COVID-19: All you need to know about Force Majeure in the UAE

Change is the only constant. This statement holds true particularly the constantly evolving definition of Force Majeure during the COVID-19 crisis. From natural calamities to riots to now this disastrous pandemic that is wreaking havoc across the world. The law that once sits quietly towards the end of a contract and is hardly even called into play has suddenly become the most discussed term nowadays. Therefore, it’s not hard to understand that force majeure is one of the consequences of coronavirus.

Although, the UAE is quite clear when it comes to employee rights and responsibilities, using labor law during these kinds of unforeseeable events is somehow a complex process. The horrendous implications of the pandemic are unprecedented and its full impacts are difficult to forecast which call for the implementation of force majeure. 

Here an attempt has been made to help you understand all about Force Majeure law in the UAE.

force majeure

What Does The Term Signify?

Literally speaking, the term ‘force majeure’ refers to a clause that contracts include removing liability for natural and unavoidable catastrophic events. For example, events that interrupt the expected course of events and restrict participants from fulfilling obligations. Therefore, the parties cite it as a reason to withhold the performance of their contractual responsibilities.

The Anomaly Of Force Majeure

Both contract and tort recognize the defense of force majeure under UAE law. The question of whether or not the outbreak of COVID-19 amounts to force majeure should be analyzed in the light of the obligation/duty by keeping in view the circumstances of the obligor. The disruption caused by the pandemic by causing business interruptions and delays to projects in the UAE, justify this enforcement, nevertheless.

The difficulty has increased because the term ‘force majeure’ is still undefined. So, it’s up to the courts to decide and interpret its criteria and conditions. Moreover, the absence of the doctrine of stare decisis in the emirate ignites further problems when considering this law. This is anomalous as the courts will decide whether or not force majeure is available for an obligatory. The ambiguity gets deeper further when the courts make decisions by keeping in view the facts of each case separately.

Principle Of Force Majeure Under UAE Law

There is no precise and specific definition of force majeure under the UAE law. However, the UAE Civil Code (Federal Law No. 8 of 1985) includes several provisions to address the concept of force majeure and its outcomes. The law also differentiates force majeure from events that render the performance of the contract simply onerous.

The Articles

Article 273(1) of the UAE Civil Code says, in part: “if force majeure supervenes which makes the performance of the contract impossible, the corresponding obligation shall cease, and the contract shall be automatically canceled”. So, in case if the performance becomes wholly impossible, there is no further need to fulfill the contract. Therefore, this leads to the cancellation of the contract.

However, in respect of continuous contacts, the part of the contract that parties performed prior to the force majeure event shall remain enforceable. Where the force majeure event renders only part of an obligation impossible to perform, Article 273(2) allows only that part of the contract to be extinguished.

Whilst a force majeure event can be a cause for termination, it can also be a defense to liability. In this respect, Article 287 of the UAE Civil Code says: “If a person proves that the loss arose out of an extraneous cause in which he played no part such as a natural disaster, unavoidable accident, force majeure, act of a third party, or act of the person suffering loss, he shall not be bound to make it good in the absence of a legal provision or agreement to the contrary”.

These are some of the important laws regarding force majeure in Dubai as well as all the emirates implement as per the UAE Civil Code.

Points to Ponder 

From a contractual point of view, there are some points to ponder on:

  • Review the wording of force majeure terms thoroughly. Pay close attention to the list of events that include this law. Analyze the consequences of triggering a force majeure as well.
  • If the list includes force majeure events, it would be a plus point. Analyze if it contains pertinent wording such as ‘pandemic’, ‘crisis’, ‘epidemic’, ‘outbreak’, and ‘governmental action’. The addition of these terms makes it easier for you to understand the terms clearly.
  • Examine thoroughly the wording of new contracts, especially the ones that describe the events as ‘unforeseeable’.
  • In case of the occurrence of any unpredictable events, the affected counterparties of contracts discuss a possible renegotiation. They can be also rescheduling of obligation, as they find necessary.
  • Most importantly, while the world at large is in herculean effort to beat this pandemic. This compels the business world to find convenient ways to resolve the crisis. Therefore, they should consider these solutions such as waiving off penalties and remote working to address this problem. 

Conclusion

Suffice it to say that the unpredictable events color the cycle of human history throughout the ages. The recent one is COVID-19. While they are unstoppable and uncontrollable, there is only one thing that you can do. Know your rights and understand the laws so that you can use them during such circumstances.