Qatar court can reduce liquidated damages that are deemed ‘grossly excessive’: expert

The decision, arising from an agreement for immigration consultancy services, was the third time that the QFC court has exercised its powers to reduce liquidated damages in a contract governed by the QFC contract regulations.

A QFC licensed company, Devisers Advisory Services LLC (‘Devisers’), entered into an agreement to provide services in assisting in a UK Innovator Visa application for Mamoun Ahmad Abdulwahab, an individual seeking to secure a business residency in the UK through the establishment of a commercial enterprise.

After Abdulwahab signed the agreement and paid an initial deposit of $10,000, his business plan was rejected by the UK endorsing body, Innovator International, on the grounds it did not meet the required thresholds of innovation, scalability and viability.

Following an unsuccessful appeal to Innovator International, and before the visa application could be submitted, Abdulwahab notified Devisers that its services were no longer necessary, before commencing court proceedings seeking to be reimbursed for the initial deposit and a payment of $2,000 for ‘lost opportunities’.

The agreement between the Abdulwahab and Devisers stated that Devisers would represent him until the visa application was successful. It also said that if the application was unsuccessful the company would refund Abdulwahab’s deposit within two weeks unless Clause 6 applied, which stated that if the visa application was refused in certain circumstances attributable to the applicant “the applicant will not be refunded any service charges paid to us”.

By article 107(2) of the QFC Contract Regulations, the court has the power to reduce damages sought to a reasonable amount if the sum is “grossly excessive in relation to the harm resulting from the non-performance and to the other circumstances”.

The court ruled that Abdulwahab had terminated the contract when he requested the refund and demonstrated clear intention not to proceed with any visa application and, applying the regulation, decided that the termination by Abdulwahab was “grossly excessive in relation to the harm resulting from the non-performance” and reduced the amount payable to him by 50%.

Richard Ashmore, a litigation expert at Pinsent Masons, said, “This case is interesting because it confirms that a clause in a commercial contract, allowing a service provider to retain a refund after a request to perform the services has been withdrawn, is properly characterised as a liquidated damages provision and therefore subject to Article 107 of the QFC Contract Regulations.”

“The decision confirms the court’s willingness to exercise its power under Article 107 to reduce liquidated damages that are grossly excessive,” he said.

“The powers of the QFC Court under Article 107 of the QFC Contract Regulations mirror those available under the Doha Civil Code.”