Legal Briefing

Selection vs sovereignty: your choice of jurisdiction clauses in Qatar

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Global Outlook: Disputes | 02 October 2018

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You are nearing the end of the discussions for concluding a contract – the obligations and rights are defined, the terms are stipulated and you are making final decisions as to how your contract will be governed. This is vital, for contracting parties are fully aware that deciding on what law will govern the agreement and which court will have the jurisdiction to apply such chosen law is essentially a decision on how you can claim your rights if a dispute arises. Freedom of contract tells you that the choice is yours – so long as it expressly agreed.

However, freedom of contract does not tell you that the choice of jurisdiction may not be as unfettered as it seems. Numerous judgments by the Qatari courts have introduced an approach to the enforcement of jurisdiction clauses in contracts that are in one way or another linked to Qatar. It has been established that the agreement by the parties to submit their dispute to a foreign jurisdiction is not always enforceable.

It is of course not an unusual or unheard of concept that freedom of choice ends where sovereignty begins – the effect of the same can be found in the framework of many jurisdictions. What the Qatari court has done is essentially to expand the ambit of it’s sovereignty to include some contractual territory, in the name of public interest. Here is how.

A closer look at the judgments

The Qatari Court of Cassation, later followed by the Court of First Instance, based their above-mentioned conclusion on two subsequent principles. These are, (a) that access to, and serving of, justice in Qatar is a matter of public interest and is related to the public order and morale, and hence, (b) Qatari courts enjoy sovereignty over matters that are linked to Qatar notwithstanding any contrary agreement by the contracting parties.

Cassation sets the rule

In an employer-employee dispute case brought before the Qatari Court in 2009, the claimant employee filed a case before the Qatari court for the recovery of its end of service gratuity that the defendant employer had failed to pay. The defendant relied on the jurisdiction clause in the employment agreement, which designates jurisdiction to hear disputes to the Canadian courts.

The Court of First Instance rejected this defence and rendered a judgment against the defendant, obliging the latter with the end of service gratuity payment. The defendant filed an appeal, but the Court of Appeal rejected the appeal, upholding the decision of the Court of First Instance. The defendant thus took the case to Court of Cassation.

The Court of Cassation rendered a final judgment in 2012, whereby it upheld and confirmed the decision of the previous courts. The Court of Cassation stated that hearing disputes that are related in one way or another to Qatar is a form of serving justice, and that serving justice is a matter of the public interest. Accordingly, the Qatari courts cannot be stripped of their authority to cater to the interest of the public by submission of their jurisdiction to the jurisdiction of a foreign court. Any contractual clause which attempts to do so is null and void. The Court of Cassation added that as the employment contract was executed in Qatar, the Qatari courts must have jurisdiction over the dispute.

First Instance follows lead

The above ruling was adopted by the Court of First Instance in a later judgment in 2015. Similarly, the defendant in this case raised a defence that the Qatari court does not have the jurisdiction to hear the dispute in question due to the fact that the jurisdiction clause in the relevant agreement was stated as the Genevan court. The Court of First Instance reiterated and quoted the judgment of the Court of Cassation. Here, too, it was stated that as the concerned distribution agreement, was executed in Qatar, then the Qatari court has jurisdiction to hear the dispute.

What does this mean?

Thus, the Qatari courts have decided that where a dispute is linked to Qatar, this dispute is automatically brought under the ambit of the public interest, and in turn, under the jurisdiction of a Qatari court. A clause agreed otherwise, ie a clause giving a foreign court the jurisdiction to hear disputes linked to Qatar, is unenforceable and not binding on neither the parties nor the Qatari courts. The question arises: what does it take for a dispute to be deemed related to Qatar?

It so happens that in both of the above-mentioned cases, the ‘link’ that tied the dispute to Qatar was that the contract subject matter of the disputes was fully executed in Qatar. However, execution of a contract in Qatar is an example of such a relation, and not a condition. In an old judgment of the Court of Appeal in 1997, the court considered the elements that would grant the Qatari courts with jurisdiction to consider international disputes. These elements, which derive from principles of private international law, are: where the court has the real and effective authority enabling it to grant the enforcement of the judgment that would be issued, if the defendant resides in Qatar, if the defendant has a Qatari nationality, if the dispute subject-matter exists in Qatar and/or where parties agree to refer their dispute to the Qatari courts.

The existence of any one or all of the above-listed factors is sufficient for bringing the dispute in question under the jurisdiction of the Qatari courts. Accordingly, where such circumstances exist, the effect of any clause referring disputes to a foreign court will be extinguished.

Conclusion – the effect in practice…

Thus, contracting parties should be aware that the freedom and discretion to choose which court will have the jurisdiction to hear their contractual disputes is not unrestricted, and the express agreement of the parties is not conclusive. Contracting parties should expect, when agreeing on a foreign court, that such agreed choice may be rendered without effect in favour of the jurisdiction of the Qatari courts. So long as the Qatari court finds that the dispute in question is related to Qatar in one way or another, the dispute will be subject to the Qatari courts’ jurisdiction. This is regardless of the intentional non-conformity by one contracting party to the agreed jurisdiction clause. Such breach does not serve as grounds for defence and nor can a foreign jurisdiction clause be relied upon as an objection to the jurisdiction of the Qatari courts.

It is for contracting parties to consider, when deciding on dispute resolution clauses, whether the materialisation of such circumstances poses any real risk to their ability to pursue their claims. Contracting parties must consider that such risk includes matters of enforcement. Where a foreign court has heard a dispute which is related to Qatar and issues a judgment on the same, such judgment may be rendered unenforceable on the basis that it was the Qatari courts, and not the foreign court, which held the real authority to hear the dispute in question. This can be done in hindsight – in other words, such objection to the foreign courts jurisdiction will be valid even if, at the time of the proceedings, both parties had bilaterally decided to refer to the foreign court.

That is not to say that the option to choose a non-Qatari court as the competent court to hear contractual disputes is not available. Contracting parties may opt for foreign jurisdiction, however, as can be seen, such option is only available where the dispute in question is not ‘linked’ to Qatar. Otherwise, for the avoidance of the above-discussed outcomes, contracting parties may choose instead to refer their Qatar-related disputes to arbitration, where the implications of sovereignty do not apply.