By TBY | Qatar | Mar 26, 2015
Qatar is now to be the world’s richest country per capita and to have the highest human development in the Arab World. This is due to the country’s extraordinary resource […]
Qatar is now to be the world’s richest country per capita and to have the highest human development in the Arab World. This is due to the country’s extraordinary resource endowment, as Qatar has the world’s third largest natural gas reserves.
Despite its historical reliance on petroleum, Qatar looks forward to the day when its wealth will be derived from its own human capital. The country is diversifying its economy and encouraging private enterprise. Qatar is particularly interested in attracting foreign businesses. Job creation, multibillion-dollar investments in education, and interaction with the entrepreneurial culture of foreign business people are the legs of the stool that will support Qatar’s future economy. The country is encouraging investment in many sectors, including infrastructure, healthcare, and athletics. While Qatar’s National Vision (QNV) lays out goals for 2030, it is using the 2022 FIFA World Cup as an international coming out party to gain recognition, while also staying on focus and on schedule. In a nod to the country’s progress so far, Morgan Stanley upgraded Qatar from Frontier Market to Emerging Market status in 2013.
Qatar has a population of more than 2 million people and although Qatari citizens number fewer than 300,000 (around 12% of the total), Qataris insist that diversification and development remains a project by and for Qataris. They are keen to borrow some aspects of foreign cultures. For example, local interest in football, which is growing into a genuine national obsession, is encouraged because it promotes individual health and teaches the country’s youth the value of teamwork. However, fundamentally, Qatar is uninterested in becoming a little Europe or America on the Gulf. Nonetheless, Qatar prides itself on allowing foreigners and their families to live in a confortable parallel society. Critically, Doha is dotted with international schools that are responsive to the expectations of the foreign population.
Equally important, foreign businesses can be confident in the rule of law in Qatar. Moreover, Qatar’s bi-cephalous legal system is conceptually accessible to foreign investors. As discussed below, Qatar is a civil law country, meaning that its procedural and substantive law is ultimately rooted in the ancient legal traditions of continental Europe. Alternatively, the Qatar International Center for Arbitration adjudicates disputes with procedures resembling those in common law jurisdictions.
Foreign investors typically establish a presence in Qatar by creating a local entity, most commonly an LLC. An LLC requires a minimum capitalization of $55,000 and ordinarily requires a local partner—either a natural or legal person—to own a 51% interest.
However, it is sometimes possible to secure ministerial approval for an LLC to incorporate with 100% foreign ownership. Indeed, Qatar investment Law No. 13 of 2000 provides that foreigners may own the entire capital of the company they incorporate if they invest in strategic sectors in line with the development plans of Qatar such as agriculture, health, education, tourism, exploitation and development of natural resources.
In 2004 and again in 2010, new laws have expanded the sectors where 100% foreign ownership is possible. Those sectors now include the employment sector, the real estate sector and the science and technology sector, financial centers, telecommunications, business consultancy, cultural services, sports services, entertainment services and distribution services.
As an alternative to incorporating a local entity, a foreign business may also open a representative office in Qatar for sales and after-sale support. Representative offices may only engage in marketing activities in order to better connect the client in Qatar with the overseas entity. Establishing a representative office is a simple and economical way for a foreign business to sponsor visas for their employees and establish a physical presence in Qatar.
Foreign investors with a legally appropriate presence in Qatar are welcome to compete in the public tender process. In Qatar, the process of awarding public contracts is clearly defined by the law and is both objective and transparent. See Law 26 of 2005 (Tenders and Auctions Regulations).
In Qatar, employees may be engaged with either fixed-term or indefinite-period (at-will) contracts. The relationship between employers and their employees is overseen by the Ministry of Labor, so that the Ministry of Labor protects employees’ rights. In order to improve employees’ rights and situation, several changes are being discussed such as the direct payment of salaries of all workers into their bank accounts. When disputes arise, they are typically resolved by an administrative procedure within the Ministry. Note that an administrative decision by the Ministry of Labor is, legally speaking, a final judgment. See, Law 14 of 2004 (Labor Law).
Qataris are big fans of sports. It is since the independence of the country in 1971 that the practice of sports started to develop. Sports are encouraged by the Qatari authorities as it is beneficial to individual health and forges friendship within the country and with other nations.
The hosting of international sporting events means that Qatar invests heavily in sports infrastructure. Hence, sport is an important sector to consider for foreign investors.
As noted above, Qatar’s civil courts follow procedures that are familiar to any civil law country. In addition, Qatar’s substantive law is heavily borrowed from foreign sources, and reflects a foreign conceptual framework. Operating in parallel is the Qatar International Court and Dispute Resolution Centre, which is housed in the Qatar Financial Centre (a special physical and legal jurisdiction for international banks, law firms, and foreign insurance companies). The Qatar International Court and Dispute Resolution Centre is an arbitral body that applies procedures similar to those in common law jurisdictions; its justices are highly experienced and come primarily from the United Kingdom. By offering a sophisticated alternative avenue of dispute resolution alongside its conventional courts, Qatar allows investors from any foreign country to acclimate quickly to the legal environment here.