcontract includes a compatible arbitration clause or there are grounds to extend the arbitration agreement to the subcontractor, request that it is joined to the arbitration proceedings.

The Arbitration Law does not include specific provisions on the joinder of parties or consolidation. For its part, the QFC Arbitration Regulations expressly give the QFC Tribunal the power to order, on the application of the parties to two or more arbitration proceedings, the consolidation of the arbitration proceedings “on the terms it considers just”.

The case differs when it comes to litigation proceedings where the judge’s imperium may allow him or her to hear and consolidate cases between the employer, the contractor and the subcontractor in relation to the same project (provided no arbitration agreement exists in any of their respective contracts and that the judge has jurisdiction in relation to all the parties involved).

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Third parties

36. May third parties obtain rights under construction contracts? How readily can those connected with the employer (such as future or ultimate owners) bring claims against the contractor in respect of (a) delays and (b) defects? To what extent are exclusions and limitations of liability in the construction contract relevant?

Qatar

Article 175 of the Civil Code upholds the principle of privity of contracts, based on which the contract’s legal effects are limited to the parties that have signed them (and their legal successors). Article 177 of the Civil Code exceptionally allows a contract to create rights (but not obligations) for third parties, if it so expressly stipulates.

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37. How readily (absent fraud, wilful misconduct, recklessness or gross negligence) can those connected with the contractor (such as affiliates, directors or employees) face claims in respect of (a) delays (b) defects and (c) payment? To what extent are exclusions and limitations of liability in the construction contract relevant?

Qatar

Under Qatari law, companies have a legal entity that is separate from that of its directors and affiliates. Construction companies generally take the form of limited liability companies, where directors are not held liable for the company’s actions except in very limited circumstances, including fraud and gross fault.

Where a foreign company operates through a registered branch in Qatar, recourse should be made against the foreign company itself as the branch does not constitute a separate entity.

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Limitation and prescription periods

38. What are the key limitation or prescription rules for claims for money and defects (and insofar as you have a mandatory decennial liability (or similar) regime, what is its scope)? What stops time running for the purposes of these rules (assuming the arbitral rules are silent)? Are the rules substantive or procedural law? May parties agree different limitation or prescription rules?

Qatar

Article 87 of the Commercial Code sets out a mandatory decennial limitation period for claims arising from commercial contracts (construction contracts are considered to be commercial where they are concluded by professionals under article 6 of the Commercial Code).

Article 711 of the Civil Code stipulates a specific decennial and joint warranty on the part of the contractor and the engineer for structural defects (including defects that would compromise its safety or risk its collapse). Such warranty starts running from the taking over date and is subject to a limitation period of three years from the date the structural defect is discovered.

The prescription rules are procedural in that they do not affect the existence of the substantive right but the parties’ ability to claim it. Under Qatari law, a limitation period can only be interrupted by taking judicial action (generally filing a lawsuit). The limitation period is interrupted even where the lawsuit is filed with the incorrect forum. The limitation period is equally interrupted if the debtor acknowledges the creditor’s right expressly or impliedly (article 414 of the Civil Code). Where the prescription is interrupted, a new prescription starts running for the same original period from the date on which the underlying act has ceased to produce any effects.

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Other key laws

39. What laws apply that cannot be excluded or modified by agreement where the law of your jurisdiction is the governing law of a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?

Qatar

As a civil law country, Qatar enshrines the principle of party autonomy according to which the parties are free to determine the terms of their agreement as they deem fit. Such autonomy is limited by the mandatory provisions of the applicable laws and the state’s public policy and morals. This also applies to the reasons underlying the agreement as well as the subject matter thereof. Construction contracts are mainly governed by the Civil and Commercial Codes. Therefore, their mandatory provisions apply and cannot be set aside by the parties. Generally, unless expressly indicated therein, legal provisions are not deemed mandatory.

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40. What laws of your jurisdiction apply anyway where a foreign law governs a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?

Qatar

Where a foreign law applies whether by operation of a choice-of-law clause or other international private law instruments, article 38 of the Civil Code prohibits the application of any of its provisions that would violate Qatar’s public policy or morals. In this case, Qatari law will apply instead.

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Enforcement of binding (but not finally binding) dispute adjudication board (DAB) decisions

41. For a DAB decision awarding a sum to a contractor under, say, sub-clause 20.4 of the FIDIC Red Book 1999 for which the employer has given a timely notice of dissatisfaction, in an arbitration with its seat in your jurisdiction, might the contractor obtain: a partial or interim award requiring payment of the sum awarded by the DAB pending any final award that would be enforceable in your jurisdiction (assuming the arbitral rules are silent); or interim relief from a court in your jurisdiction requiring payment of the sum awarded by the DAB pending any award?

