QATAR'S successful bid for the 2022 Fifa World Cup has injected much enthusiasm into the region’s construction market and is seeing an influx of contractors, consultants and sub-contractors looking to obtain advice on how to set up and apply for commercial operation licences ready for when tender packages are announced.

Since the announcement, Qatar is now firmly placed on the international stage with the world’s media focusing on the guaranteed construction of stadiums, hotels and infrastructure. In addition, industry insiders have begun to speculate about the opportunities the World Cup will bring to the Middle East and what this means for regionally and internationally based contractors, tourism and retail. The general consensus is that Qatar will be “the place to be” for the next decade.

The current proposal estimates the construction expenditure over the next 11 years to reach the $50-billion mark. Outlined in Qatar’s Fifa proposal are nine stadiums (all equipped with cooling facilities), 24 venue-specific and 34 team-based hotels, and 32 team-based training sites and three stadiums to undergo major renovation. In addition, there will be a plethora of infrastructure projects undertaken in Qatar, and possibly the region, to effectively facilitate the event.

It will be interesting to see how the current market players adapt to the scale of the construction required to host such a major sporting event, particularly, given that sporting infrastructure has taken a back seat in recent years to the more commercial oil and gas, hotel and leisure, residential and commercial developments.

While there are indeed great opportunities for contractors and consultants based in the region, there are already reports that authorities are limiting the number of construction and consultancy licences that are being issued to market newcomers. The limiting of such licences will clearly have far-reaching implications. One such impact may be demand being potentially higher than supply. If this is the case, there may be considerable price repercussions on construction materials which may increase the overall cost of construction.

There are those that are already concerned with the potential impact on available resources, appetite for risk and, of course, pricing. Coupled with this are the general constraints which apply to any entity wishing to establish a trading operation in Qatar. These include the need for a local partner, possible tax withholding schemes, visa and sponsorship requirements and so forth. These issues can have significant time and cost implications for any entity wishing to start up.
Before actually opening a business in Qatar, a representative trade office (RTO) can be established there in order to promote the company’s business activities. The RTO can be used to promote the company in the country and introduce it to Qatari companies and projects but the RTO cannot conduct business there, that is, earn revenue.

Foreign companies or individuals wishing to establish a business presence in Qatar have various options available to them the most common of which are:

• Incorporating a limited liability company (LLC) which must be, at least, 51 per cent Qatari owned. An LLC can comprise a minimum of two and a maximum of 50 partners and must have a minimum capital of QR200,000 ($54,500). he liability of each member for the LLC’s debt is limited to his share capital. Where agreed by the shareholders, the management of the LLC can be conducted by the foreign shareholder. Further, the profits of the LLC can be split in proportions different to the shareholding proportions to reflect the different degrees of participation that the respective shareholders have in the LLC’s management and operation. The foreigner’s share of profit will be taxable, which can be up to 30 per cent.

• By exception, the Ministry of Business and Trade may grant a ‘Temporary Branch’ licence to operate in Qatar to a foreign company which is a party to a contract with a state agency. The foreign company becomes fully licensed and registered in Qatar and 100 per cent foreign-owned and controlled. However, the licence and registration are based upon the contract and, therefore, limited to its duration and the works to be performed under it. If additional contracts are obtained, these must be registered and appended to the company’s commercial registration. A company that is a party to a subcontract that stems from a main contract with a state agency may also qualify for this exception.

• Article 68 Companies (based on an exception mentioned in article 68 of the Qatari Companies Law) are essentially joint venture arrangements, which are owned partly by the government or a public authority in partnership with foreign investors. The main advantage of an Article 68 Company is that the Companies Law only applies to the extent that it does not conflict with the memorandum and articles of association, joint venture agreement or other contracts of establishment. The shareholders are, therefore, able to draft those documents free from all or any of the restrictions contained in the Companies Law. Also, due to a recent amendment in the law, the foreign investor’s share ownership in an Article 68 Company can be more than 49 per cent with the approval of the Council of Ministers.

• A foreign company may, with approval from the Ministry of Business and Trade, establish a Qatar branch office to invest for economic development purposes or to facilitate the performance of public services. In addition, a branch may be established if the company is engaged in certain sectors such as tourism, development of natural resources, education, health, sports, consultancy or IT. This exception is narrowly applied. The application process is longer and more involved than the others, and ministerial approval is less likely because approval is granted on a case-by-case basis.

Also, all companies wishing to undertake construction work in Qatar have to obtain a licence from the Urban Planning and Development Authority.

In line with Fifa requirements, “Green Qatar 2022” has been established to highlight the nation’s commitment to environmental protection with consistent government legislation being implemented to ensure the local laws are in line with international best practice.

In conclusion, there are a number of potential legal issues which may arise: pressure on dispute resolution facilities may be a concern; a 10-year strict liability period for designers and contractors; and liquidated damages clauses are subject to challenge in the courts and may act as a cap.

* DLA Piper has 3,500 lawyers located in 30 countries and 69 offices worldwide.