Insurance

In brief: construction contracts and insurance in Qatar

Contracts and insurance

Building contracts

What standard contract forms are used for construction and design? Should the language of the contract be the local language? Are there any restrictions on choice of law and venue for dispute resolution?

The form of contract used for construction and design varies with each project and depends on the parties involved. Private sector projects do not have a standard form of contract; the parties generally rely on the International Federation of Consulting Engineers (FIDIC) as modified by the specific contract specifications or on the general conditions of contracts issued by the Public Works Authority (Ashghal) also modified by the specifications particular charges. Projects executed for government and public entities, such as Qatar Energy, Ashghal, General Electricity and Water Corporation and the Private Engineering Office, generally rely on their own standard contracts, which are based on the FIDIC set of contracts as amended in accordance with the special conditions. of contract.

As of January 2019, Arabic is the mandatory language to be used by official and governmental bodies and all related institutions as well as courts (except in Qatar Financial Centre, where English is used). Nevertheless, the contracts are available in English. In the private sector, the parties are free to adopt the language of their choice. The predominant languages ​​are Arabic and English.

The parties are free to choose the law governing their contract, which will be confirmed by the courts provided that the provisions of this law do not contravene the public order or morals of Qatar.

The parties are free to submit their disputes to a foreign court. However, for reasons of public order, Qatari courts have, in some cases, rejected parties’ agreements on foreign jurisdiction and retained jurisdiction over disputes before them.

Since January 2017, the agreement to arbitrate in administrative contract disputes is subject to the approval of the Prime Minister or his delegate.

Parties are also free to agree to alternative dispute resolution, including arbitration, to resolve disputes. After Qatar enacted the Arbitration Act in 2017 and ratified the Singapore Convention on Mediation in March 2020, it then enacted the Mediation Act No. 20 of 2021 for the Settlement of Civil and Commercial Disputes.

Payment methods

How are contractors, subcontractors, suppliers and workers typically paid and is there a standard frequency for payments?

Contractors, subcontractors and suppliers are paid according to their contract, which may vary. Payments are generally made by bank transfer or check, while the cash payment method is not preferred, knowing that the subcontractors and certain suppliers are mostly paid on a back-to-back basis.

The Wage Protection System has been put in place to ensure workers and employees are paid by direct bank transfer from the employer’s account to the employee’s bank account to ensure adequate and timely compensation. The penalties for violating this article are imprisonment, a fine or both.

Contractual matrix of international projects

What is the typical contractual matrix of a major project in your jurisdiction in terms of the contractual relationships between the various participants in the construction project?

The standard matrix is ​​as follows: employer – representative of the employer – engineer – project manager. The project manager will be the one who will sign the contracts with the subcontractors, as and when required.

PPPs and IFPs

Is there a formal legal and regulatory framework for PPP and PFI contracts?

On May 31, 2020, Qatar published the Public-Private Partnerships Law No. 12 of 2020, which outlines how partnerships are regulated between the government and the private sector in Qatar. The PPP law includes the allocation of land through rent or license to use, for development by the private sector through build-operate-transfer, build-transfer -operate, build-own-operate-transfer, and operate and maintain, among other provisions. This law is expected to lead to the launch of several investment projects in Qatar and support projects related to the Qatar National Vision 2030 and the 2022 FIFA World Cup.

joint ventures

Are all members of the consortia jointly responsible for the whole project or can they divide the responsibility among themselves?

Consortia can be established as a joint venture between two or more companies which can either be:

  • incorporated in the form of a company: in this case, the liability of the partners will vary according to the type of company incorporated and the distribution of responsibilities between them; Where
  • unincorporated: in this case, the agreement concluded with the employer will determine their respective obligations towards the latter and the agreement concluded between the members will determine their respective obligations towards each other and towards the banks, taking into account their role , their contribution and scope in the project. In most projects, the members will have joint and several liabilities towards their employer and this liability may vary towards the banks.

Tort Claims and Indemnity

Do local laws allow a contracted party to be indemnified against all acts, errors and omissions resulting from the work of the other party, even when the first party is negligent?

The Qatari civil code makes a distinction between contractual liability and tort liability. The contractual responsibilities of the respective parties can be freely determined between them, with the exception of certain cases where the restriction or reduction of any liability is considered by law to be null and void, such as the ten-year liability of the contractor and the designer or any agreement which restricts or reduces any liability. prior to the establishment of the right or due to an unlawful act.

Compensation for damages suffered results from the actions, omissions or negligence of the other party. In construction and design contracts, there are usually provisions for liquidated damages and the provision of an irrevocable and unconditional performance bond on first demand.

A contracted party may be indemnified against all acts, errors and omissions resulting from the work of the other party, regardless of whether that party was negligent in any way, and these provisions will in most cases be binding, valid and enforceable, it being understood that a disclaimer of liability will be interpreted in a restrictive manner. Contractual provisions that expose a party to excessive liability are likely to be considered invalid due to violation of the principle of justice. Parties should therefore exercise caution when including such clauses in their agreements.

Liability towards third parties

When a contractor constructs a building that will be sold or leased to a third party, does the contractor bear any potential liability to the third party? Can the third party sue the contractor despite the absence of contractual confidentiality?

Contracts bind only the parties who sign them: the contractual link prevents a person who is not a party to a contract from enforcing a clause of this contract. This means that a third party (e.g. buyer, lessee) will not be able to make a claim under the relevant contract unless that contract has been novated or the rights and obligations arising therefrom have been assigned. Notwithstanding this, a third party may invoke tort liability, which imposes civil liability for failure to comply with obligations imposed by law. In construction, the tort of negligence is most often added to the ten-year liability imposed by law on the contractor and the architect or engineer for defects in the building or work serious enough to render it unfit for its intended use, or which present a threat to its structural integrity and safety; this liability cannot be contractually limited or excluded, and any attempt to do so will be deemed void.

Under the Civil Code, a third party may consider filing a “collateral suit” against both the contractor and the landlord who sold or leased the premises to the third party. Criminal action against the contractor or designer can be brought in the event of a criminal action, and compensation for damages suffered can be claimed.

Insurance

To what extent do the available insurance products enable the entrepreneur to cover: damage to third-party property; injury to workers or third parties; delay damage; and damage due to environmental hazards? Does local law limit contractor liability for damage?

Insurance products in Qatar provide the entrepreneur with a wide coverage area, including:

  • damage to third party property;
  • professional allowance;
  • fires;
  • workers’ compensation policy, which includes workers’ compensation and employer liability;
  • start delay; and
  • loss of expected or potential revenue in the event that a construction project suffers physical loss or damage during construction.

Coverage may be subject to negotiation between the insurance company and the insured to cover other areas.

Delayed damage due to environmental hazards (eg runoff of toxic liquids to adjacent land) is generally excluded. However, sudden and accidental pollution coverage may apply.

Local laws do not limit the liability of contractors except in circumstances beyond the control of a party or the fault of their customers or a third party, unless otherwise agreed by the parties.

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May 02, 2022