Do the Sanctions Against Qatar Qualify as Force Majeure?
Depending on where you are in the World, you may or may not be aware that certain political sanctions were recently imposed against Qatar by Bahrain, Egypt, Saudi Arabia and the United Arab Emirates. Diplomatic ties have been severed and an embargo on all land, air and sea connections between these countries and Qatar has been put in place.
Given the fact that Qatar is very busy constructing a number of projects in preparation for the FIFA World Cup in 2022, it’s unsurprising that we have had some requests for advice from contractors whose operations in Qatar have been affected by the sanctions and are who are looking for a means of claiming extensions of time and/or damages. Most of the queries are along the lines of: are claims eligible under the FIDIC provisions of force majeure?
My opinion on this is ‘no’ and I will explain my reasons, but as we will see later, there are also conflicting opinions being shared by others. Let’s first take a look at the reasons for my opinion.
Force Majeure as Defined by FIDIC
Sub-Clause 19.1 (Definition of Force Majeure) offers the following:
‘In this Clause, “Force Majeure” means an exceptional event or circumstance:
- which is beyond a Party’s control,
- which such Party could not reasonably have provided against before entering into the Contract,
- which, having arisen, such Party could not reasonably have avoided or overcome, and
- which is not substantially attributable to the other Party.
So far then, the sanctions against Qatar tick all the above boxes so maybe they should be considered as a Force Majeure event or circumstance? Before coming to a decision though, let’s have a look at the rest of the clause, which states:
Force Majeure may include, but is not limited to, exceptional events or circumstances of the kind listed below, so long as conditions (a) to (d) above are satisfied:
- war, hostilities (whether war be declared or not), invasion, act of foreign enemies,
- rebellion, terrorism, revolution, insurrection, military or usurped power, or civil war,
- riot, commotion, disorder, strike or lockout by persons other than the Contractor’s Personnel and other employees of the Contractor and Subcontractors,
- munitions of war, explosive materials, ionising radiation or contamination by radio-activity, except as may be attributable to the Contractor’s use of such munitions, explosives, radiation or radio-activity, and
- natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity’.
Given the fact that ‘conditions (a) to (d) above are satisfied’ by the situation in question, this part of the clause provides further qualifications to these conditions in that ‘Force Majeure may include, but is not limited to, exceptional events or circumstances of the kind listed below’. The sanctions cannot in any way be considered to be of the kind listed, so in my view, this excludes them from being classed as a Force Majeure event on this basis.
We must consider however, that this provision allows that an event may include, but is not limited to’ the type of event listed. In my opinion, this directs us to consider similar events to those listed but since the sanctions cannot be regarded as being similar, this again prevents them qualifying as a Force Majeure event. Furthermore, I think that if the drafters of this clause didn’t intend to define Force Majeure as similar to the kind of events listed, then there would be no reason to list the kind of events here and the definition could have just remained as stated in the first part of the clause.
Differing Professional Opinions
I mentioned earlier that not everyone shares my opinion on this matter and an eminent law company published a recent article which considered that the sanctions do qualify as a force majeure event, solely on the basis of the first half of Sub-Clause 19.1 (Definition of Force Majeure). It’s always interesting to debate these things so I contacted the author, put forward my opinion and invited him to offer his interpretation of how the second part of the clause should be applied to the sanctions but unfortunately I did not receive a reply. (Note: If I do get a reply in future, I’ll update this blog post with their opinion so we can debate from both sides).
I guess this illustrates that two people, whose job it is to be knowledgeable about certain matters, can sometimes have two diametrically opposed opinions. I will therefore leave it to you to make up your own minds on whether the sanctions imposed on Qatar may be defined as force majeure.
Got any thoughts on this? Comment below.
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Hi Adebowale,
Thanks for your interesting post. I too think that simplest is best and it is when we over-complicate matters and search for alternatives to what should possibly be obvious, that things get tricky. Having said that, if we are representing one of the parties or serving both in an impartial situation, I believe that we have a professional duty to thoroughly examine a situation before reaching a conclusion. As you may see from the contents of this blog – this one can have different interpretations.
Hi Andy,
It is quite possible, and often so, that big problems may actually have a simple solution.
