In light of recent developments in the Middle East, particularly military operations between the United States and Israel against Iran and retaliatory Iranian airstrikes on GCC countries, an increasing number of GCC companies, including state-owned enterprises, are seeking to invoke force majeure provisions in their commercial contracts. Some have already formally declared force majeure events.
These developments raise important questions regarding the legal framework governing force majeure under Qatari law and how companies can effectively manage the potential impact of such uncertain circumstances on their contractual obligations. This article examines the relevant legal provisions applicable when contractual obligations become impossible to perform, as well as situations where performance remains technically possible but has become excessively burdensome.
Force majeure under Qatari Law
Under Qatar law, a force majeure event is one that lies beyond the control of one or both contracting parties and renders the performance of contractual obligations impossible. The occurrence of such an event may relieve a party from liability and excuse it from performing its contractual obligations, and may even lead to the termination of the contract by operation of law.
In the absence of an express force majeure clause within a contract, the parties may rely on the relevant provisions of Qatari law governing such events.
The Qatari Civil Code
Article 188 of the Qatar Civil Code (Law No. 22 of 2004) establishes both the conditions for invoking force majeure and the legal consequences that follow. Under this provision, where a contract imposes binding obligations on both parties and performance by one party becomes impossible due to an external cause beyond that party’s control, the affected obligation, together with any corresponding obligations, shall be extinguished, and the contract shall be deemed rescinded by operation of law.
Where the impossibility of performance is only partial, the obligee retains an option either to enforce the contract to the extent that the remaining obligations can still be performed or to seek termination of the contract in its entirety.
Two essential conditions must be satisfied for force majeure to apply under the Qatar Civil Code. First, the event must have been unforeseeable at the time of entry into the contract. Second, the event must have been unavoidable. Where the event was predictable or avoidable, or where the performance of the obligation was not rendered impossible, the force majeure provisions may not be invoked.
Notwithstanding the foregoing, Article 188 is not mandatory, and force majeure events may be made subject to contractual agreement. Article 258 of the Qatar Civil Code permits parties to agree that an obligor remains responsible for any defaults or damages resulting as a consequence of a force majeure event. Additionally, the parties may contractually define what shall constitute a force majeure event, even in circumstances where such event does not satisfy the conditions of the Qatar Civil Code. Furthermore, parties may agree on the legal consequences and ramifications of a force majeure event.
The Qatar Financial Centre Regulations
For entities operating within the Qatar Financial Centre (QFC) the relevant provisions are found at Article 94 of the QFC Contract Regulations (version 2, 2024).
Under Article 94 of the QFC Contract Regulations, neither party shall be deemed in breach of contract, nor otherwise liable to the other, as a result of any delay or failure in performance, if and to the extent that such delay or failure is caused by a force majeure event. However, the party not affected by force majeure is relieved from any obligation to make payment to the affected party for as long as performance is suspended, except in respect of performance that has actually been carried out and complies with the contractual terms.
Notably, Article 94 expressly provides for an extension of time where performance is delayed by force majeure, but the QFC Contract Regulations do not provide for any entitlement to additional payment or compensation for the affected party during the period of suspension. The unaffected party is simply relieved from its payment obligations until performance resumes, and neither party may claim damages from the other in respect of any delay or failure in performance caused by force majeure.
The QFC Contract Regulations also impose procedural obligations on the affected party. The affected party must promptly notify the other party of the nature, extent, effect and likely duration of the force majeure circumstances. It must also use all reasonable endeavours to minimise the effect of force majeure on its performance and resume full performance as soon as the event ceases. If the force majeure event delays or prevents performance for a continuous period exceeding six months, the unaffected party is entitled to give notice to terminate the contract.
In the absence of an express force majeure clause, the provisions of the Qatar Civil Code or the QFC Contract Regulations shall apply, including the prescribed conditions and the consequences. It should also be noted that courts in Qatar retain discretion to determine, on a case-by-case basis and having regard to the facts and evidence presented, whether the conditions for force majeure have been satisfied and whether the affected party should accordingly be released from its contractual obligations.
Burdensome Performance: Exceptional Circumstances Under Qatari Law
The Qatar Civil Code, at sub-Article 171(2), recognises situations where performance remains possible but becomes excessively onerous for the obligor due to exceptional and unforeseeable circumstances. The same conditions applicable to force majeure regarding the unpredictability and unavoidability apply to exceptional circumstances.
However, three key distinctions exist between the two doctrines. First, exceptional circumstances do not render the performance of an obligation impossible; rather, performance becomes significantly onerous for the obligor. Secondly, the occurrence of an exceptional circumstance does not lead to termination of the contract or exemption of liability. Third, the provisions contained in sub-Article 171(2) are mandatory and the parties cannot contract out of them.
Where the conditions of the exceptional circumstances are satisfied, sub-Article 171(2), empowers the court to impose an adjustment to the contractual obligations to restore balance between the parties and mitigate excessive loss to the obligor, while maintaining the contractual relationship.
This position does not find a parallel in the Qatar Financial Centre. Article 85 of the QFC Contract Regulations establishes a clear principle: where the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations, unless force majeure applies pursuant to Article 94. Accordingly, the protections available to companies under the Civil Code in relation to onerous performance are not available within the Qatar Financial Centre.
Practical Guidance for Businesses During Uncertain Times
Many companies may be affected by the current uncertain circumstances. However, whether these circumstances establish a force majeure event, thereby exempting a company from its obligations under a commercial contract, or establish exceptional circumstances allowing the court to adjust contractual obligations, must be assessed on a case-by-case basis.
In a notable judgment issued by the Qatari Court of Cassation relating to the COVID-19 pandemic, the Court confirmed that the pandemic may be qualified as a force majeure, an exceptional circumstance, or a normal event that does not affect the performance of the contract at all, depending on the specific contract and the effect of the pandemic on the parties obligations. This underscores the importance of careful analysis in each case.
Therefore, it is strongly recommended that companies seek legal advice on the effect of current uncertain circumstances and military actions on the performance of their contractual obligations before taking any decision to declare force majeure.
Conclusion
Navigating the complexities of force majeure and exceptional circumstances under Qatari law requires a thorough understanding of the applicable legal framework and careful consideration of the specific facts at hand. Businesses operating in Qatar should proactively review their commercial contracts and seek expert legal guidance to determine whether force majeure or exceptional circumstances may apply to their particular situation.
How Al Tamimi Can Help
Their team of experienced lawyers can assist businesses in navigating contractual challenges arising from the current circumstances and any other unforeseen events, including reviewing commercial contracts and advising on whether force majeure or exceptional circumstances may apply.
They can also assist in court cases and alternative dispute resolution involving issues discussed in this article.
Key Contacts
Hani Al Naddaf, Partner, Head of Dispute Resolution - Qatar, h.alnaddaf@tamimi.com
Diana Abu Al Adel, Senior Associate, d.aladel@tamimi.com
Asad Ullah Khan, Associate, as.khan@tamimi.com