QATAR: An Introduction to Dispute Resolution
Introduction to Dispute Resolution in Qatar
The post-world cup period in the State of Qatar witnessed the promulgation of significant legislation relating to ‘Dispute Resolution’.
Qatar has adopted the civil-law legal system, with some legislation harmonised with the principles of Islamic law. However, recently, as a result of international exposure and diversification of investments in Qatar, Qatar has started to adopt model laws for commercial matters.
For a legal practitioner in Qatar, it is essential to observe the changes in the legal environment, due to the increase of foreign investors entering the market and the corresponding updates in business legislation. This overview will shed some light on the key issues in the legal and commercial environment that may be most relevant to clients.
Developments of the Dispute Resolution system in Qatar: Effects on Clients and the Legal Profession
Though the pandemic slowed down the evolution of the legal system, Qatar regained its potential quickly and hosted the FIFA World Cup 2022, without any kind of organisational disputes. The State implemented drastic developments in the judicial sector after overcoming the sequential hurdles of the ‘blockade’ and the ‘pandemic’, followed by the challenge of presenting the World Cup.
Attracting FDI
Furthermore, the Qatari government offered business incubators and free economic zone platforms to attract foreign direct investment, such as the Qatar Financial Centre (QFC). Setting up a business in the QFC is easy. After submitting your application, a relationship manager will guide you through the process of registering, obtaining a license, and beginning operations. Companies established under the QFC responsibility can be fully owned by foreign investors. Moreover, with QFC, certain fees are applicable, such as establishment fees (around USD5,000) and annual fees (between USD500–5,000). These are used by the platform to assess the strategic fit and the benefit of your company to Qatar.
As an alternative to starting a new business, buying a business that is operating and making a profit (a going concern) can make the process more straightforward, as this doesn’t involve lodging capital, obtaining sponsorship, or registration. All you have to do is agree on a price and transfer the ownership of the business. Further, it has been made easier for expats per the new laws to retain full ownership of the company if they open their business in a free trade zone, which entitles them for 100% repatriation of profits and a possible 20 years’ tax holiday.
Updates to Anti-Money Laundering Regulations
Additionally, the legislature updated several anti-money laundering regulations and imposed specific obligations on companies, as well as their boards and managers, such as those imposed under the decision of the Minister of Commerce and Industry No. 2 of 2022 on Fulfilling the requirements for combatting Money Laundering and Financing of Terrorism connected with the Commercial Companies. Law No. 3 of 2023 has been promulgated replacing Law No. 25 of 2004, to combat the concealment of non-Qataris practicing commercial, economic, and professional activities in violation of the law.
The aims of the new Law include:
ensuring fair practices in commercial transactions,
establishing an investment friendly environment,
stability to law-abiding commercial entities,
fair reporting of concealed cases,
healthy collaboration between government and private entities,
prevention of further concealment by imposing penalties, collecting State’s rightful taxes etc.
Qatar also made some important amendments to the Tax Law of 2018 by promulgating Law no. 11 of 2022, in order to:
align with international practices especially on Global minimum tax,
to expand the scope of income tax,
to help relieve from foreign taxes,
and also to increase transparency and accountability.
The executive regulations of 2019 were also amended by the Council of Minister’s decision No. 3 of 2023, thus enabling specific definition to Permanent Establishment, extension of powers to the Tax Authority and enhanced reporting requirements to entities.
The Level of Activity, Trends and Developments in Your Area
The Law No. 21 of 2021 on Investment and Commerce Court law has had the greatest effect, as the Investment and Trade Court which is the first commercial court started functioning in 2022. The Court is set up in all three levels of litigation and delivers a superior quality of Judgment and a level of specialisation in the performance of judges. The new law managed the Commercial Court’s system with unique provisions, to shorten the length of proceedings and overcome the procedural challenges.
Moreover, amendment of some provisions of the Commercial Companies Law Number 11 of 2015 (the Companies Law) by Law Number 8 of 2021 (the Amending Law), has introduced significant changes to the Companies Law, enhancing the legal and regulatory framework in the State of Qatar. The substantive changes introduced by the Amending Law relate to, amongst other things, the governance of companies; anti-money laundering and counter-terrorist financing (AML/CTF); attendance and voting at general assembly meetings; disclosure and reporting requirements; conflicts of interest; and ownership of shares by subsidiaries. The Amending Law also introduces changes to align the Companies Law with the Qatar Financial Markets Authority (QFMA) Board Decision Number 5 of 2016 issuing the QFMA’s Governance Code (the QFMA’s Governance Code).
The Amending Law strengthens the rules on conflicts of interest and recognises the concept of senior executive management. The Amending Law requires the chairman, members of the board of directors, and senior executive management of a public shareholding company to periodically disclose to the general assembly the positions they occupy, whether in a personal capacity or as representatives of other legal persons. A member of the senior executive management of a company is not permitted to participate in any business or activity that competes with the business or activity of the company, unless approval is obtained from the general assembly. This restriction on participation in competing business previously only applied to the chairman and members of the board of directors.
In-addition, the Law introduces the definition of a minority shareholder, which is consistent with the QFMA’s Governance Code. It further protects the rights of minority shareholders by requiring that an offer be made to the minority shareholders in the case of an acquisition of 50% or more of the company’s share capital. Additionally, under the Amending Law, the articles of association of a public shareholding company may allocate one or more seats on the board of directors for representatives of minority shareholders, and one seat for a representative of the employees in the company.
Further, as per the Commercial Registration Law, commercial registration can only be valid for one year renewable 30- days before the expiration date noted on the commercial registration. The Ministry has the right to delete a person’s registration if the renewal process is not completed within a 90-day period from the date the relevant person is notified of the requirement to renew the commercial registration. This helps expedite the registration and renewal procedures in response to demands from the business community. It achieves this in a number of ways, including removing the need to go to court to appeal a decision on registration. Now such applications are heard by the Minister of Economy and Commerce, which will be a more efficient process as the Minister must decide the application within 15 days of receiving it.
This is clearly observed through our lenses as lawyers as we see our legal services have increasingly sought to assist in the establishment of those new companies. There is no doubt that this globally followed event, will have a formidable impact on Qatar’s continuous economic growth which will of course positively affect the legal field.
Difficulties Faced by Clients and How These Can be Overcome
The courts have transitioned to a different system following the issuance of the law on the Establishment of the Investment and Commerce Court. The new law has a number of provisions with the purpose of reducing the length of proceedings, and unnecessary adjournments. More than before, clients are seeking legal guidance about compliance requirements related to corporate law. There have also been some disputes before disciplinary councils and courts related to violations of the requirements for combatting money laundering. We can definitively say that compliance is the trend, and most particularly compliance with anti-money laundering regulations and guidelines. Furthermore, the amendments changed some rules related to holding companies and shareholders’ rights in the context of liability claims of managers or board of directors. Clients are expected to carefully consider the new amendments to the Commercial Companies Law, for compliance purposes.
It has been, however, difficult for clients to comprehend how the system has been changing after the recent procedural developments. These hurdles require close guidance from lawyers who are experts, not only in the procedural law, but in the way the court’s internal system functions in reality.