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8/14/2019 Main contractual implications related to Sukuk issuing in Qatar
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Main contractual implications related
to Sukuk issuing in Qatar
Bernard Barbour
Head of Legal, Compliance & Shariaa Affairs/Company Secretary
QInvest LLC
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Two legal systems operate in Qatar:
- Civil law- Common law (QFC)
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1- Civil law
Qatar is an Islamic state and the Permanent Constitution of Qatar
provides at Article (1) that:The Islamic Shariaashall be a main source of legislation in the state.
In addition . Law no. (22) of 2004 (the Civil Code) provides in Article
(1) paragraph (2) that:If no legislative provision is given, the judge will issue a ruling in accordance with Islamic
Shariaa
and Article (151) of the Civil Code provides that:
If the object of an obligation is contrary to the public order or morals, the contract will bevoid ;
1- Civil law
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2- Recognition of Trust
2- Recognition of Trust*
The Laws of Qatar do not recognize the concept of a
trust as commonly understood in common law
jurisdictions, and may construe a trust as an agency
relationship. A Qatari court may not, therefore, enforceany trust arrangements set out in the transaction
documents or the Certificates in accordance with their
terms and may, at its discretion, apply Qatari law agency
principles to the relevant provisions of the transaction
documents of the Certificates;
* QFC Jurisdiction recognizes Trust according to a specific regulation related to it.
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3- Conclusive Certificates
3- Conclusive Certificates
Any provision to the effect that any calculation, determination,
certification, notification will be final, conclusive or binding
might be set aside by courts of Qatar or might not be found to
be conclusive, final or binding if the same were made or givenunreasonably, fraudulently, incorrectly, arbitrarily, in the
absence of good faith or in the event of manifest error. Further,
the courts of Qatar may not accept the calculation,
determination, certification, notification of one party to be final,
conclusive or binding without further enquiry, notwithstandingprovisions to the contrary.
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4- Restrictions on Real Estate
4- Restrictions on Real Estate
Qatari Law position is clear when it comes to the real estate
ownership in Qatar, where the right to own lands is limited to Qataris.
Some exceptions have been made to the ownership restriction by
issuing laws allowing the ownership of non-Qataris in specific areas in
Qatar;
Nevertheless, non-Qataris can (i) lease lands for (99) years in the
areas specified by the Council of Ministers , which entitles the owner
of the leasehold to sell this right to third parties, to lease it, to assign it
or to use it in any other way in accordance with the applicable laws (ii)
have a mortgage over a land as a security .
(real estate laws are of public order, real estate tranactions cannot be
subject to a foreign law).
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5- Currency Issues
5- Currency Issues
No clear text exists as to whether a judgment in a foreign currency
would be awarded by Qatari courts in relation to the transaction
documents or whether any judgment obtained in another
jurisdiction in a foreign currency would be enforced by the Qatari
courts in relation to that currency. In the event that the Qataricourts were to make an award in Qatari Riyals, they would not
necessarily calculate the award on the basis of any conversion
provisions set out in the transaction documents.
The basis of the calculation of any such award would be at thediscretion of the court. Further, currency indemnity provisions
contained in the transaction documents may not be enforced by
the Qatari courts;
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6- Late Payment
6- Late Payment- The courts of Qatar may not allow the charging of more a reasonable percentage simple interest or profit
rate despite any agreement by the parties for higher and/or compounding rates.
- Penalties are void and liquidated damages are recognized but are subject to the Civil Code, which
provides, under Articles (265) and (266) that:
the contracting parties may specify in advance the amount of compensation by stipulation in the contract or in a subsequent
agreement.
Liquidated compensation shall not be due if the debtor proves that the creditor did not suffer any damage. It may be reduced if
the debtor proves that the estimation was excessive or that the original obligation has been partly performed. Any agreement to the
contrary shall be void. If the damage exceeds the liquidated compensation, the creditor shall not claim more that his liquidated
amount unless he proves that the debtor has committed fraud or gross negligence.;
- In Addition the Civil Code provides under Article (256) that:
Should it become impossible for a contractor to perform his obligation he shall be liable to compensate for failure to fulfill his
obligation, unless he proves that the impossibility of performance arose from a foreign cause beyond his control. The same
judgment shall applyif the party under an obligation delays in the performance of his obligation.
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7- Set - off
Article (395) of the Civil Code provides that set-off may
not prejudice the rights of third parties, and Articles (265)
- (267) of the Civil Code which set out how a judge may
determine the value of any loss and award theconsequent damages, and is based on Article (390)paragraph 1 of the Civil Code which states, Adebtor will have
a right of set-off between what he owes the creditor and what is owed to him by the
creditor, even if the cause of the two debts is different, if the object of each is freefrom any dispute, payable and demandable in law;
7- Set - off
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8- Force Majeur
8- Force Majeur
Article (258) of Civil Code stipulates
It may be agreed that the debtor shall assume the risk of unexpected events and force majeure.
Accordingly where any relevant document contains a force
majeure clause which specifies the exclusive events that
constitute a force majeure, then such force majeure clause will be
valid, legally binding and enforceable in accordance with its terms
between the parties to that document and no such party will be
entitled to seek relief pursuant to the Civil Code in respect of any
event that does not fall within the exclusive definition of force
majeure contained in that document.
