The current US – Israel – Iran conflict and adjacent geopolitical developments in the Middle East have introduced a renewed level of uncertainty for businesses operating across the region. Escalating tensions and the resulting security concerns are affecting international transportation networks, in particular airspace and maritime logistics.
For companies with regional operations or contractual relationships involving the UAE and broader Gulf Region, these disruptions raise important legal questions concerning contractual performance and the potential invocation of force majeure clauses.
Supply Chain Disruption in the Current Crisis
The current regional crisis has the potential to impact supply chains in several ways, including:
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- disruptions to air freight routes and airspace restrictions;
- delays or rerouting in maritime shipping corridors, in particular through the Strait of Hormuz;
- lack of supplies affecting regional manufacturing or logistics; and
- increased insurance costs, compliance checks, and banking delays in cross-border transactions.
Many businesses operating in the UAE and the wider GCC rely on multi-jurisdictional supply chains that extend across Europe, Asia, and the Middle East. Disruption in one part of this network may therefore have cascading effects, delaying the delivery of raw materials, components, or finished products.
Such disruptions may affect a party’s ability to perform obligations under supply agreements, distribution contracts, construction contracts, or service agreements.
Force Majeure Clauses in Commercial Contracts
It is common for commercial contracts to contain a force majeure clause, which allocates risk when extraordinary events prevent a party from performing its contractual obligations.
While the wording varies, such clauses typically apply to events that are: (i) beyond the reasonable control of the affected party; (ii) not reasonably foreseeable or avoidable; and (iii) prevent or materially hinder contractual performance.
Commonly listed force majeure events include: (i) war or armed conflict; (ii) government action or sanctions; (iii) closure of transportation routes; (iv) natural disasters; and (v) pandemics or public emergencies.
Many disruptions caused by the recent conflict may fall within the definition of a force majeure event. However, the applicability of force majeure must always be assessed on a case-by-case basis, in particular the wording of the relevant clause and the applicable law.
When Can Force Majeure Be Invoked?
Invoking force majeure generally requires that several conditions are satisfied.
Causation
The event relied upon must directly prevent or substantially hinder contractual performance.
For example, a supplier may rely on force majeure if a shipping route becomes unavailable due to security restrictions or manufacturing facilities are unable to operate due to government-imposed closures.
By contrast, purely economic hardship, such as increased costs or reduced profitability, will usually not be sufficient to trigger force majeure.
Unavoidability
The affected party will often be required to demonstrate that the consequences of the event could not reasonably have been avoided or mitigated.
For example, if alternative suppliers, transport routes, or delivery mechanisms were reasonably available, the party may be expected to pursue those alternatives.
Notice Requirements
Many force majeure clauses impose strict notice requirements, requiring the affected party to notify the counterparty within a specified timeframe after becoming aware of the force majeure event.
Failure to comply with these notice provisions may result in loss of the right to rely on the clause.
Legal Framework Under UAE Law
Even where a contract does not contain an express force majeure clause, UAE statutory law provides mechanisms that may excuse or adjust contractual obligations in exceptional circumstances.
The operative legislation is Federal Law No 5 of 1985 on Civil Transactions (the “Civil Code”). For contracts with performance obligations extending beyond 1 June 2026, reference should also be made to Federal Decree-Law No. 25 of 2025 on Civil Transactions, which will replace the current Civil Code on that date.
The statutory force majeure framework under the Civil Code is contained principally in Article 273 (bilateral contracts) and Article 287 (external cause defense, which provides that a party is not liable for loss if it results from an external cause beyond their control). These provisions operate alongside any contractual force majeure clauses agreed between the parties.
Force Majeure Under the Civil Code
Article 273 of the Civil Code addresses the effect of force majeure on bilateral contracts. Four elements must be satisfied to establish force majeure:
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- impossibility of performance;
- causation (the impossibility must result from the force majeure event);
- unforeseeability (the event could not reasonably have been anticipated at the time of contracting); and
- uncontrollability (the event must be beyond the affected party’s control).
Consequences of Force Majeure
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- The consequences of force majeure causing impossibility depend on its extent:
- Total impossibility: Where performance of a specific obligation becomes completely impossible, the corresponding obligation is extinguished and the contract is automatically terminated.
- Partial impossibility: Where impossibility affects only part of the contractual obligations, the consideration for the impossible part is extinguished. The creditor retains the right to rescind the contract provided the debtor is notified.
- Temporary impossibility: In contracts involving ongoing or successive performance, the same principle applies. The creditor retains the right to rescind the contract provided the debtor is notified.
Hardship (Article 249)
Where performance has not become impossible, but excessively onerous due to exceptional and unpredictable circumstances, the hardship doctrine under Article 249 of the Civil Code may apply. Unlike force majeure, which concerns impossibility, hardship addresses situations where performance remains technically possible but would cause disproportionate loss to the obligor.
Under Article 249, if justice so requires and after balancing the interests of both parties, the court may reduce the excessive obligation to reasonable limits. This remedy is discretionary and requires demonstration that the circumstances were both exceptional and unpredictable at the time of contracting. The doctrine is particularly relevant in cases of geopolitical instability, significant price escalation, or supply chain disruption that render performance economically impracticable.
Practical Steps for Businesses
In light of the current situation, businesses should take several proactive steps.
Monitor Supply Chain Exposure
Businesses should identify critical supply chain dependencies, including affected suppliers, vulnerable transport routes and alternative sourcing options.
Review Existing Contracts
With regard to the affected trading relationships, businesses should carefully review the underlying commercial agreements. Specific focus should be on the terms of force majeure provisions, notice requirements and provisions relating to termination, suspension or renegotiation.
Maintain Documentation
If performance becomes affected, companies should maintain clear records of disruptions, including delays; government restrictions; and communications with suppliers.
This documentation may be important if the invocation of force majeure is later contested.
Engage with Counterparties Early
In many cases, commercial disruption is best addressed through early engagement with contractual partners, allowing parties to explore revised delivery timelines, temporary suspensions or negotiated contractual amendments.
If you would like more information about this topic then please contact us.
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SENIOR ASSOCIATE
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TRAINEE ASSOCIATE
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