Seat of arbitration: Doha or the QFC


In summary

This article considers the QFC as a seat of arbitration, with particular focus on the QFC Court as the supervisory court; the applicable curial law in a QFC-seated arbitration; and the advantages and disadvantages of choosing the QFC as the seat, rather than Doha, from the perspective of interim measures and the enforcement of arbitral awards.


Discussion points

  • The QFC Court
  • QFC-seated arbitration
  • The QFC Court as the Competent Court in a Doha-seated arbitration
  • Seat: the QFC or Doha?
  • Interim relief and the enforcement of arbitral awards

Referenced in this article

  • Law No. 7 of 2005 (the QFC Law)
  • The Arbitration Regulations 2005 (the QFC Arbitration Regulations)
  • C v D [2021] QIC (F) 8
  • Law No. 2 of 2017 (the Qatari Arbitration Law)
  • The UNCITRAL Model Law on International Commercial Arbitration
  • American Cyanamid v Ethicon [1975] AC 396
  • Chedid & Associates Qatar LLC v Said Bou Ayash [2015] QIC (A) 2
  • Leonardo SpA v Doha Bank Assurance Company LLC [2020] QIC (A) 1

Introduction

For arbitration practitioners in Qatar, Doha-seated arbitrations will be commonplace. However, there is another (and lesser-known) jurisdiction in Qatar: the Qatar Financial Centre (QFC), which can also serve as an arbitral seat.

The QFC was established by Law No. 7 of 2005 (the QFC Law) as an offshore business and financial centre in Doha, with a separate legal, regulatory and commercial framework. Its legal system is based on English common law. The QFC has its own arbitration law, called the Arbitration Regulations 2005 (the QFC Arbitration Regulations), and its own court, known as the Qatar International Court (the QFC Court).

This article considers the QFC as a seat of arbitration, with particular focus on the QFC Court as the supervisory court; the applicable curial law in a QFC-seated arbitration; and the advantages and disadvantages of choosing the QFC as the seat, rather than Doha, from the perspective of interim measures and the enforcement of arbitral awards.

The QFC Court

Somewhat surprisingly, the QFC Arbitration Regulations do not prescribe the QFC Court as the supervisory court in QFC-seated arbitrations. However, the QFC Court has decided the matter: in C v D [2021] QIC (F) 8, it held that, when an arbitration is seated in the QFC, the QFC Court is the supervisory court.

If parties wish to bring proceedings before the QFC Court in its original jurisdiction, article 8(3) of the QFC Law and article 9 of the QFC Court’s Regulations and Procedural Rules provide that at least one of them must be a QFC-registered entity. This was also considered to be the position in respect of the QFC Court’s supervisory jurisdiction in a QFC-seated arbitration. In other words, if neither party was registered in the QFC, it was thought that they could not validly agree to designate the QFC as the arbitral seat. However, in C v D, where neither entity was so registered but the QFC was designated as the arbitral seat, the QFC Court decided that the QFC Court is the supervisory court in a QFC-seated arbitration, irrespective of whether the parties to the dispute (or either of them) are entities established within the QFC.

C v D demonstrates that the QFC Court has an arbitration-friendly approach. And this would potentially attract entities based in mainland Qatar, primarily foreign entities operating there, to opt for the QFC as the seat of arbitration.

The curial law

QFC-seated arbitration

The QFC Court assumed jurisdiction over the underlying proceedings in C v D. It did so both as the supervisory court in a QFC-seated arbitration, and for the purposes of the relevant mainland statute, Law No. 2 of 2017 (the Qatari Arbitration Law), which invokes the notion of supervisory court by its reference in article 1 to ‘Competent Court’. While the QFC Court’s ruling is unambiguous to the extent of deciding that the QFC Court is the supervisory court for QFC-seated arbitrations, paragraph 6 of the decision has left some room for debate as to the applicable curial law – the QFC Arbitration Regulations or the Qatari Arbitration Law – in a QFC-seated arbitration.