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9- Foreign Law
9- Foreign Law
The Civil Code recognizes the contracting
parties freedom of contract including the
parties freedom to have a choice of law.
Although this choice may be restricted in
certain circumstances, the restriction is
usually related to issues of public morals
and policy.
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10- Insolvency
10- Insolvency
The obligations of the parties under the transaction documents will be subject to any limitations
arising from (to the extent the following are applicable) bankruptcy, liquidation, insolvency,
administration, and other terms and general principles relating to or affecting the enforcement of
creditorsrights;
According to Companies Law No. (5) of 2002 a liquidator of a company shall pay the debts of a
company after deducting liquidation expenses including the remuneration of the liquidator by
first paying amounts payable to the companysemployees, then the amounts due to the state of
Qatar and then rents payable to the owner of any real estate leased by the company and then
other amounts due in accordance with priorities according to law.
Article (375) of the Civil Code gives Qatari courts discretion to grant a grace period for
repayment of debts. Article (664) of Law No. (27) of 2006 (the Commercial Code Law) provides
that the adjudication of Bankruptcy shall not automatically terminate the contract, unless the
contract was based on personal considerations (i.e., the unique characteristics or qualificationsof a natural person). Subject to approval of a Qatari court, a bankruptcy administrator has
discretion as to whether or not to implement contracts, and where the bankruptcy administrator
does not implement a contract, the other party can terminate the contract and participate, with
the other creditors, in the compensation resulting from termination;
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11- Immunity
11- ImmunityLaw No. (18) of 1996 amending certain provisions of
Law No. (10) of 1987 in respect of the Public and
Private Properties of the State of Qatar provide that
the assets of the State which are used for a publicservice or as public utility will be immune from
enforcement. For all other properties, the immunity can
be waived contractually. The waiver of sovereign
immunity has never been tested before a Qatari courtor any other authority in Qatar.
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12- Enforcement of Foreign Judgments
12- Enforcement of Foreign Judgments
A judgment obtained from a foreign court will be enforceable in Qatar subject to the
provisions of Articles 379 and 380 of the Civil Procedure Code, which provides, in the case
of Article 379, that judgments and orders pronounced in a foreign country may be ordered
to be executed in qatar upon the conditions determined in that country for the execution of
a Qatari judgment and orders and provides, in the case of Article 380, that an order will not
be made unless and until the following have been ascertained, that: (i) the judgment ororder was delivered by a competent court of the foreign jurisdiction in question; (ii) the
parties to the action were properly served with notice of proceedings and properly
represented (iii) the judgment or order is one that is capable of being executed by the
successful party to the proceedings in conformity with the laws of the foreign jurisdiction in
question; and (iv) the foreign judgment or order does not conflict with a previous judgment
or order of a competent Qatari court and is not contrary to public or morality in Qatar.
The Civil Code also provides that provisions of foreign law must not be applied in Qatar if
such provisions are inconsistent with Islamic Shariaa,public order or morals prevailing in
Qatar.
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13- Enforcement of Foreign Arbitral Awards
13- Enforcement of Foreign Arbitral Awards
Qatar joined the New York Convention of 1958 on the Recognition and Enforcement of
Foreign Arbitral (the Convention)by Emiri Decree No. 29 of 2003. Accordingly, whenever the
Convention applies to a foreign arbitral award, the award will be recognized and enforced in
Qatar subject to compliance with the requirements of the Convention. The 1985 Riyadh
Judicail Cooperation Convention also applies to arbitration awards enforcement among
member states.
Under article 190 of the Civil Procedure Code No. 13 of 2005 (the CivilProcedure Code)
parties may agree to refer a specific dispute to arbitration agreement or they may agree in
advance so to refer all disputes which arise from the execution of a specific contract.
A valid arbitration clause pre-empts the litigation option under 192 of the Civil procedure
Code.
The enforcement of a foreign arbitral award is further subject to complying with the formalities
outlined in articles 379-383 of the Civil Procedures Code, which includes the translation of the
award into Arabic, filling a request to enforce a foreign arbitral award with the first instance
court, and upon the approval of the court an enforcement order will be granted.
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14- General
14- General- All documents submitted to Qatari courts must be in Arabic language. Documents originally in a
language other than Arabic are binding; however they should be translated into Arabic for submissions to
a Qatar court and are then deemed to be the definitive and binding version for the purposes of all
proceedings before these courts.
- Any term of an agreement may be varied, amended or discharged by the parties thereto by a further
agreement that may be effected orally, in writing or by a course of dealing, notwithstanding provisions to
the contrary.
- Where any person vested with discretion or may determine a matter in its opinion, Qatari Law may
require that such discretion is exercised honestly, in good faith and not capriciously or that such opinion
is based on reasonable grounds.
- The effectiveness of any provision exculpating a party from a liability or duty otherwise owed may be
limited if they are unreasonable, if the act causing such liability was intentional or the party causing such
liability was grossly negligent or fraudulent.
- No stamp, registration or other taxes, duties, assessments or governmental charges of any nature are
payable on or in relation to the execution, delivery, performance or enforcement of the Sukuk documents
or are required to render the documents or the Certificates admissible as evidence in Qatar.
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Thank you
Thank you
Bernard Barbourbbarbour@qinvest.com
mailto:bbarbour@qinvest.commailto:bbarbour@qinvest.comRecommended