I want us to take a step back and look at your opinion, you agree that the conditions or definitions in sub clause 19.1, which defines a force majeure have been met, therefore, the definitive term in the clause is:
“…Force Majeure may include, but is not limited to, ….”, this presupposes that there are other exceptional events and the particular case meets the previous over-riding definition hence does not need to be listed…it is therefore part of “..not limited to…” events.
Furthermore, it goes ahead to state..”…so long as conditions (a) to (d) above are satisfied:…”
Have conditions (a) – (d ) been satisfied? If so, a force majeure is in effect. Take note that FIDIC has defined what a force majeure is as per the conditions and not as per a dictionary.
In conclusion, I think, as they say in law, you “mis-directed” yourself in your judgement through your 2nd level argument when you assumed that the list is exhaustive whereas, the clause itself has stated that the list is inexhaustive with only one qualifier, that items can be added to that list of events as long as they meet the conditions of your 1st line of argument, i.e. meeting the definition stated in sub-clause 19.1 (a) to (d).
Thanks.
Hi Andy,
This has reference to your original post with respect to the intent of the drafters of this clause under FIDIC 1999 contracts and I made some further reading from the FIDIC Guide First Edition 2000 hoping to gain some appreciation of this particular provision.
Basically, the guide suggest that there is in effect a sixth criterion, that the circumstances prevents the affected Party from performing any (one, more, or all) of its obligations. This is not included in the definition in Sub-Clause 19.1 but is stipulated or a precondition under Sub-Clauses 19.2 and 19.4. It also elaborated that sub-paragraphs (i) to (v) of Sub-Clause 19.1 are only illustrative examples, some of which might occur and not be Force Majeure.
Interestingly, in the FIDIC Guidance for Preparation of Particular Conditions Clause 19, it is recommended for the Employers to verify the wording of the general conditions if it is compatible with law governing the Contract. Perhaps for the reason that force majeure has different meanings depending on the jurisdiction.
If there is already a provision or a series of test to prove and define the existence of Force Majeure in Sub-Clause 19.1 a to d and the criterion in Sub-Clause 19.2& 19.4 (considering it does not contravene the local laws of Qatar), would it be repetitive or a duplication and will be onerous to examine again by reference to non-exhaustive list of events listed in the last part of Sub-Clause 19.1 (i) to (v)?
Thanks
Hi Emil – Thank you for your informative comment. The various discussions and opinions on this blog just go to show that contracts cannot contemplate all circumstances that may conceivably occur and that we have to take a sensible view when interpreting them and of course the law always has to also be taken in to account. Sometimes this is not an easy task.
Interestingly, I have just returned from the FIDIC conference in London, which saw the launch of the 2017 editions of the Red, Yellow and Silver forms of contract. One change is that the old Sub-Clause 17.3 (Employer’s Risks) and Clause 19 (Force Majeure), which were very similar, have been replaced by a single clause 18 (Exceptional Events). One of the reasons given for this was the various definitions and interpretations of force majeure under different legal jurisdictions.
Response provided on behalf of Andy Hewitt.
The current situation with Qatar does not fit neatly into any Force Majeure definition. I do not think there are any legs in this argument. Similarly arguments using Article 171(2) of the Qatar Civil Code do not get far either because this is trumped by Article 700. If you are looking for an entitlement as a result of the blockade (or whatever else you want to call it), I would suggest that rather than looking at external events, look at how Employers have reacted to it.
I do not believe that it is a force majeure event principally because the sanctions/embargo/blockade/hostility call it what you like was always foreseeable. It is not the first time that the GCC countries have had spats amongst the brothers and it will not be the last time either.
Ergo, this sort of event is a normal risk of doing business in the region and the Tenderers should have made allowances for that risk?