In paragraph 6, the Court held as follows:

As the court of the seat of the arbitration, and the Competent Court under Law No. 2 of 2017 issuing the Law of Arbitration in Civil and Commercial Matters, the Court was satisfied that it had jurisdiction to deal with the application, in circumstances in which an arbitral tribunal could not yet act, or act effectively.

In a recent QFC-seated ICC arbitration, the question of the applicable curial law of a QFC-seated arbitration was discussed. One party contended for the application of the QFC Arbitration Regulations, while the other submitted that the Qatari Arbitration Law was the applicable curial law. The second party relied on paragraph 6 of C v D and article 1 of the Qatari Arbitration Law to argue as follows: (1) article 1 of the Qatari Arbitration Law defines the QFC Court as a Competent Court; therefore, (2) as the Competent Court, the QFC Court should apply the Qatari Arbitration Law in a QFC-seated arbitration; and (3) paragraph 6 of C v D implies that the QFC Court applied the Qatari Arbitration Law in that case, and accordingly, the same principle should apply to a QFC-seated arbitration. (The tribunal in that case has not yet rendered its ruling on the applicable curial law, which is expected to be included in the final award.)

In the authors’ view, this interpretation is misconceived. Further to article 1 of the Qatari Arbitration Law, the Competent Court can be ‘the Civil and Commercial Arbitral Disputes Circuit in the Court of Appeals [in mainland Qatar]’ or the QFC Court ‘pursuant to the agreement of the Parties’. Therefore, parties can nominate the QFC Court as the Competent Court in a Doha-seated arbitration. If, in a Doha-seated arbitration, the parties designate the QFC Court as the Competent Court, the QFC Court must apply the Qatari Arbitration Law. However, in a QFC-seated arbitration, the QFC Arbitration Regulations would be the applicable curial law, not least because article 6 of the QFC Arbitration Regulations provides that ‘Parts 1 to 4 of these Regulations’, which contain all the operative provisions, ‘apply where the QFC is the Seat of an Arbitration’.

This view is consistent with paragraph 6 of the decision in C v D: the QFC Court accepted jurisdiction in that case because (1) it is the supervisory court in a QFC-seated arbitration; and in any event (2) even if it is considered that non-QFC registered entities could not opt for the QFC as the seat, and therefore the arbitration would be deemed to be seated in Doha, the QFC Court could accept jurisdiction as it is the Competent Court under the Qatari Arbitration Law.

The QFC Court as the Competent Court in a Doha-seated arbitration

Article 6(2) of the QFC Arbitration Regulations provides that articles 11, 12 and 23 and Part 4 of the QFC Arbitration Regulations apply where the seat is outside the QFC, regardless of the law of the seat. Accordingly, in a Doha-seated arbitration, the QFC Court would not only apply the Qatari Arbitration Law as the law of the seat, but also the specific provisions set out in article 6(2) of the QFC Arbitration Regulations. This might, at first blush, give the impression that the QFC Court would have to consider potentially conflicting curial laws when acting as the Competent Court in a Doha-seated arbitration.

However, a review of these provisions shows that there would be no such conflict.

Article 11 of the QFC Arbitration Regulations is materially identical to article 8 of the Qatari Arbitration Law: if an action is brought before the QFC Court in a matter which is the subject of an arbitration agreement, and a party challenges the QFC Court’s jurisdiction on that basis before filing its first statement on the substance of the dispute, then the QFC Court must refer the parties to arbitration.

Article 12 of the QFC Arbitration Regulations contains the same principle as article 9 of the Qatari Arbitration Law: parties can seek interim relief from the QFC Court. However, unlike article 9 of the Qatari Arbitration Law, article 12 of the QFC Arbitration Regulations does not limit the circumstances in which the QFC Court can grant such interim measures, namely that the arbitral tribunal does not have jurisdiction or is incapable of acting effectively at the time.

Article 23 of the QFC Arbitration Regulations provides that interim measures granted by an arbitral tribunal are enforceable upon application to the QFC Court. This principle is also enshrined in article 17(3) of the Qatari Arbitration Law. The grounds for challenging the enforcement of an interim measure are more extensive in article 23, which is addressed later in this article.

