News / 07-07-2017 / Dubai

Since diplomatic ties were severed between the UAE and Qatar, we have received various queries regarding how this impacts our clients’ businesses. We have collated the most commonly asked questions and answers below, as well as some points to bear in mind, to provide a handy reference point as first port of call in case any queries relating to the Qatar situation arise. 

Please note that, as this is a live situation, the information below is correct as of 5 July 2017. We will update this Q&A as and when needed.

What is the impact of the measures on nationals and residents residing in Qatar and UAE?

On 5 June 2017, diplomatic ties between the UAE and Qatar were severed, with the result that:

1.  Qatari diplomats had to leave the UAE within 48 hours of 5 June.

2.  Qatari nationals had to leave the UAE within 14 days of 5 June. There was a report by Amnesty that raised concern about the humanitarian impact and we believe there has been some leeway if there are family ties to the UAE.

3.  Residents in Qatar whose nationality would normally allow them entry to the UAE with a visa on arrival now need to apply for a visa before they travel if they have a Qatar residency visa in their passport. 

4.  UAE nationals are prohibited (by the UAE) from travelling to or via Qatar. 

Are there any restrictions on banking relations with Qatar?

On 9 June 2017, the UAE, KSA and Egypt issued a list identifying 59 individuals and 12 entities that are reportedly linked to terrorism. The accounts of those individuals and entities were reportedly frozen by the UAE Central Bank.
The joint statement also identified six Qatari banks which will be subjected to increased scrutiny – QNB, Qatar Islamic Bank, Qatar International Islamic Bank, Barwa Bank, Masraf Al Rayan and Doha Bank.

Aside from those named in the statement of 9 June 2017, we are not aware of any other banking restrictions to/from Qatar or involving Qatari entities. 

At the moment, it appears that trading, unless impacted by the so-called ban or sanctions in other ways, remains possible. Companies trading with Qatar should be prepared to encounter delays in payments if the listed banks are used, but there is currently no general prohibition on trade with Qatar or payments to Qatar. Also, there are no restrictions on receiving funds from Qatar, although businesses should expect greater scrutiny of transactions which may lead to delay. 

How can businesses manage their risk exposure when they want to deal with Qatar while, at the same time, ensuring that business transactions can continue? 

In general, businesses need to structure their operations in order not to violate the restrictions. At the moment, the transportation routes are affected and, therefore, businesses need to restructure their logistical arrangements. 
In addition to taking note of the above points, businesses need to anticipate potential further restrictions and structure any upcoming deals accordingly. This means ensuring that there are adequate force majeure, change of circumstance, sanctions and termination provisions in the contracts. 

Can goods from the UAE be shipped to Qatar via Oman? 

We understand that goods which had arrived in Jebel Ali or were en route to Jebel Ali, for example, before the measures kicked in have been transshipped to Qatar via Oman. There have also been reports of feeder services being established between Oman and Qatar.

It is difficult to say with certainty as the measures are not very specific and the circulars issued by the port authorities and the federal transport authority only relate to what is or is not permitted in the port by way of obtaining clearance. The starting position is that UAE origin goods should not be sent to Qatar. It is clearly not possible to do so directly from the UAE to Qatar as clearance would not be obtained for that. However, it may be possible to send UAE goods to Oman, but they remain UAE goods and, therefore, this is arguably in breach of the measures. On the other hand, there is no prohibition on trade and so, if there is a practical work-around the restriction put in place by the port, there is no suggestion that this will be prevented or that there would be repercussions on those conducting such transfers. However, we would caution that this position needs to be monitored as the situation is developing.

Are there any restrictions for Qatari chartered vessels?

As matters currently stand, there are no (restrictions on Qatari chartered vessels in the UAE Federal Transport Authority notice. However, we are aware that Fujairah agents are advising that there is a restriction on vessels chartered by Qatari companies or individuals. Therefore, it would be prudent to check with each specific emirate beforehand on this point. 

Whether a vessel currently in Dubai that then has to proceed to Fujairah can be legitimately ordered to Qatar to load product for discharge at a European port?

As things currently stand, Fujairah port is following the FTA guidance and accordingly, a vessel whose next call is Qatar is permitted to enter and leave Fujairah as long as she is not Qatari flagged, owned or chartered. 

What amounts to Qatar ownership – registered ownership, beneficial ownership, shareholding or a charterer in the middle of a long chain?

At the moment, the position remains uncertain and we recommend that clearance from the port is obtained in advance. 

Are there any problems for Qatari vessels carrying cargo from Qatar going through the Suez Canal?

We are not aware of any suggestion from the Egyptian authorities that they will extend their measures to include restricting access to the Suez Canal for Qatari vessels and cargo. 

Article 1 of the Convention of Constantinople (1888) provides access to the Canal to all vessels, irrespective of flag. However, Article 10 permits the Egyptian authorities to take measures for the defence of Egypt and the maintenance of public order.

Are there any restrictions in place between Oman or Kuwait and Qatar?

Currently, there are no restrictions in place between Oman or Kuwait and Qatar.

What is the position in relation to force majeure under English law?

Under English law, there is no recognised concept of force majeure and it is a purely contractual matter. This means that the parties cannot rely on force majeure unless it is expressly provided for in the contract.

Typically, a force majeure clause would provide that a party will be relieved of its obligations to perform the contract when certain unexpected or extraordinary events occur affecting the performance of the contract, which are beyond the parties’ control.  

Parties are free to draft clauses as they see fit. When drafting force majeure clauses, parties need to take care when drafting the clause in order to ensure that it reflects what the parties intended. Ultimately, the application and effect of a force majeure event will be determined by the precise construction and interpretation of the clause itself.  

What happens if there is no force majeure clause in the contract (governed by English law)?

If there is no force majeure clause in the contract and an unexpected event occurs that is beyond the parties’ control, and affects the performance under the contract, the parties may be able to rely on the English common law doctrine of frustration. 

This principle generally operates to discharge both parties from further performance under a contract where a supervening event occurs which results in the contract being physically or commercially impossible, or illegal, to perform, or something radically different from that originally undertaken.

The key for showing frustration is that it must actually be impossible to perform the obligations and not just more difficult or more expensive. So in circumstances such as this, if a contract expressly requires that UAE origin goods are delivered directly to Qatar, without any flexibility on this, then there may well be an argument that frustration would apply.

English law takes a very restrictive approach to the requirements for frustration of a contract because the effect is to automatically bring the contract to an end.It is consequently  difficult to argue successfully that a contract has been frustrated. 

What is the UAE law position in relation to force majeure?

Under UAE law, as in other Gulf countries, the doctrine of force majeure may be relied upon by a party to a contract as a matter of law. There is no need for a force majeure clause to expressly be set out in a contract. 

The main circumstances that would trigger a force majeure event would be those that make performance under a contract or performance of an obligation impossible or where the event is unforeseeable and outside of the parties’ control. It is only a force majeure event when the parties could not have predicted it.  

UAE law does not list events that may constitute a force majeure event. However, it is generally accepted that force majeure events include ‘unforeseeable events’, such as natural disasters, civil unrest, and political disturbance that may extend to war. 

In addition to contractual force majeure provisions, UAE law permits a judge or an arbitrator, after considering the interests of each party, to vary the contractual obligations to a “reasonable level” in exceptional circumstances by virtue of Article 249 of the UAE Civil Code. UAE case law has found that new legislation or an administrative order that may affect the non-performance of certain contractual obligations may amount to a force majeure event.