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What statutes or regulations govern procurement of defence and security articles?
Law No. 24 of 2015 Promulgating the Law Governing Tenders and Auctions (the Tender Law) governs the procurement of contracts by government ministries and other public bodies.
However, the armed forces, police and other military entities are not required to comply with the Tender Law when the tender relates to a matter that is considered confidential in nature (article 2 of the Tender Law).
In practice, all contracts procured by the armed forces and the police will be considered confidential in nature so will not be subject to the Tender Law.
How are defence and security procurements identified as such and are they treated differently from civil procurements?
As above, the armed forces, police and other military entities are not required to comply with the Tender Law when the contract relates to a matter that is considered confidential in nature.
How are defence and security procurements typically conducted?
Defence and security procurement is usually conducted directly by the relevant entity. For example, the army, air force, navy and the Ministry of Interior will usually conduct their own procurement exercises.
Where the matter is considered confidential in nature, the procurement process may be restricted to certain preferred bidders or the procurement may be made directly with a single supplier.
Are there significant proposals pending to change the defence and security procurement process?
No. The most recent version of the Tender Law came into force in June 2016, so (as of the time of writing) we are not expecting any further substantial changes.
Are there different or additional procurement rules for IT versus non-IT goods and services?
Information technology procurement is not treated differently. If an information technology contract is procured by the armed forces, police or another military entity then, in most cases, it will be considered confidential in nature and the Tender Law will not apply.
Are most defence and security procurements conducted in accordance with the GPA or other treaty-based procurement rules, or does this jurisdiction commonly use the national security exemption to procure them?
Qatar is not a signatory to the GPA.
Qatar has entered into bilateral defence treaties with several important defence partners such as the United States and France. However, the provisions of these treaties do not impact the way the defence contracts are procured.
Disputes and risk allocation
How are disputes between the government and defence contractor resolved?
Owing to the confidential nature of the issues involved, arbitration agreements are usually included in contracts between state entities and international defence contractors. The arbitration is usually conducted under the rules of the International Chamber of Commerce, the London Court of International Arbitration or the Qatar International Center for Conciliation and Arbitration. It is important to ensure that state entities are authorised to enter into an arbitration agreement.
Most disputes are resolved before formal arbitration proceedings are commenced.
Contracts will generally be governed by the laws of Qatar, but there are precedents of state entities accepting a foreign law (such as Swiss law) as applicable to a defence contract.
To what extent is alternative dispute resolution used to resolve conflicts? What is typical for this jurisdiction?
As above, most contracts include an arbitration agreement. Other forms of alternative dispute resolution, such as mediation, conciliation and expert determination, are relatively unusual in Qatar.
What limits exist on the government’s ability to indemnify the contractor in this jurisdiction and must the contractor indemnify the government in a defence procurement?
The term ‘indemnification’ is not specifically recognised under Qatar law, and there are no statutory provisions limiting the state’s ability to indemnify contractors or specifically requiring defence contractors to indemnify the state.
Limits on liability
Can the government agree to limit the contractor’s liability under the contract? Are there limits to the contractor’s potential recovery against the government for breach?
Most contracts in the defence sector include both a total cap on liability (this is often the purchase price or total fee) and an exclusion of indirect and consequential loss and loss of profit.
These limitations and exclusions are generally enforceable but must be carefully drafted because article 170(2) of the Qatar Civil Code (Law No. 22 of 2004) provides that they will be interpreted narrowly (ie, to limit the scope of the exclusion).
On the basis that most significant defence contracts will not be subject to the Tender Law (see questions 1 and 2), there will be no statutory or regulatory limitations on the liability of the state or of the defence contractor.
Risk of non-payment
Is there risk of non-payment when the government enters into a contract but does not ensure there are adequate funds to meet the contractual obligations?
State entities need to agree a budget with the Ministry of Finance before entering into a contract. Payment delays can occur where that budget is exceeded, for example, because of variations.
Under what circumstances must a contractor provide a parent guarantee?
For major contracts, the state will likely insist that a parent company guarantee is provided. A performance bank guarantee (payable on demand) will also be required for almost all contracts.
