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.
Cost allocation

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.

Disclosures

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.

Audits

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.

IP rights

Who gets the ownership rights to intellectual property created during performance of the contract? What licences are typically given and how?

Foreground intellectual property 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 intellectual property 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 intellectual property 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.

Economic zones

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) and in free zones administered by the Qatar Free Zones Authority (QFZA), which allow 100 per cent foreign ownership.

The QFC 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).

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.

The QFZA now accepts applications from foreign companies wishing to establish in either of the two free zones that have been established to date, namely Ras Bufontas - Airport Free Zone, which seeks to attract industries including logistics, consumer products, light manufacturing, services, technology and applications, and pharmaceuticals; and Umm Al Houl - Port Free Zone, which seeks to attract industries including maritime, polymers and plastics, advanced manufacturing and logistics.

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 invest in Qatar in accordance with the provisions of the Foreign Capital Investment in Economic Activities Law (No. 1 of 2019) (the Foreign Investment Law).

In summary, the Foreign Investment Law.

Repealed the previous Foreign Investment Law No. 13 of 2000;

  • Makes it clear that foreign investment can be up to 100 per cent in all economic activities, except for banking, insurance (unless an exemption is issued by the Council of Ministers), commercial agencies and certain government-owned entities.
  • Requires an application to be made with the Ministry of Commerce and Industry. A decision must be made within 15 days from date the application is complete. An appeal against a rejection can be made to the Minister, who must make a decision in relation to the appeal within 30 days.

The Ministry of Commerce and Industry to issue Executive Regulations that will set out more detail about the implementation and means of enforcement of the Foreign Investment Law, but at present it is not clear when those Executive Regulations will be issued. Until such time, the previous regulations shall apply to the extent they are not contrary to the new Foreign Investment 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 Commerce and Industry 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 is awarded 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 Commerce and Industry 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?

Not applicable.