A growing number of companies across the GCC, including the UAE, are invoking force majeure clauses as war-related disruptions ripple through energy exports, shipping routes and supply chains, putting one of contract law’s most critical safeguards under real-world stress.
QatarEnergy's operating facilities in Ras Laffan Industrial City. Qatar suspended liquefied natural gas production after Iranian strikes hit Gulf energy facilities. Photos by AFP file
From state oil giants to private fuel suppliers, firms are increasingly turning to force majeure — a legal provision that allows contractual obligations to be suspended when extraordinary events make performance impossible.
In simple terms, force majeure acts as a contractual “escape valve.” It protects companies from penalties when events beyond their control — such as war, natural disasters or government restrictions — prevent them from fulfilling obligations. However, under UAE law, the threshold is high: companies must prove that performance is impossible, not merely more expensive or difficult.
The ongoing regional conflict has triggered a wave of such declarations. Industry estimates suggest that over 25–30 companies across the GCC, including five to seven major national energy players and 15–20 UAE-based marine operators, have invoked or operationally applied force majeure so far — a number expected to rise if disruptions persist.
In the UAE, the impact has been most visible in Fujairah, one of the world’s largest marine fuel hubs. Bunker suppliers such as Mediterranean Eastern Enterprise and Pearl Marine issued force majeure notices after missile strikes disrupted shipping and damaged storage infrastructure.
Among the most prominent cases, QatarEnergy, Kuwait Petroleum Corporation, and Bapco Energies have all invoked force majeure on exports following attacks on infrastructure and threats to tanker movements through the Strait of Hormuz.
International operators have followed suit, including Chevron, which declared force majeure on gas supplies after security shutdowns.
Dr Sunil Ambalavelil, chairman of a UAE-based legal firm, Kaden Boriss, says the primary trigger is the threat to the Strait of Hormuz, through which nearly a fifth of global oil flows. With shipping routes disrupted and infrastructure under attack, companies are increasingly able to meet the strict legal threshold of “impossibility.”
Ratings agencies say the broader economic fallout, however, remains contained — for now.
According to Moody’s, “the near-term credit impact of the conflict on GCC insurers is expected to be limited,” with its baseline assumption that the disruption will last only “a matter of weeks.”
Moody’s added that the primary impact channel is through financial markets rather than direct losses, noting that “the primary transmission channel… would be through investment portfolios rather than underwriting performance.”
Similarly, Fitch Ratings said the region’s financial systems and corporates remain resilient, stating that “Middle Eastern sovereign ratings generally have sufficient headroom to withstand a short regional conflict.”
However, Fitch cautioned that risks would rise if the conflict is prolonged, particularly if energy infrastructure or shipping routes suffer sustained damage.
Legal experts say the current crisis is one of the most significant real-world tests of force majeure in the region.
“Force majeure under UAE law is interpreted narrowly and requires clear evidence that performance has become impossible,” said Dr Ambalavelil, emphasising that companies cannot rely on the clause simply because contracts have become commercially unattractive.
Lawyers at Charles Russell Speechlys further note that the disruption must be “unforeseeable, unavoidable, and render performance absolutely impossible.”
This distinction is crucial in determining which sectors can rely on protection.
Energy exporters, shipping firms, logistics operators and marine fuel suppliers are the most directly protected, as physical disruption — damaged facilities, halted shipping or blocked routes — clearly prevents performance. Aviation, ports and certain industrial sectors could also qualify.
However, the picture is more nuanced in the UAE’s real estate sector.
While the conflict may slow demand, delay construction or increase costs, force majeure cannot be invoked simply because market conditions weaken. UAE law draws a clear line between “impossibility” and “hardship.”
Dr Ambalavelil explained that a 2024 ruling by the Dubai Court of Cassation confirmed that war qualifies as force majeure only if it directly prevents contractual performance — not if it merely affects profitability or sentiment.
“This means real estate developers can invoke force majeure only in cases of genuine construction disruption — such as material shortages, site inaccessibility or logistics breakdowns. Many contracts, particularly those based on international FIDIC standards, allow for time extensions in such cases,” he said.
Legal experts at Hadef & Partners note that while developers may gain relief for delays, they must clearly demonstrate causation, and buyers retain the right to challenge such claims.
Dubai’s regulatory safeguards further limit misuse. Escrow-linked construction milestones and strict resale rules ensure that contracts cannot be easily abandoned due to volatility.
The broader implication is that while force majeure is providing critical legal protection to companies facing operational shutdowns, it is not a blanket shield.
For global markets, the surge in declarations is already tightening energy supply and increasing price volatility. For the GCC, it highlights both exposure to geopolitical shocks and the strength of its legal and financial systems.
As the conflict evolves, force majeure will remain a key legal tool — not just protecting companies, but testing the robustness of contracts across sectors.
In the UAE, particularly in real estate, the message is clear: protection exists, but only where disruption is real, direct and unavoidable — preserving a delicate balance between flexibility and accountability even in times of war.
Issac John
Issac John is Managing Editor at Khaleej Times and has over 45 years of experience in top-tier newsp...