Defence procurement law fundamentals
Mandatory procurement clauses
Are there mandatory procurement clauses that must be included in a defence procurement contract or that will be read into the contract regardless of their actual inclusion?
There are no mandatory provisions specifically relating to the procurement of defence contracts, but there are mandatory provisions under Qatar law that will apply to all contracts. These include:
- an obligation to act in good faith (article 172 of the Civil Code);
- article 171(2) of the Civil Code, which provides that the court may reduce a party’s obligations to a reasonable limit where there is an event that:
- is exceptional;
- could not have been foreseen;
- renders performance of a party’s obligations onerous; and
- threatens that party with substantial loss; and
- article 266 of the Civil Code, which permits a court to reduce the amount of liquidated damages agreed between the parties where the debtor can show that they are excessive or that the obligation was partially fulfilled.
How are costs allocated between the contractor and government within a contract?
Most contracts will be a fixed price, but there is no defined method of procuring defence contracts and the procurement method will depend on the nature of the thing being procured.
What disclosures must the contractor make regarding its cost and pricing?
There are no statutory requirements and this will depend on the express provisions of the tender and contract.
How are audits of defence and security procurements conducted in this jurisdiction?
It is unclear if there are any audits being conducted on the procurement process conducted by the various state agents. A body called the State Audit Bureau has, in theory, the power to audit procurement processes. However, the law regulating the powers of the State Audit Bureau specifically excludes defence and security matters from its jurisdiction.
Who gets the ownership rights to intellectual property created during performance of the contract? What licences are typically given and how?
Foreground intellectual property (IP) management in Qatar needs to be considered carefully; in particular, there are statutory restrictions on future assignment of copyright that can often be difficult to manage. Qatar does not have a ‘works for hire’ doctrine in its IP legislation and there are prohibitions around the waiver of moral rights (the Qatari Copyright Law, articles 10 and 11). The assumption, therefore, is that the individuals who provided the creative input would be the first owners.
Depending on the specific nature of the defence and security project, original equipment manufacturers and other vendors in the sector are generally amenable to granting certain exclusivity. However, the commercial terms are often heavily negotiated. With ‘IP rich’ projects with any sort of industrial element in Qatar and the wider Gulf region, there is a greater emphasis on ancillary know-how licences and knowledge-sharing obligations upon the foreign licensor.
With regard to patent protection, Qatar became bound to the Patent Cooperation Treaty system in August 2011 and had enacted its first domestic patent law in 2006 with Law 30 of 2006. Notwithstanding this, patent filings from Qatar remain relatively low.
If defence and security projects in Qatar have the potential to yield jointly developed novel inventions, a protocol around disclosure and management of a filing programme should be considered in the relevant contract.
Are there economic zones or other special programmes in this jurisdiction commonly utilised by foreign defence and security contractors for financial or other procurement-related benefits?
There is a separate and distinct regime for establishing companies in the Qatar Financial Centre (QFC), which allows 100 per cent foreign ownership and has been put in place primarily to attract international financial services companies (but also some support functions and since 2014 wider activities outside the financial services sector) to come to Qatar.
The QFC was established by the government of Qatar and is located in Doha.
The QFC was originally intended to provide an environment solely to attract international and domestic financial services institutions and service providers in support of those institutions to encourage participation in the growing market for financial services in Qatar and elsewhere in the region.
However, the QFC is now willing to accept applications for business registration from other types of service providers that are not associated with the financial services sector, for example, in the fields of engineering-related scientific and technical consulting activities; and project management.
The QFC has recently approved applications from defence contractors to set up entities dedicated to business development and provision of technical assistance services (provided there is no import or export of equipment). See ‘Update and trends’ regarding developments on the QFC.
The process for incorporation in the QFC is more user-friendly than in ‘mainland’ Qatar, and after initial meetings are held with the QFC Authority to determine the ‘strategic fit’ of an applicant company, the QFC Authority appoints a representative with whom an applicant can coordinate regarding documents to be prepared and submitted during the process.
Forming legal entities
Describe the process for forming legal entities, including joint ventures, in this jurisdiction.