The fact that this then becomes a speculative risk (aliatory) which is prohibited under sharia law may then invoke the defense under Article 171(2) of the Qatar Civil Code which states: “Where, however, as a result of exceptional and unforeseeable events, the fulfillment of the contractual obligation, though not impossible, becomes excessively onerous in such a way as to threaten the obligor with exorbitant loss, the judge may, according to the circumstances and after taking into consideration the interests of both parties, reduce the excessive obligation to a reasonable level.” As illustrated by the Qatar Court of Cassation Judgement 62/2006(70), the agreement must not conflict with public order or ethics, i.e. the gharar and riba prohibitions. Thus, where these prohibitions manifest, then, as provided for under article 171(2) Book 1, Chapter One, Sources of Obligations, Contracts, Elements of Contract, Binding Force of the Contract where the Contractor’s obligations becomes ‘…excessively onerous in such a way as to threaten the obligor with exorbitant loss, the judge may, according to the circumstances and after taking into consideration the interests of both parties, reduce the excessive obligation to a reasonable level…’; and article 171(3) which provides, ‘…any agreement to the contrary shall be void…’
Thanks for everyone’s input
In my opinion it is Force Majeure and i do agree with Bayo Sofidiya opinion 100%
And i want to add the following:
If we deal with this issue as Force Majeure, we will able to grant EOT to the contractor without prolongation cost as this is third party incident and pay only the contractor’s actual loss due to this blockade, otherwise, the contractor will raise his claim for actual loss + prolongation cost.
One more clarifications is required, If we did not consider it as Force Majeure, then under which contractual’s provision we can consider or deal.
Regards’
I agree with David as I have stated in the first paragraph of my last post. The adjacent countries have forced a blockade around Qatar which is a slightly different matter and is not specifically referred to in the FIDIC Contract. We have moved away from the original question of the use of Force Majeure again however David has pointed out that in the Middle East in particular the Civil Procedures Codes for the relative jurisdictions takes precedence over any Contract and that these should be taken into account when any claims are presented, particularly in such a difficult position as the construction industry finds itself in Qatar.
I have had to deal with this first hand and note that I generally agree with Andy. The current situation does not sit neatly into the definition of Force Majeure. The twisting and contractual gymnastics to say the situation is an act of hostilities etc. is a very difficult argument in my view. However I made a couple of points:
1) The situation is not a embargo in my view, it is a blockade. Any embargo is a legal restriction on trading with a country. A blockade is a closure of boarders and access. A blockade does not have to be total and Qatar still has port and an air corridor. I draw a comparison to the Berlin Airlift of 1949. An air corridor was still available, but all land access was blockaded.
2) Many contracts over here specify a minimum quantity of GCC products to be used within the Works, this may no longer be possible so Contractors should be aware of this.
3) Article 171(2) of the Qatar Civil Code states: “Where, however, as a result of exceptional and unforeseeable events, the fulfilment of the contractual obligation, though not impossible, becomes excessively onerous in such a way as to threaten the obligor with exorbitant loss, the judge may, according to the circumstances and after taking into consideration the interests of both parties, reduce the excessive obligation to a reasonable level.” At first blush this may seem to be the answer, however to get over this bar is very difficult and the current situation may not be sufficient to do so.
4) From an Employer’s perspective, care needs to be taken to ensure bonds and insurances are still valid in Qatar, particularly if the Contractor has its base in one of the blockading countries.
Dear All,
Having read Ekwere’s comments I think that they are irrelevant to the question posed. It is obvious that any claim has to be fully substantiated and all the factors have to be taken into account. Maybe the approved materials were always to be coming from India and therefore the claim has no merits. Maybe the materials were to be delivered from KSA and are therefore no longer available. In this second case the Contractor will be forced to commence the procurement process again and obtain a second approval from the Engineer for material from outside those countries blockading Qatar.
However we have to look at the fundamental principles involved and not get hooked onto the individual cases for which we haven’t received the full information and therefore are unable to make judgement. I personally am an arbitrator and have seen many different cases on similar subjects to each other and which rulings have been given differently due to circumstances, the contractual position of the Parties, substantiation of delays, actual presentation of the case by the Parties, all of which have a bearing on how they are dealt with. In this situation each one will have its own merits and demerits and so they should be dealt with accordingly, however the fundamental principles remain, is this current political situation one that can be dealt with under the auspices of “force majeure”, and I feel that it can due to the acts of the other states being of an unfriendly nature to Qatar nationally.
