Force majeure concept

Coronavirus in the UAE – Force Majeure or Hardship?

The coronavirus is the undefeatable proof that we live in a globalized world. 

There’s uncertainty as to whether the Covid-19 will be treated under Article 273 (which regulates Force Majeure contentions) or Article 249 (which covers hardship circumstances) of the UAE Civil Code. 

In very brief, the key decision maker will be to assess whether the events caused by the coronavirus were foreseeable, impossible to overcome and extraneous. 

This is the reading that UAE Courts make of Article 273 of the UAE Civil Code:

Dubai Court of Cassation, 188/2009

“[…]it is a prerequisite for being allowed to rely on force majeure that it should be the result of an unforeseen event that could not have been averted, namely that the results thereof could not have been guarded against or prevented, in such a way as to make performance of the obligation impossible.”

Dubai Court of Cassation, 730/2015

“[…]force majeure requires lack of connection between that parties and the accident, and that the accident to be unpredictable and impossible to be averted, and that what should be impossible to anticipate or stop is what the accident causes, such as wars, earthquake, fire, drowning or theft or floods, droughts, storms, and so on.”

We could all well expect the coronavirus to fall within the impossibility and unforeseeability of Article 273, along with its extraneous character (as has little connection with ourselves and our dealings), however there is some controversy.

The controversy arises out of the foreseeability factor as the Courts may deem the World Health Organization (“WHO”)’s declaration at the end of January 2020 as sufficient heads up as to foresee its international impact. In fact the WHO declared that the outbreak constituted a public health emergency of international concern.

Contracts entered into after this date may be deemed as foreseeable. 

Contracts entered before they will still need to prove the impossibility in the execution of the contractual obligations. 

Contracts that fail to meet the threshold of Article 273 may seek recourse under Article 249 of the UAE Civil Code which leaves judges ample room to reasonable adjust to the circumstances to balance a given party’s burdensome obligations.  If they meet the threshold of Article 273, in turn, the contract will be terminated and parties will need to be restored to the pre-contract situation or damages will be awarded (in application of Article 274 of the UAE Civil Code).

It will be very important to look at the underlying contracts and applicable laws and jurisdictions to draw the best plan of action and assess whether notices to counterparty need to be sent straightaway, whether you can claim force majeure, whether the force majeure in the underlying contract will prevail over the definition drawn by the national courts. The answer may no longer be in the body of a civil code but we may need to look for a global solution considering the connectivity of international contracts and parties.

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