By Rabih Tabbara
First movers are likely to have an advantage in the lucrative Qatari market. writes Rabih Tabbara
Qatar has massive civil infrastructure projects in planning and execution that must be completed in the next several years. All of this work translates into excellent opportunities for regional and international engineering and construction firms. While there are many quality firms and contractors already active in Qatar, it is apparent that many more will be required to execute the coming work. There are regulatory hurdles to clear before entering the market, however.
Engineering firms wishing to do business in Qatar must be registered with the Ministry of Municipality and Urban Planning. There are three basic avenues to registration: (1) registering a JV company between the foreign engineering firm (49%) and a Qatari national (51%), (2) registering a branch of an international engineering office (IEO), or (3) securing a single project registration.
Under (1), foreign engineering firms may register a local engineering office, which requires a JV company with a Qatari national or a 100%-owned entity which must hold at least 51% of the shares in the JV company. Although this set-up is relatively straightforward, identifying a local partner – whether an individual or a corporate entity to do business with – could prove problematic. Alternatively, those engineering firms that qualify can set up an IEO under the Engineering Law No. (19) of 2005 and related regulations. Qualifying to establish such an office includes demonstrating compliance with several criteria designed to assure that the firms who are registered are established firms with an appropriate depth of international experience in their disciplines. For those who qualify, however, an IEO affords 100% foreign ownership and control.
Option (3) is available to foreign firms that have been awarded a government contract (or subcontract) that serves a public benefit, and is to be performed over a period of not less than one year, in which case that entity may establish a foreign branch in Qatar for the sole purpose of performing the government contract.
There are several benefits to registering an IEO. For example, there is no need to engage with a local partner. Furthermore, IEOs, unlike some local firms, are not subject to any regulatory limit on the size and value of the projects they can perform.
The time required to complete the registration process varies according to whether the foreign company and its professional staff have all their papers in order to the satisfaction of the Ministry of Municipality and Urban Planning (PEC). Registration of the consultancy office follows after registration of the resident professionals. It generally takes months to complete the registration process.
Construction contractors wishing to do business in Qatar face similar regulatory hurdles. There are two basic avenues of entry available: (1) The establishment of a limited liability company or (2) establishing a branch office for the purpose of performing a specific contract.
With regard to (1), Qatar’s Commercial Companies Law sets out the general rules applicable to limited liability companies. Most notably, and as with (1) for engineers, the law requires that Qatari nationals hold not less than 51% of the share capital in any such company.
Furthermore, unlike engineering firms, there is no provision to allow foreign construction contractors to establish a wholly-owned subsidiary in Qatar for general contracting.
However, foreign contractors that have been awarded a major contract can apply to the Minister of Business and Trade to be granted an exception, allowing them to set up a branch in Qatar for the purpose of performing the specific contract. The branch registration lapses upon completion of the project.
Setting up a Qatari limited liability company is clearly more advantageous for contracting companies who wish to perform multiple projects in Qatar, since this set up shall not be limited to one particular project, and thus ensures a more sustainable presence in the Qatari market. As with engineering firms, however, there can be challenges in identifying an appropriate local partner.
(Rabih Tabbara is counsel at Kilpatrick Townsend Legal Consultancy. The opinions expressed are his own.)