Dear all,
For those who have commented and/or those reading the blog,
I am in support of what Mohammed Azad Hossain wrote above. Whether it is considered as “Force Majeure” or not, the Contractor will need to prove that the action/sanction has affected his performance of the work such as where the materials/equipment were to be procured/bought, procure labour force. The approved Project Vendor List (PVL) for the project must have been mentioned by the Client stating and the Contractor was asked to select any two manufacturers to submit MAS for approvals.
If the materials were to be bought from Saudi, Bahrain, UAE, etc, the Contractor will still have to inform the Consultant or Engineer at earliest time possible, it is the prompt response of the Engineer/consultant to the Contractor that may determine EOT and associated cost, bearing in mind that the Contractor has the obligation to reduce any additional cost to the project.
Procuring from any other location with proper invoices provided as may be instructed by the Engineer will require additional cost to the project. Subsequent approval will have to considered time (EOT).
In whichever way one may consider the Qatar sanction from procurement point of view, alternative place of procurement, there will be claims for time and additional cost as it has affected so many factors in the project construction works. But I have rejected the claims for this because the contractor had submitted two vendors for each of the materials and equipment from say SA and India, so if the SA has blocked, then he has to go for the India manufacturer to procure at no additional time and cost as the two manufacturers were approved and all category of labors are still available within Qatar, so there is no reason for the claims.
Hi all and thanks for your comments. I thought that this may spark some debate.
I also checked the dictionary for a definition of hostilities and got the same unhelpful definitions as Bayo. I guess that we can agree that its not very friendly to have imposed the embargo, but we haven’t reached acts of warfare yet.
Robert’s ‘acts of foreign enemies’ may be applicable, but are the nations involved actually enemies or are they just being unfriendly towards each other?
What does seem certain is that there is likely to be a long debate about the issue and there are good arguments to be made for either interpretation, depending on which side of the contracting fence you happen to be located. I can hear the lawyers rubbing their hands together and preparing to order new Porsches already.
Hi Andy,
Could the wording “…act of foreign enemies…” be applicable in this case. The sanctions certainly aren’t acts of friendly nations in virtually isolating Qatar from their adjacent neighbours and greatly restricting transportation. We also have the Qatari purchase of a number of warships from Italy. Do the Qatari’s themselves consider the acts of the adjacent nations as hostile?
This could be a factor for consideration?
Hi Andy,
I agree with Bayo Sofidiya’s comment above and that the event falls under the category of “hostilities” as per FIDIC CoC for Construction 1999 (Red book) Sub-Clause 19.1 (i).
It would be interesting to hear if you are in agreement or have a different interpretation?
Many thanks,
Simon
As per FIDIC Sub-Clause 19.1, I believe that “sanctions against Qatar” could be considered as Force Majeure. As per the expressed definition of (a) to (d) it falls under Force Majeure.
However, you have a different view in consideration to the 2nd part of this Sub-Clause and your opinion is “no”. The second part described the events generally considered as Force Majeure and it said that the list of the events is not exhaustive (not limited to). Moreover, this second part has an weak implication because it has been qualified with “may include”.
Though it may qualify as “Force Majeure”, it will not automatically qualify for EOT or Damages, the Contractor must substantiate with proper records and prove that Damage occurs due to the above sanction.
Hi Andy,
I beg to differ with your opinion.
In my opinion, ‘hostilities (whether war be declared or not)’ amply covers the situation and hence the current situation must be treated as ‘Force Majeure’.
Hi Andy,
I understand your opinion, however i also do not share your view on this for this reason. After satisfying (a) to (d) and you look at (i) war, hostilities (whether war be declared or not), invasion, act of foreign enemies,i believe that the Qatar sanctions can be classed as hostilities, this is my reason;
If you check the Oxford dictionary definition for hostilities it states 1) hostile behaviour – Unfriendliness or Opposition 2) hostilities – Acts of warfare
Also the Cambridge dictionary states – Unfriendliness – an occasion when someone is unfriendly or shows that they do not like something or an occasion when someone shows that they do not agree with or like something or fighting in a war.
We can all agree that there is no act of war at this present time, however the countries mentioned do not like Qatar’s approach to certain things and as such have become unfriendly with Qatar, therefore this falls under the definition of hostilities. As such in my opinion fall under the sub clause (i) of the relevant FIDIC clause.