Introduction
Changes already in place
Anticipated changes
Comment
Introduction
Following the announcement that Qatar will host the 2022 FIFA World Cup, significant growth is expected in the country, especially in the construction and infrastructure sectors. Several major projects are envisioned for the event, including the construction of 12 stadiums, multiple five-star hotels, world-class rail and metro network systems, Doha Festival City, Barwa Commercial Avenue, the new Doha International Airport and several other infrastructure projects, including bridges and tunnels.
Since the announcement of the winning bid, the Qatari government has made important changes in its legal system. It further anticipates introducing additional changes in the near future that will impact on the construction industry. The most relevant changes are outlined below.
Changes already in place
Introduction of New Green Building Code
Construction companies willing to participate in the proposed construction projects in Qatar will need to comply with the New Green Building Code.(1) Qatar is keen to encourage sustainable, environmentally friendly development and is committed to a greener future. However, the impact on construction project costs remains to be determined. The expected changes include providing a 'green area' in offices, setting up an environmentally friendly waste-management system and encouraging recycling.
Changes in Gulf Cooperation Council investments
Gulf Cooperation Council companies are now allowed to establish a legal presence in Qatar without a Qatari partner having at least a 51% stake of the company.(2) This will attract construction companies which will be entitled (subject to prior approval from the Ministry of Business and Trade) to conduct business in Qatar without the need to team up with a local partner.
Establishment of Anti-corruption Department
Emiri decision 75/2011 established severe penalties for breaching anti-corruption rules, ranging from large fines to lengthy prison sentences. All legal entities and persons doing business in Qatar, including construction-related entities, are bound by this decision.(3)
Anticipated changes
Construction Code
Legislators are currently working on a New Construction Code, which is expected to be enacted before the end of 2012.
Draft Arbitration Code
Legislators are working on a separate Arbitration Code. Contractors, engineers and other parties in the construction industry may wish to follow closely any changes to the arbitration regime in Qatar. Arbitration has been the preferred dispute resolution mechanism in many other projects, and it can be expected that World Cup projects will also be subject to arbitration.
Draft law relating to the hotel industry
A special law regulating the hotel industry is expected to be enacted in the near future.
Draft law regulating rolling stock (railway and metros)
As part of its bid, Qatar indicated that it would be providing a railway network connecting the Gulf Cooperation Council countries, as well as a metro system connecting the 12 World Cup 2022 stadiums. It is expected that the government will issue special regulations for the rolling stock sector.
Changes to labour laws
Given that approximately 90% of the Qatari labour force works on construction projects, legislators are discussing the need to introduce a mandatory minimum wage, as well as additional benefits (eg, health insurance) applicable to construction workers.
Anticipated changes to sponsorship law
As the law currently stands, an employee requires his or her sponsor's permission before he or she can leave Qatar or change employer. In order to attract more foreign investors and labour staff, the sponsorship law is likely to be relaxed to allow for greater freedom of movement.
Changes to foreign investment laws
It is expected that the current 51% Qatari ownership rule will be relaxed. The media has also reported that by the end of 2012 foreign investors should be entitled to hold larger stakes in public shareholding companies.(4)
Changes to property ownership laws
It is expected that the areas where foreigners may own real property will be expanded.(5) However, the government has yet to make an official announcement.
Comment
The construction sector is likely to be one of the main drivers of local growth in Qatar in the years leading up to the 2022 FIFA World Cup. In light of the expected changes to the Qatari legal system, construction companies could soon find it easier to do business in Qatar.
For further information on this topic please contact Melina Llodra or Georges Racine at Lalive by telephone (+41 22 319 87 00) or email ([email protected] or [email protected]). Alternatively, please contact Marcus Boeglin or Ramy Saleh at Lalive in Qatar by telephone (+974 4496 7247) or email ([email protected] or [email protected]).
Endnotes
(1) Qatar Construction Standards 2010, Section 7.
(2) Law 13/2000 in relation to the Foreign Investment Law states that a foreign investor may not own more than 49% in the shares of the capital of a local company subject to the exceptions under Article 2.2 (Article 2.1).
(3) Emiri decision 75/2011 establishing the Administrative Control and Transparency Authority.
(4) Law 13/2000 states that a foreign shareholder cannot own more than 25% of shares in the capital of a public shareholding company.
(5) Law 17/2004 states that foreigners are able to own real property in Qatar in the areas of the Pearl, West Bay Lagoon and Al Khor Resort.