Part 4 (articles 42 and 43) of the QFC Arbitration Regulations is materially identical to Chapter 7 (articles 34 and 35) of the Qatari Arbitration Law.

Seat: the QFC or Doha?

The QFC Arbitration Regulations and the Qatari Arbitration Law are modelled on the UNCITRAL Model Law on International Commercial Arbitration (the UNCITRAL Model Law). The two statutes are, therefore, materially identical. However, one crucial area of difference is in relation to the grant of interim relief by arbitral tribunals.

The test for interim measures

To begin with, article 17(1) of the Qatari Arbitration Law and article 22(2) of the QFC Arbitration Regulations are materially the same in respect of the type of interim measures or relief that an arbitral tribunal can grant, as they replicate article 17 of the UNCITRAL Model Law. Those measures are: to maintain or restore the status quo pending determination of the dispute; to take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm, or to prejudice the arbitral process; to preserve assets out of which a subsequent award may be satisfied; or to preserve evidence that may be relevant and material to the resolution of the dispute.

However, the QFC Arbitration Regulations go one step further by adopting article 17A of the UNCITRAL Model Law, to provide a stringent legal test that must be satisfied by the party requesting interim relief, as follows:

(A) harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
(B) there is a reasonable possibility that the requesting party will succeed on the merits, provided that any determination on this possibility shall not affect the discretion of the Arbitral Panel in making any subsequent determination.

Therefore, in a QFC-seated arbitration, an arbitral tribunal must apply a two-stage test when deciding applications for interim relief. First, the arbitral tribunal has to determine whether damages are an adequate remedy. If the risk to the applicant is not reparable by damages, then the arbitral tribunal must look at the balance of convenience: in other words, does the harm likely to be caused to the applicant if the relief were not granted substantially outweigh the harm that the respondent would likely suffer if the relief were not ordered? Next, the arbitral tribunal must consider if there is a reasonable prospect of success on the merits. This mirrors the test for injunctive relief under English law, as laid down by the House of Lords in American Cyanamid v Ethicon [1975] AC 396, and therefore will be familiar to common law practitioners in Qatar.

On the other hand, the test under the Qatari Arbitration Law (set out in the operative part of article 17) is that the interim measure is either ‘dictated by the nature of the dispute’, or it is intended for the prevention of ‘irreparable harm’.

While both statutes prescribe a legal test for interim measures, it will be seen that these tests differ greatly. The test under the QFC Arbitration Regulations is stricter than that prescribed by the Qatari Arbitration Law. The notion of relief ‘dictated by the nature of the dispute’ is plainly a broad one, enabling counsel to present a variety of arguments to justify interim relief in light of the underlying dispute between the parties. The alternative test of prevention of irreparable harm is equally wide. While it can be argued that ‘irreparable harm’ ought to mean harm that is not compensable by damages, in the absence of any learning or authority on this issue, it is likely to be a matter that arbitral tribunals will consider on a case-by-case basis. Furthermore, the absence of the need to satisfy the balance of convenience test removes a significant hurdle for granting interim relief.

Enforcement of interim measures

Article 17(3) of the Qatari Arbitration Law provides as follows: ‘The Party in whose favour the order for provisional measures or an interim award is issued may, after it obtains written permission from the Arbitral Tribunal, request the Competent Judge to order the enforcement of the order or award issued by the Arbitral Tribunal, or any part of it . . .’.

Therefore, in a Doha-seated arbitration, if a party succeeds in obtaining an interim measure from an arbitral tribunal, whether by way of a procedural order or an award, it is enforceable, subject to the arbitral tribunal’s written permission. In practice, however, such permission tends to form part of the relevant order or award, thus avoiding the need to obtain permission separately after the event.