As far as mainland Qatar is concerned, foreign investors may only invest in Qatar in accordance with the provisions of the Foreign Capital Investment in Economic Activities Law (No. 13 of 2000), as amended (the Foreign Investment Law).
Foreign investors may invest in all parts of the national economy (other than in the case of certain exceptions) with a Qatari partner who must normally own at least 51 per cent of the enterprise.
The Ministry of Economy and Commerce may permit foreign investors to own more than 49 per cent and up to 100 per cent of a company in specified sectors called the ‘priority sectors’, namely business consulting; technical services; information technology; cultural, sports and leisure services; distribution services; agriculture; manufacturing; health; tourism; development and exploitation of natural resources; energy and mining.
A completely new Foreign Investment Law may be issued in the near future, replacing the current law. However, we do not have details of the new law or when the new law will take effect. Accordingly, our responses to these queries, at least with reference to any mainland Qatar option, are subject to what may be provided for in this new law.
The incorporation and organisation of companies is governed by the Commercial Companies Law (No. 11 of 2015) (the Commercial Companies Law), which came into effect in August 2015. The Commercial Companies Law regulates the types of company that may be established in Qatar.
The following are required in order to incorporate a company and obtain a commercial registration:
- memorandums and articles of association in Arabic, which conform with the standard form provided by the Ministry of Economy and Commerce and have been approved by the Ministry;
- notarised, authenticated and consularised copies of the foreign company’s certificate of incorporation, memorandum and articles of association and board resolution or power of attorney authorising someone to act on its behalf to establish a company in Qatar;
- a letter from a Qatar bank indicating the deposit of the share capital at that bank; and
- Qatar Chamber of Commerce Registration (issued simultaneously with the Commercial Registration certificate, which will confirm Chamber membership).
Once the company has been incorporated and the Commercial Registration issued, the share capital can be released to the company’s directors or the general manager for the purposes of running the company. The following licences must then also be obtained:
- a commercial licence;
- a signage licence; and
- an immigration card.
A foreign company that has a contract with the government of Qatar or a quasi-government entity may be able to register a branch office (as opposed to incorporating a Qatar company) if it has entered into a contract in respect of a ‘government qualified project’. Historically, most defence contractors have established themselves as a branch office, on the basis of a contract with the Qatar armed forces or the Ministry of Interior.
The following are required in order to register a branch office and obtain a Commercial Registration:
- a stamp to be affixed by the government entity on an application containing the particulars of the contract;
- authorisation from the Ministry of Economy and Commerce to establish a branch;
- notarised, authenticated and consularised copies of the foreign company’s certificate of incorporation, and memorandum and articles of association;
- a notarised, authenticated and consularised power of attorney from the foreign company to the manager of the branch; and
- Qatar Chamber of Commerce Registration (issued simultaneously with the Commercial Registration Certificate, which will confirm Chamber membership).
Once the branch has been approved and the Commercial Registration issued, the following licences must also be obtained:
- a commercial licence;
- a signage licence; and
- an immigration card.
If applicable, the company or branch may also need to be entered in the Importers’ Register or Contractors’ Register.
It is also possible to register a trade representative office (TRO), which may essentially only be used to promote a foreign company in Qatar so as to introduce it to Qatari companies and projects, through marketing and promotions. A TRO may not be engaged in selling or entering into contracts in Qatar. Business must be carried out by the foreign entity (where the contract can be performed substantially outside Qatar) or by a company or branch authorised to do business in Qatar.
Access to government records
Are there statutes or regulations enabling access to copies of government records? How does it work? Can one obtain versions of previous contracts?
There is no formal process to access such records.
Supply chain management
What are the rules regarding eligible suppliers and supply-chain management and anti-counterfeit parts for defence and security procurements?
International trade rules
What export controls limit international trade in defence and security articles? Who administers them?
There is no home-grown defence industry in Qatar to date, and therefore no export of locally manufactured weapons. Export control regulations from the defence suppliers’ countries of origin usually contain restrictions on the ability for a state client to re-export equipment to other countries. Each force purchasing foreign equipment will be in charge of managing its export control obligations.