Qatar

While it remains silent on the matter, nothing in the Arbitration Law or more generally Qatari law would prevent the contractor from requesting that a DAB decision be formalised by the acting arbitral tribunal in an interim award or order pending the final outcome of the dispute. The same can be requested from the Qatari court ruling on the substantive dispute.

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Courts and arbitral tribunals

42. Does your jurisdiction have courts or judges specialising in construction and arbitration?

Qatar

While there are no specialist chambers within Qatari courts for construction disputes, specialist chambers or circuits were established within the Court of Appeal to rule on matters relating to commercial and civil arbitration disputes.

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43. What are the relevant levels of court for construction and arbitration matters? Are their decisions published? Is there a doctrine of binding precedent?

Qatar

Construction matters are heard by Civil and Commercial Courts, which include three levels: the Court of First Instance, the Court of Appeal and the Court of Cassation.

As for arbitration matters, a circuit specialising in commercial and civil arbitration disputes is established with the Court of Appeal. For arbitrations seated in the QFC, the first instance circuit of the Commercial and Civil Court of the QFC is the competent authority to deal with arbitration-related matters.

The enforcement judge within the Court of First Instance or that within the Civil and Commercial Court of the QFC (as the case may be) has jurisdiction in relation to the enforcement of arbitral awards.

In Qatar and as is the case in other civil law countries, judges are required to interpret and apply the law and do not have legislative powers. Consequently, the notion of “binding precedents” that is proper to common law jurisdictions does not apply. Nonetheless, the judgments rendered by the Court of Cassation as the highest judicial authority should generally be followed by lower courts to avoid having their judgments set aside.

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44. In your jurisdiction, if a judge or arbitrator (specialist or otherwise) has views on the issues as they see them that are not put to them by the parties, can they raise them with the parties? Is the court or arbitral tribunal permitted or expected to give preliminary indications as to how it views the merits of the dispute?

Qatar

Courts and tribunals are not expected to give preliminary indications as to how they view the merits of the dispute and should only address the claims raised by the parties. One of the main grounds of appeal against a judgment or challenge against an award is that where a judge or arbitrator has ruled on matters that were not raised by the parties. Nonetheless, nothing would prevent an arbitrator from submitting general queries to the parties with the aim of receiving their respective positions on a specific matter.

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45. If a contractor, say, wishes to arbitrate pursuant to an arbitration agreement, what parallel proceedings might the employer bring in your jurisdiction? Does it make any difference if the dispute has yet to pass through preconditions to arbitration (such as those in clause 20 of the FIDIC Red Book 1999) or if one of the parties shows no regard for the preconditions (such as a DAB or amicable settlement process)?

Qatar

If a party fails to satisfy pre-arbitration steps and initiates premature arbitral proceedings, the employer in this case or the party wishing to challenge such conduct may claim that the arbitration has been prematurely initiated and should therefore be dismissed.

There is no parallel jurisdiction to hear disputes that are subject to arbitration unless they relate to inarbitrable matters or if the arbitration clause is not valid. Nonetheless, should a party elect to file its substantive case with the court, the other party should promptly and in its first memorandum (prior to filing any defence) object to the jurisdiction of the court at the risk of being considered as having waived arbitration.

Emergency courts retain jurisdiction to rule on any urgent matters that are outside the scope or jurisdiction of the arbitral tribunal.   

Pre-arbitration steps are generally binding upon the parties and may serve as a ground to challenge an arbitration on the basis that it was filed prematurely.

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46. If the seat of the arbitration is in your jurisdiction, might a contractor lose its right to arbitrate if it applied to a foreign court for interim or provisional relief?

Qatar

Article 9 of the Arbitration Law is clear as to a party’s right to seek interim relief from state courts without it being considered a waiver of its rights to arbitrate.

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Expert witnesses

47. In your jurisdiction, are tribunal- or party-appointed experts used? To whom do party-appointed experts owe their duties?

Qatar

Under Qatari law, the parties may submit expert evidence in support of the case both in arbitration and before the courts. Both courts and tribunals may also appoint their own experts. In either case, the experts are bound to remain independent and owe their duties to the courts or arbitral tribunals.

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State entities

48. Summarise any specific limitations or requirements that apply when the employer is a state entity or public authority (including, for example, public procurement rules, limits on rights to suspend or terminate, excluded lien rights and arbitrating – as well as enforcing an award – against such an employer).

Qatar

State entities cannot resort to arbitration unless prior approval is obtained from the Prime Minister as required under article 2 of the Arbitration Law. The provisions of the Tender Law also apply to construction contracts involving a state entity as the employer. Article 10 of the Tender Law further adds that state entities may agree, once a dispute has arisen, to resolve it by way of arbitration after obtaining the approval of the Minister of Economic and Finance.

Article 57 (2) of the Civil Code prohibits any acts of disposal or attachment on public assets, which also cannot be owned by operation of the legal prescription period.

