Main contractual implications related to Sukuk issuing in Qatar

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 [email protected]
mailto:[email protected]:[email protected]