On the other hand, article 23 of the QFC Arbitration Regulations sets out a more comprehensive scheme for the enforcement of interim measures. First, article 23(1) provides that an interim measure is automatically binding, unless otherwise stated by the arbitral tribunal, and that it is enforceable upon an application to the QFC Court. Notably, the last sentence of article 23(1) recognises the enforcement of interim measures issued outside Qatar, prescribing that such a measure can be enforced ‘irrespective of the country in which it was issued’.

That said, article 23(2) sets out various grounds on which the QFC Court can refuse to enforce an interim measure granted by an arbitral tribunal. These grounds are divided into two categories: (1) where the application to refuse enforcement is made by a party; and (2) grounds that the QFC Court can consider on its own initiative. Of particular interest is the following ground for refusal: ‘the interim measure is incompatible with the powers conferred upon the [QFC Court], unless the [QFC Court] decides to reformulate the interim measure to the extent necessary to adapt it to its own powers and procedures for the purposes of enforcing that interim measure and without modifying its substance.’ There is no guidance by way of authority or otherwise as to which matters are considered ‘incompatible’ with the QFC Court’s powers. Likewise, the power to reformulate (or amend) an interim measure is wide-ranging. Unless there is clarity provided on this issue by the QFC Court, whether through case law or practice direction, it is difficult to gauge the extent to which the QFC Court can exercise the power to reformulate interim measures granted by arbitral tribunals.

Enforcement of arbitral awards

The QFC Arbitration Regulations and the Qatari Arbitration Law are founded on the UNCITRAL Model Law. For this reason, the grounds for challenging or setting aside an arbitral award are materially identical in each. However, they prescribe different time limits for making such an application: under the Qatari Arbitration Law, it is one month from the date of receipt of the award (or the corrected award), whereas the QFC Arbitration Regulations set a three-month period.

Furthermore, under article 41(2)(B)(ii) of the QFC Arbitration Regulations, an award can be set aside if it is against the ‘interest of the QFC’. On the face of it, this appears to be more limited than the general ground of ‘public policy’, which is the term used in article 33(3) of the Qatari Arbitration Law. However, this matter has yet to be decided by the QFC Court.

Other factors

As the QFC Court can be designated as the Competent Court in a Doha-seated arbitration, if parties wish to avail themselves of the QFC Court, they do not need to prescribe the QFC as the seat. Therefore, the question arises if there is any advantage in choosing the QFC Court as the supervisory court, whether by way of a QFC-seated arbitration or by designating the QFC Court as the Competent Court in an arbitration seated in Doha.

It might be thought that the QFC Court is more expeditious than mainland courts, not least because the volume of litigation in the mainland Qatari courts is higher. Further, the QFC Court provides a more diverse and international pool of judges, including those with significant experience of international arbitration – such as the current President of the QFC Court, Lord Thomas of Cwmgiedd, who is the former Lord Chief Justice of England and Wales – and a very efficient registry in charge of the administration of cases.

Unlike in the mainland Qatari courts, there is no obligation on parties before the QFC Court to instruct local counsel. This is because any practitioner who has rights of audience before the higher courts of their home jurisdiction is permitted to appear before the QFC Court. In consequence, there is an obvious cost saving.

Furthermore, where the QFC is the seat, parties can rely on English law principles if an issue is not addressed in the QFC Arbitration Regulations: see Chedid & Associates Qatar LLC v Said Bou Ayash [2015] QIC (A) 2 at paragraph 18 and Leonardo SpA v Doha Bank Assurance Company LLC [2020] QIC (A) 1 at paragraphs 42–45.

Conclusion

While Doha and the QFC have materially identical arbitration laws, the QFC is still in its infancy as an arbitral seat. Doha-seated arbitrations are certainly more commonplace, and it is rare to see parties choosing the QFC Court as the Competent Court. This is because local entities and businesses who wish to arbitrate under the Qatari Arbitration Law tend to be more familiar with the mainland Qatari courts and their supervisory regime. For the same reason, where a party wishes to have the QFC Court as the supervisory court, it would likely opt for the QFC as the seat. Indeed, in the authors’ view, there is much to commend the QFC as an arbitral seat, including the high quality of the judiciary.

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