INTRODUCTION
Recent military escalation in the Middle East has once again demonstrated how quickly geopolitical developments can affect commercial activity. Missile and drone attacks across parts of the region together with heightened security concerns have created disruption across transportation networks insurance markets and global supply chains. For businesses operating in or trading with the Gulf such developments can quickly translate into operational challenges and contractual uncertainty.
The Gulf remains one of the most important hubs for global energy trade logistics and financial services. As a result, developments in the region often have immediate implications for international commercial relationships. Supply chains may be interrupted, transport routes affected and insurance or regulatory conditions altered with little warning.
In these circumstances businesses frequently turn to one contractual mechanism in particular which is force majeure. Many commercial agreements contain force majeure provisions that are intended to address extraordinary external events that may interfere with contractual performance. However, while armed conflict may appear to fall within the types of events contemplated by such clauses the legal analysis is rarely straightforward.
The existence of conflict does not automatically excuse contractual obligations. Instead, the availability of relief depends on the wording of the relevant clause and the extent to which the event has genuinely affected the party’s ability to perform their obligations.
WHAT IS FORCE MAJEURE AND WHY DOES IT MATTER?
Force majeure clauses are commonly included in commercial agreements as a means of allocating the risk of extraordinary external events. These provisions recognise that certain developments may arise which are beyond the control of the contracting parties and which may interfere with the performance of contractual obligations.
Commercial contracts frequently refer to events such as war, civil unrest, government intervention, natural disasters, infrastructure disruption or interruptions to transportation networks. When such events occur the clause may allow a party to suspend performance, delay delivery obligations or in some circumstances terminate the affected part of the agreement.
It is important to remember that force majeure is not an automatic defence to non-performance. The clause operates strictly within the boundaries defined by the contract itself. Whether relief is available depends on the precise wording of the provision and on the factual circumstances surrounding the disruption. Therefore, it is very important that the effected parties read the force majeure clause.
Businesses should therefore approach force majeure not as a general concept but as a specific contractual tool whose operation must be assessed carefully in each case.
WHEN CAN A FORCE MAJEURE CLAUSE BE RELIED UPON?
In practice the ability to rely on force majeure depends on several key considerations that are commonly examined by courts and arbitral tribunals.
First, the event relied upon must be external to the affected party and beyond its reasonable control. Armed conflict, government restrictions or infrastructure disruptions may fall within this category depending on the wording of the clause. Importantly, it should be included as part of the force majeure clause either explicitly or impliedly.
Second, the party invoking force majeure must demonstrate that the event has genuinely prevented or seriously interfered with the performance of its contractual obligations. A mere increase in cost or commercial inconvenience will rarely be sufficient.
Third, there must be a clear connection between the external event and the failure to perform the relevant contractual obligation. Businesses must therefore be able to demonstrate that the disruption has had a direct impact on their ability to fulfil the contract.
Fourth, parties must comply with any procedural requirements contained in the contract. Many force majeure clauses require prompt written notice to the counterparty together with information explaining the nature of the disruption and its anticipated duration.
Finally, businesses are usually expected to take reasonable steps to mitigate the impact of the disruption where possible. Even where an external event has occurred companies may still be required to explore alternative means of performance if they are reasonably available.
WHAT PRACTICAL STEPS SHOULD BUSINESSES CONSIDER?
Against the backdrop of the current escalation, businesses operating in or trading with the region should take proactive steps to assess their contractual exposure.
One important step is to review existing commercial contracts in order to understand how force majeure provisions are drafted. Particular attention should be given to the types of events listed in the clause and to the specific relief that the provision allows.
Businesses should also assess whether current developments may realistically affect their operations. This may include potential disruption to supply chains, transportation arrangements, infrastructure access or financial channels.
Where disruption appears likely, companies should carefully review any notice requirements contained in their contracts. Timely notification may be required in order to preserve the ability to rely on force majeure or other contractual protections.
It is also advisable for businesses to maintain clear records documenting the operational impact of any disruption. Internal reports correspondence with suppliers, transport providers, insurers and counterparties may later become important evidence if contractual disputes arise.
Finally, companies should consider whether alternative arrangements may allow performance to continue despite disruption. In some cases, alternative suppliers transportation routes or operational adjustments may reduce the risk of contractual breach.
HOW DO YOU MANAGE CONTRACTUAL RISK DURING PERIODS OF INSTABILITY?
Force majeure should not be viewed solely as a defensive mechanism that is invoked after disruption occurs. Instead, it forms part of a broader approach to contractual risk management.
Businesses operating in regions exposed to geopolitical volatility may wish to review the drafting of force majeure provisions in future agreements to ensure that the allocation of risk reflects current commercial realities. Consideration may also be given to insurance arrangements contractual flexibility mechanisms and operational contingency planning.
Open communication between contractual counterparties can also play an important role during periods of instability. In many cases early dialogue may allow parties to adjust delivery schedules or operational arrangements without escalating into formal disputes.
WHAT IF THE CONTRACT DOES NOT HAVE A FORCE MAJEURE CLAUSE?
In some circumstances commercial contracts may not contain an express force majeure provision. In common law jurisdictions, parties may seek relief through the doctrine of frustration which operates where an unforeseen event fundamentally alters the nature of contractual performance or renders it impossible. The legal position in the UAE is addressed through statutory provisions of the UAE Civil Code.
Article 273 of the Civil Code provides that where a force majeure event renders the performance of a contractual obligation impossible, the corresponding obligation is extinguished, and the contract is rescinded by operation of law. Where the impossibility affects only part of the contract the obligation relating to that part may be extinguished while the remainder of the contract continues.
In addition, Article 287 recognises that a party will not be liable for damages where the loss results from a cause beyond its control such as force majeure unforeseen circumstances or the act of a third party provided that the party invoking the defence did not contribute to the occurrence of the event.
The Civil Code also addresses situations where performance has not become impossible but has become excessively burdensome. Article 249 provides that where exceptional public circumstances arise which could not reasonably have been foreseen and which threaten the debtor with heavy loss the court may reduce the affected obligation to reasonable limits after considering the interests of both parties.
These provisions demonstrate that even in the absence of an express force majeure clause UAE law recognises mechanisms that may relieve a party from liability or allow contractual obligations to be adjusted where extraordinary external events fundamentally affect contractual performance.
CONCLUSION
Geopolitical instability inevitably creates uncertainty for international commerce. The recent escalation in the Middle East illustrates how quickly external developments can affect transportation networks, supply chains and commercial relationships. Force majeure clauses may provide an important form of contractual protection where performance is genuinely prevented by events beyond the parties control.
However, the availability of relief depends on careful analysis of the contractual wording and the factual circumstances surrounding the disruption. Businesses that proactively review their contractual exposure maintain clear documentation and assess operational risks will be better positioned to navigate periods of geopolitical volatility.