The Financial Crisis

Effects on Qatar Construction

Industry

Julian Pope,
Partner
Denton Wilde Sapte, Doha
6 April 2009
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The Qatar Construction Market

•Positive Outlook
•Qatar budget 2009/2010
•Availability of information
•No widespread cancellation of projects
•Materials costs reduced

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Some Ongoing Major Public Projects
• New Doha International Airport
• New Doha Port
• Ras Laffan Port Expansion
• Rail/Light Rail schemes
• Qatar-Bahrain Bridge (?$ 4bn)
• Lusail
• Pearl
• Ras Laffan C IWPP ($ 3.9bn)
• Others

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Credit Crisis –What it means

•Increased risk of insolvency of counterparty

•Inability to pay debts as they fall due (Art 606)
•For contractors & sub-contractors: payments
dry up
•For employers: contractor unable to pay
suppliers/sub-contractors. Work stops
•Difficult commercial decision when to cut
losses

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Credit crisis –If there are insolvency
issues

•Termination
•Suspension
•Novation –an employer remedy for contractor
insolvency

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Novation
• Employer replaces an insolvent contractor with a solvent
substitute, who takes on his rights and obligations
• Who will be responsible for defects in completed work/other
existing breaches?
• Record of the state of the work
• Account of payments made/outstanding claims
• Delays
• Liability of outgoing contractor (?? Recovery)
• Position of sub-contractors/suppliers
• Assignment of supplier/sub-contractor warranties

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Qatar insolvency law
• Commercial Law, No 27 of 2006 Arts 606 -846
• Permits creditors to apply for a corporate bankruptcy order,
except companies owned by the State of Qatar or utilities in
which the state has a majority stake (and certain others) (Arts
718, 719)
• Contracts made pre-bankruptcy order remain valid (Art 664)
• Court may appoint 1 to 3 administrators to realise assets and
distribute to creditors (Art 676)
• If assets insufficient to pay 20% of debts, directors and
managers can be personally liable unless can prove they
conscientiously administered the company’ s affairs (Art 732)
• Criminal sanctions (Arts 835, 837 +)
• No major corporate insolvencies yet –untested how
would work in practice
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Is the Contract Worth the Paper its
Written On?
•Only if you can enforce it
•Has the counterparty any assets?
(bonds/guarantees)
•Effective dispute resolution procedure?
•Enforcement of arbitration award/court judgment?
•Key considerations when a project is stressed

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Dispute Resolution Procedures

•Numerous different provisions

•Arbitration
•Place of arbitration –court’
s supervisory role
•Arbitration in Qatar
•Law 13 of 1990 –various provisions to support
arbitration (3 months unless agree otherwise)
•Qatar International Centre for Arbitration est 2007
•Qatar party to the New York Convention
•QFC

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Dispute Resolution (contd)

•Arbitration outside Qatar

•Subject to supervision of the courts of the seat
of the arbitration
•Language
•Enforcement of the award –New York
convention

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Julian Pope,
Partner
Denton Wilde Sapte, Doha

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