Qatar crisis highlights question of force majeure

by Dentons
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Imports of construction materials needed for the State of Qatar to deliver its World Cup and Vision 2030 infrastructure schemes are being severely impacted by the recent closing of borders by key neighbours Saudi Arabia and the UAE, leading to increased costs and delays on major construction projects.

Does the current diplomatic crisis constitute a qualifying event for the enforcement of a force majeure clause of a construction contract?

When invoked, force majeure, meaning "superior force", essentially frees both parties from liability or obligation to a commercial contract in the event of circumstances outside of the control of the contracting parties, such as military action, strikes or natural catastrophes.

Under Qatari law, the doctrine of force majeure, found at Article 256 of Law No. 22 of 2004 (the Civil Code) states: "If the debtor does not perform the obligation specifically, or is delayed in its performance, he is obliged to compensate the damage caused to the creditor; unless it is proved that the non-performance or the delay was for an extraneous cause for which the debtor is not responsible."

Further, parties can agree to take responsibility for the consequences of a force majeure event, as Article 258 of the Civil Code states: "It is permissible to agree that the debtor shall bear the responsibility of force majeure or sudden incident."

As such, where an agreement contains a force majeure clause which specifies the exclusive events that constitute force majeure, then such clause will be valid, binding and enforceable between the parties to that agreement.

Qatari law provides no definition for what constitutes a force majeure event, so parties will have to read their contracts carefully. The definition of a force majeure trigger event may be drafted widely, as follows: "any event beyond the reasonable control of both parties"; or may be drafted narrowly to include only a list of specific events, such as: "fire, flood, earthquake, tsunami, war, terrorist acts, riot, strike, civil unrest, epidemic, critical shortage of key materials, government orders". When drafting, it is important to define carefully any trigger events for the force majeure provisions to apply.

The effect of the force majeure clause can be to relieve affected parties of their obligations under the contract or at law, until such time as the event triggering the force majeure clause ceases to exist. This may mean that a contractor can be entitled to cease work and/or a paying party can be entitled to suspend payments.

At this critical time, it is important that our clients are aware of what has been agreed will happen upon the occurrence of a force majeure event.  We recommend, therefore, that you read your contract carefully, paying attention to both: (i) the definition of trigger events; and (ii) the impact of force majeure on your contractual obligations.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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