What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?
The preference is to contract directly with a foreign contractor who will set up a branch office to perform the local part of the contract. However, there are recent examples where the Qatar armed forces request the incorporation of a subsidiary with a designated joint venture partner. See ‘Update and trends’ regarding developments on Barzan Holdings.
Are certain treaty partners treated more favourably?
Qatar has signed defence cooperation treaties with a number of countries, the two main partners being the United States and France. In particular, there is a SOFA (Status of Forces Agreement) between the United States and Qatar to serve as a legal basis for the presence of a large US military base in Qatar. However, Qatar tends to diversify its alliances and has recently signed a defence cooperation agreement with Turkey. The existence of such defence treaties tends to signal a strategic relationship. Yet, to the best of our knowledge, the treaties do not grant any more favourable treatment from a commercial or legal perspective when it comes to buying equipment.
Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?
Qatar has issued the Qatar Israeli Boycott Law No. 13 of 1963. This law is still in effect and has not been formally amended. The effect of the law is that it prohibits any commercial dealings with Israeli citizens or persons directly or indirectly, which would include any such persons exercising any contractual rights under contracts. In addition, sanctions implemented by Qatar from time to time should be assessed, which can affect transfers or payments with relevant countries, or certain entities or individuals within those countries. See ‘Update and trends’ regarding the current Gulf crisis.
Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?
There is no formal defence offset regime in Qatar, but we have seen some recent examples where delivering some added value locally (beyond maintenance and training) was considered favourably by the Qatar armed forces. See ‘Update and trends’ regarding developments on Barzan Holdings.
Ethics and anti-corruption
Private sector appointments
When and how may former government employees take up appointments in the private sector and vice versa?
There are no restrictions relating to former government employees joining the private sector or former private sector employees joining government entities.
How is domestic and foreign corruption addressed and what requirements are placed on contractors?
There is no specific law in Qatar governing corruption. However, the Qatar Penal Code (Law No. 11 of 2004) includes provisions relating to the bribery of public officials, which is widely defined to include employees and those working in ministries, other government agencies, authorities and public institutions as well as:
- arbitrators, experts, administrators, liquidators and receivers;
- chairmen and members of the board of directors and all other employees in private institutions and associations, cooperatives and companies if one of the ministries, or other government agency, authority or public institution is a shareholder therein;
- anyone who carries out work relating to public service upon instructions from a public official; and
- chairs and members of legislative committees and the municipality committees and others who have a public representative type role whether appointed or elected.
Additionally, government entities, including ministries and other authorities (with some exceptions), as well as companies in which the government holds a majority shareholding, private institutions for public benefit and pensions funds are subject to the supervision of the State Audit Bureau. Pursuant to Law No. 11 of 2016, the State Audit Bureau has the right to review the accounts of entities subject to its supervision and to prosecute the perpetrators of any financial irregularities.
The provisions of the Qatar Tender Law No. 24 of 2015, which apply to all government ministries and other public institutions (with certain exceptions), provide for a contract awarded to a contractor being void if it is proven that the contractor used fraud or manipulation in obtaining or performing the contract or if it is proven that the contractor either directly or indirectly bribed a government official.
There are no provisions relating to foreign corruption. However, Qatar has ratified the United Nations Convention against Corruption and the 2010 Arab Convention for Fighting Corruption, which include definitions of foreign public officials (ie, public officials who may be in Qatar but exercising the function on behalf of a foreign country). However, there are no specific provisions reflected in domestic law.
What are the registration requirements for lobbyists or commercial agents?
Generally, any person undertaking business activities in Qatar needs to be licensed by the Ministry of Economy and Commerce and various other agencies. In addition, commercial agencies in Qatar fall into two categories. There is a category of registered agents that are governed by the Commercial Agencies Law (Law No. 8 of 2002: Registered Agencies) and unregistered agencies that are governed by the Commercial Code (Law No. 27 of 2006: Unregistered Agencies). Registered agencies must be registered at the Ministry of Economy and Commerce. There may be internal rules and practices within government departments that require that only ‘approved’ intermediaries be used.
