Qatar Foundation wins major victory in £1.9bn hospital dispute

London’s High Court has confirmed that Qatar Foundation lawfully terminated its £1.9bn hospital contract with a joint venture (JV) of construction firms Contrack and London-listed OHL.

The High Court rejected the JV’s challenge against a November 2018 arbitration award, which found among other things that that Qatar Foundation (QF) lawfully terminated its contract to design and construct the state-of-the-art Sidra Medicine hospital in Doha.

The High Court judgment noted that arbitration challenges are “not to be used simply because one of the parties is dissatisfied with the result” and praised the arbitration Tribunal as “eminent and highly experienced”.

QF claims hundreds of millions of dollars in the ongoing arbitration, with further hearings scheduled to deal with issues including recovery of the additional costs to complete construction.

QF is a major contributor to the Qatari construction sector. It continues to partner with international construction businesses on some of the most innovative construction projects in the region.

Michael Mitchell, General Counsel for Qatar Foundation, said: “Qatar Foundation is pleased that the court has confirmed our approach to this arbitration. We have always maintained that the JV’s challenge represented a futile last-ditch effort to evade accountability for their significant delays and defaults in delivering the Sidra project. We now look forward to concluding the arbitration and obtaining an appropriate monetary award.”

QF engaged the JV in 2009 to design and construct Sidra Medicine, which provides healthcare for women and children throughout the Middle East. The original contract price for the hospital was approximately £1.9bn.

QF terminated its contract, and immediately commenced arbitration proceedings against the JV, in July 2014 alleging defaults and delays to construction. In November 2018, the Tribunal issued an award, finding - among other things - that QF had lawfully exercised the termination provisions for default under the Contract and that QF had been entitled to make its calls on performance and advance payment guarantees. The Tribunal hearing the arbitration consists of the Right Honourable Sir Stanley Burnton, Mr Richard Wilmot-Smith QC and Mr Richard Fernyhough QC.

The JV challenged the award on the basis of “serious irregularity”, and sought that the award be remitted to the Tribunal for reconsideration. In order to successfully challenge the award, the JV needed to show that the award had been affected by “serious irregularity” which “has caused or will cause [the JV] substantial injustice”. The UK High Court has now dismissed the JV’s challenge.

The future arbitral programme envisages a two-week hearing, commencing in February 2020, to deal with the merits and quantum of that claim, alongside the JV’s prolongation costs claim, and a three-week hearing commencing in October 2020 to deal with the merits of QF’s cost to complete claim.