IV. What Can We Learn from Past Crises?
4.1 The Iran-Iraq War (1980–1988)
The Iran-Iraq War gave us the first major arbitration decisions on force majeure in a Gulf conflict. The key question was simple: does war automatically trigger force majeure? Or has a party still had to prove that the specific contractual obligation became impossible to perform?
The answer was: it depends on the contract. International Arbitral Tribunals drew a clear line between cases where infrastructure was destroyed, or routes were physically closed (force majeure upheld) and cases where performance was merely more expensive or less profitable (force majeure rejected). War, by itself, was not enough.
The cases also emphasised foreseeability. Where parties contract against a backdrop of known instability, it becomes significantly harder to argue that subsequent disruption was unforeseeable, a point that remains highly relevant today.
4.2 COVID-19 — The Stress Test
COVID-19 was the significant test of force majeure law the UAE has ever seen. The results were striking: most force majeure claims under Article 273 failed. The courts held firm on the impossibility standard. But Article 249, the hardship provision, delivered real results.
The Abu Dhabi Court of Cassation, in Judgment No. 835 of 2021, confirmed that the impossibility standard under Article 273 must be applied strictly, no exceptions. In Judgment No. 512 of 2021, it held that force majeure must be the sole cause of non-performance. The Dubai Court of Cassation, in Judgment No. 479 of 2021, found that pandemic restrictions did not, on their own, make performance impossible under the contracts in question.
Hardship, on the other hand, worked. Courts treated supply chain disruptions, rising costs, and government-imposed restrictions as exceptional circumstances that justified adjusting, not terminating, contracts. The same logic applies squarely to the disruption’s businesses are facing today.
V. What Should You Be Doing Right Now?
5.1 Fix Your Contracts
- Review contractual frameworks proactively
In light of the current regional environment, businesses operating in the UAE should carefully review existing contracts and future agreements to ensure risks are appropriately managed.
- Leverage freedom of contract under UAE law
UAE law allows parties to define force majeure more broadly than the strict impossibility standard under Article 273. This flexibility should be used to align contractual protections with commercial risk.
- Define force majeure clearly
Avoid vague wording. Specify events: war, blockades, sanctions, government prohibitions, airspace closures, port closures, and key shipping routes such as the Strait of Hormuz.
- Lower the contractual threshold
Do not rely solely on legal impossibility. Draft clauses to cover material disruption, excessive cost, or practical inability to perform.
- Comply strictly with notice requirements
Most clauses impose strict deadlines. Missing them can defeat an otherwise valid claim. If in doubt, issue protective notices now.
- Include hardship provisions
Particularly for long-term or high-value contracts, include mechanisms for renegotiation before escalation to formal proceedings.
5.2 Take Action Today — Not Tomorrow
- Audit your contracts: identify where you are exposed and map the relevant force majeure, hardship, and notice provisions.
- Send notices promptly: do not wait for perfect information. Early, protective notices are far safer than late ones.
- Preserve evidence: retain all relevant materials, including communications, government directives, and logistics records.
- Demonstrate mitigation: document the steps you have taken to explore alternative routes, suppliers, or methods of performance.
- Engage commercially: where possible, seek practical solutions. Negotiated outcomes are often faster, less costly, and more certain than formal disputes.
VI. Five Questions Every Business Should Be Asking
Before you pick up the phone and declare force majeure, stop and ask yourself:
- Does your clause actually cover this? Read it carefully. Does it specifically include events such as airspace closures, port blockades, route interdictions, or sanctions? If it relies on vague, generic wording, a court may interpret it narrowly. If in doubt, assume it is not covered.
- Is performance truly impossible or just more difficult? Be honest. If performance is still possible via alternative routes at higher cost, that is hardship under Article 249, not force majeure under Article 273. The distinction is critical.
- Was the event genuinely unforeseeable? Regional instability in the Gulf has been well documented for years. If you contracted against that backdrop, a court may find the risk was foreseeable and allocated to you.
- Have you complied with notice requirements? Check your clause carefully. What are the deadlines, and have you met them? Missing the notice window can defeat your claim, regardless of its merits.
- Can you demonstrate that all reasonable alternatives have been exhausted? Courts expect evidence of mitigation, alternative suppliers, routes, or arrangements, and attempts to renegotiate. Failing to demonstrate this can significantly weaken your position.
VII. Key Takeaways
- Force majeure under UAE law sets a high bar.
The test is impossibility, not difficulty, delay, or increased cost.
- Article 249 (hardship) is often the more realistic avenue.
It addresses excessive burden and allows for adjustment rather than termination.
- Foreseeability will be a key battleground.
The broader the known risk environment, the harder it becomes to rely on unforeseen events.
- Process can determine outcome.
Timing, documentation, and mitigation efforts are often decisive in practice.
- Courts favour preservation over termination.
Where possible, obligations are more likely to be adjusted than discharged entirely.
Seek Legal Counsel
For further information or advice in relation to any of the matters addressed above, please feel free to contact the Corporate team at Habib Al Mulla & Partners.
Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.