Limitations on agents
Are there limitations on the use of agents or representatives that earn a commission on the transaction?
There are no such limitations in laws. However, internal rules and practices within government departments may impose such limitations.
The general position under Qatar law is that the parties are free to contract and as such there are no restrictions on the amounts to be paid. However, the law governing registered agencies imposes a limit on commission received. Such commission must be restricted to 5 per cent of the value of the goods sold.
Conversion of aircraft
How are aircraft converted from military to civil use, and vice versa?
What restrictions are there on manufacture and trade of unmanned aircraft systems or drones?
In March 2017, Qatar’s civil aviation authority issued Regulation No. 5 of 2017 covering the registration requirements and permissible uses of unmanned aircraft systems (UAS), depending on the category to which a UAS belongs.
Which domestic labour and employment rules apply to foreign defence contractors?
Except for Qatar Petroleum (and its related companies), security guards, housemaids and agricultural workers, all private sector contracts of employment are governed by Labour Law No. 14 of 2004. Such contracts must be in Arabic (or bilingual) and approved and registered with the Ministry of Labour and Social Affairs.
In particular, employers outside the QFC should be aware of the requirement to pay an end-of-service benefit to employees who have been employed for at least 12 months. Such benefit must not be less than three weeks’ salary for every year of employment.
Companies established and regulated under the QFC have their own different employment regulations governing the relationship between the QFC employer and the QFC employees.
In the case of mainland Qatar and the QFC, companies will need to obtain residence and work permits for their expatriate staff.
All expatriate employees must be sponsored by their corporate employer, who is responsible for them while they are in Qatar.
Defence contract rules
Are there any specific rules that contractors, foreign or domestic, are bound by in defence contracts?
There are no specific rules except in terms of procurement process (see question 3).
Do contractors avail themselves of these rules when they perform work exclusively outside of the jurisdiction?
Must directors, officers or employees of the contractor provide personal information or certify that they fulfil any particular requirements to contract with a government entity?
There is no such specific requirement prior to entering into a contract. When an employee of a defence contractor wishes to become a resident, he or she should, however, tender a legalised and translated police clearance certificate from his or her country of origin.
What registration or licensing requirements exist to operate in the defence and security sector in the jurisdiction?
See question 19.
What environmental statutes or regulations must contractors comply with?
No specific regulations apply. Any industrial activity carried out in Qatar would, however, need to comply with Law No. 30 of 2002 on Environmental Protection.
Must companies meet environmental targets? What are these initiatives and what agency determines compliance?
Do ‘green’ solutions have an advantage in procurements?
Updates & Trends
Updates & Trends
Updates and trends
As was the case last year, the main development remains the regional crisis between Qatar and several of its neighbours (ie, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt), which erupted early in June 2017. Despite efforts by various parties to mediate this crisis, it still has not been resolved at the time of writing and there are no apparent signs of a solution in the near-term. Consequently, the Qatari authorities have taken measures to pursue the long-term development of the country without relying on its neighbours and former allies. In that context, the defence sector is still very dynamic. Qatar has continued its buying spree from various countries, thus both modernising its equipment, deterring potential hostile neighbours and cementing relations with key allies.
One key development since last year is the establishment of Barzan Holdings, which was made official in March 2018 on the occasion of the DIMDEX Defence Exhibition. Barzan Holdings is a commercial company, established in the Qatar Science & Technology Park (QSTP), and owned by the Ministry of Defence of Qatar. The role of Barzan Holdings is to become the joint venture partner of reference in a number of defence programmes, to promote the development of a home-grown defence industry and to support research and development defence activities in Qatar. We are aware that several joint venture companies between Barzan Holdings and foreign defence contractors were set up in 2018 (also in the QSTP) and others are under negotiation.
The other notable development is the establishment of several defence companies under the umbrella of the QFC through wholly foreign-owned subsidiaries or branches whose business scope usually focuses on project management and technical assistance activities. This new development allows defence contractors who are not required to team up with Barzan Holdings to establish themselves without a local partner and in a form that is more permanent than the project branch, whose life expectancy is directly related to the duration of a contract for which it has been set up.