updated on 11 February 2014
QuestionWhy are UK law firms flocking to Qatar?
With a population of approximately two million, of which approximately 270,000 are indigenous, the third smallest state in the Middle East has close to 30 foreign law firms currently present in the market. More notably, this has taken place in the space of seven years. However, having a presence in the Middle East is not a new phenomenon. A multitude of international law firms already have well-established offices in the Middle East and networks in Saudi Arabia. Yet of late Doha, Qatar has featured in many firms' global expansion strategies.
Qatar has the world's highest GDP per capita and the rapid and exponential growth witnessed in Qatar in the last 30 years has resulted in a noticeable transformation of the country. A Moody's report on the GCC state shows that it grew by approximately seven times in absolute terms between the years of 2000 and 2010. Much of the economic success is due to the fact that Qatar has the third largest reserves of natural gas in the world and is the largest exporter of Liquefied Natural Gas (LNG). Though the economy is still reliant on the hydrocarbons sector (it was responsible for 42% of the GDP figures last year), there is a real push for diversification into non-oil sectors by the Qatari government. Education, health, tourism and the financial services are just some of the many industries experiencing growth in Qatar.
One attempt at achieving the goal of a multi-faceted economy is the adoption of the ‘Qatar National Vision 2030' by the Qatari government. This outlines Qatar's impressive growth strategy for the next 15 years and the focus ranges from economic to societal development. The 2030 Vision has resulted in the realisation of a variety of projects, such as the Sidra Medical and Research Centre (Sidra) which is funded by Qatar Foundation with the world's largest endowment for a medical and research centre of $7.9 billion. Sidra is attracting world-class talent as it aims to undertake groundbreaking medical research using its ultra-modern technology and facilities. Government spending has been increased to fund colossal infrastructural projects, such as plans for a $35 billion rail and metro line, a $7 billion seaport, new roads, plus hotels and housing projects.
Qatar has also created a big splash on the world stage due to the investments made by its sovereign wealth fund, the Qatar Investment Authority (QIA), which has assets of an estimated value in excess of $100 billion. This is another attempt at diversifying into new asset classes and investments. The sovereign state already has prior dealings with several UK law firms due to its sizeable investments in London, some of which are the Shard, Harrods and stakes in Sainsbury's PLC.
Qatar's successful bid to host the 2022 FIFA World Cup has accelerated its transformation into a major player globally. Locally the impact has been astronomical, with construction and population size visibly increasing year on year.
The Qatari government expects that 400,000 fans will arrive in the country for the World Cup and anticipates the need for 12 stadiums and 90,000 hotel rooms to meet the demand. As a result the Qatari government is poised to spend up to $130 billion on infrastructure projects ahead of 2022. There is therefore increasing demand for construction, architectural consultancy and project management services, including a booming insurance sector.
The top 20 megaprojects by value in Qatar, according to MEED publication, have a combined value of $193.4 billion but around 87% of the planned project spend is yet to be awarded. There is an influx of foreign companies wanting to tap into this lucrative market. As a result, the demand for legal services has also increased in parallel, as market entrants are looking to be advised generally as to the Qatari foreign investment laws, company and tax laws, employment and immigration matters and construction law, particularly in relation to tendering.
The first hurdle many international companies face is how to conduct business in Qatar without breaching local laws, and most law firms will have corporate departments which will advise clients as to the most appropriate business medium to adopt. Unlike in the United Kingdom, the default position pursuant to the Foreign Investment Law in Qatar is that a non-Qatari investor may only set up a limited liability company (LLC) as a minority shareholder and must have a Qatari partner who owns at least 51% of the shares in the LLC. There are certain exceptions which permit a non-Qatari to own more than 49% of the share capital, but this is sector specific and subject to the approval of the minister of economy and commerce. Corporate lawyers will often find themselves advising clients as to legal and - more importantly - practical solutions which regularise commercial arrangements between the local and foreign parties. The foreign party will look toward its legal advisers to provide it with comfort in terms of its legal and commercial position should a dispute arise in a jurisdiction which does not recognise a doctrine of binding precedent in the courts. Corporate lawyers are expected to interpret the local laws and requirements, which are usually in Arabic, and assist clients with compliance with the local laws as seamlessly as possible.
The Qatar Financial Centre (QFC) has recently had the effect of "freeing-up" some of the strict requirements of the Foreign Investment Law. The QFC was established to create a financial hub in the region and encourages the growth of asset management, captive insurance and financial services. Most importantly, foreign firms can now set up 100%-owned offices and all profits can be remitted outside Qatar. Most law firms in Qatar, along with other multinational financial services providers, will be licensed by the QFC. As a result, law firms will also find themselves advising ‘authorised' and ‘licensed' firms regarding their regulatory obligations.
Interestingly, the QFC has its own legal system which is based heavily on the English common law system and is separate to the Qatari local system, which is based on civil and Islamic law. The Qatar International Court and Dispute Resolution Centre (QICDRC) set up by Lord Woolf, the former lord chief justice of England and Wales, applies "international common law" allowing the renowned panel of judges headed by president Lord Phillips of Worth Matravers (former president of the UK Supreme Court) to consider and apply legal precedents from other common law jurisdictions. Although foreign lawyers do not have rights of audience in the local courts, there is no restriction on foreign lawyers appearing before the QICDRC.
The construction industry is generally booming in the GCC region and the same goes for Qatar. The high volume of projects include numerous innovative and world-class projects, such as the $5 billion Doha Bay bridge and underwater tunnel, now known as the Sharq Crossing, designed by renowned Spanish architect Santiago Calatrava. Several law firms will have a construction practice that will undertake front-end construction work (ie, drafting and negotiation of construction procurement documents) and back-end work involving construction disputes between principals, contractors and sub-contractors. Due to the court system in Qatar, dispute resolution clauses need to be drafted carefully, usually offering the option to use alternative dispute resolution methods.
Opening an office in Doha is a strategic decision that many law firms have made in order to meet the demands of their clients who might already use them in other countries in the Middle East. A strong grasp of the local legal requirements and market conditions, combined with an understanding of how multinationals function along with their business objectives and other legal obligations back home, are vital when advising clients, who, let us not forget, are looking for practical and efficient commercial solutions for undertaking business in this booming economy.
Maryam Shaikh is a second-year MENA trainee, currently based at Clyde & Co's Doha office.