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Settlement offers

49. If the seat of the arbitration is in your jurisdiction, on what basis can a party make a settlement offer that may not be put before the arbitral tribunal until costs fall to be decided?

Qatar

There is no law that specifically regulates the practice of utilising settlement offers or that prohibits a party from using a settlement offer before a court or tribunal until costs fall to be decided. However, the parties are bound by their agreement to hold a document confidential under the principle of the binding effects of contracts.

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Privilege

50. Does the law of your jurisdiction recognise "without prejudice" privilege (such that "without privilege" communications are privileged from disclosure)? If not, may it be agreed that a sum is payable if communications to try to achieve a settlement are disclosed to a court or arbitral tribunal?

Qatar

The concept of "without prejudice" communications does not exist per se in Qatar and there are no express legal provisions in this respect. It is, therefore, not sufficient for a party to indicate that a communication is sent “without prejudice” to prevent it from being disclosed before tribunals or courts. However, parties remain free to agree on the confidentiality of exchanges and on a specific compensation for any breaches thereof.

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51. Is the advice of in-house counsel privileged from disclosure under the law of your jurisdiction? Is the relevant law characterised as substantive or procedural law?

Qatar

Legal professional privileges between client and attorney are recognised and imposed on lawyers under Law No. 23 of 2006 on advocacy.

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Guarantees

52. What are the requirements for a guarantee under the law of your jurisdiction? Are oral guarantees effective?

Qatar

Article 809 of the Civil Code provides that guarantees can only be proven in writing, even if the principal claim may be proven orally. While the writing is required as a matter of proof and not validity, oral guarantees are not enforceable in practice.

Article 810 of the Civil Code requires that the guarantor be solvent and a Qatari resident. Where such a guarantor becomes insolvent or no longer resides in Qatar, another guarantor or sufficient security must be provided by the debtor.

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53. Under the law of your jurisdiction, will the guarantor’s liability be limited to that of the party to the underlying construction contract, if the guarantee is silent? Can the guarantee’s wording affect the position?

Qatar

Under article 814 of the Civil Code, it may not be agreed to guarantee an amount higher than the debt and the terms of such guarantee may not be more rigorous than the conditions of the guaranteed debt.

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54. Under the law of your jurisdiction, in what circumstances will a guarantor be released from liability under a guarantee, if the guarantee is silent? Can the guarantee’s wording affect the position?

Qatar

As per articles 817 to 822 of the Civil Code, a guarantor will be released from the guarantee under several circumstances including where (i) the original debtor has been discharged from liability, (ii) the creditor accepts payment of the debt from a person other than the guarantor (iii) if the debt’s security is lost as a result of the debtor’s fault, and (iv) the debtor becomes bankrupt and the creditor fails to claim the debt in the bankruptcy proceedings (the creditor’s right of recourse against the guarantor will lapse to the extent that such creditor could have recovered had the debt been claimed therein).

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On-demand bonds

55. If an on-demand bond is governed by the law of your jurisdiction on what basis might a call be challenged in your courts as a matter of jurisdiction as well as substantive law? Assume the underlying contract is silent on when calls may be made.

Qatar

Given their nature, on-demand bonds are generally released immediately by banks in Qatar once payment is demanded by the beneficiary, irrespective of whether the latter was entitled to call on the bonds. This is expressly stated in articles 406 to 413 of the Commercial Code.

A party wishing to circumvent the beneficiary from calling on the bonds may file an ex parte application with the emergency court requesting that the bond be frozen. While these applications are generally rejected by Qatari courts given the nature of the bonds, Qatari courts have issued decisions to freeze the bonds in specific cases.

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56. If an on-demand bond is governed by the law of your jurisdiction and the underlying contract restrains calls except for amounts that the employer is entitled to (such as sub-clause 4.2 of the FIDIC Red Book 1999), when would a court or arbitral tribunal applying your jurisdiction’s law restrain a call if the contractor contended that: (i) the employer does not have an entitlement in principle; or (ii) the employer has an entitlement in principle but not for the amount of the call?

Qatar

If the contract sets out conditions that should be fulfilled for an employer to be entitled to make a call on the bond, such conditions are likely to be taken into consideration by arbitral tribunal or court ruling on the substantive dispute to issue interim measures or orders to prevent the cashing of the bonds pending the final determination of the dispute.

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Further considerations

57. Are there any other material aspects of the law of your jurisdiction concerning construction projects not covered above?

Qatar

On 12 April 2022, the PWA issued Circular No. 18 of 2022 for PWA’s Strategic Plan for Project Management during the FIFA 2022 World Cup that includes specific instructions to construction contractors, including, inter alia, to expedite the works and to complete them by specific periods to avoid full enforcement of the remedies available under the contract by the PWA. The contractors’ non-compliance with the above-mentioned Circular as well as its impact on the works may result in a considerable number of claims and disputes once the FIFA event is concluded.

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