Force Majeure And The Middle East Crisis: Is "War" A Trigger In Commercial Contracts?

Recent developments in the Middle East have again placed force majeure at the centre of commercial contracts. Following the escalation of hostilities involving Israel, the United States and Iran, several companies in the region and beyond have reportedly declared force majeure on their contractual obligations. News reports indicate that QatarEnergy, YNCC in South Korea, Aluminium Bahrain, and Chandra Asir all have invoked force majeure in response to the unfolding situation.

It may not be long before Malaysian companies face similar questions in their own commercial relationships.

Many businesses will remember how, during the COVID-19 pandemic, force majeure suddenly became a central issue in international contracts. For months, it seemed like a ghost haunting commercial agreements, appearing in disputes across industries and jurisdictions. After the pandemic subsided, the issue gradually faded from the spotlight.

Today, that ghost appears to be returning – this time driven by geopolitical tensions rather than a global health crisis. At first glance, the answer may seem simple. Many contracts list "war" as a force majeure event. If war occurs, surely force majeure applies. In practice, the situation is rarely that straightforward. As always in contract law, everything ultimately depends on the precise wording of the agreement. This write-up revisits the most important elements of force majeure and highlights why this matters for Malaysian companies.

If your business is currently facing supply disruptions or uncertainty around contractual obligations, you may wish to seek early legal guidance. You can submit your query confidentially here.

The Contract Problem: When the Clause Only Mentions "War"

Force majeure clauses are meant to deal with extraordinary events that prevent a party from performing its contractual obligations. In many cross-border supply agreements – particularly in energy, commodities, shipping and manufacturing – the clause lists specific events such as:

• war
• earthquake
• flood
• fire
• pandemic

Often, the clause goes further and states that only the listed events qualify as force majeure. At first sight, this seems clear enough. But problems arise because modern conflicts rarely resemble traditional wars.

Many contracts drafted years ago simply refer to "war" without defining the term. Yet today's geopolitical tensions may involve:

• missile or drone strikes
• limited military operations
• regional escalation between several states
• attacks on infrastructure or shipping routes

These events may disrupt supply chains and commercial performance. However, it may not always be obvious whether they fall within the contractual concept of "war." When disputes arise, this question can become highly contested.

"War" in International Law vs "War" in Contracts

One source of confusion lies in the difference between international law and contract law. In international law, the concept of armed conflict is relatively broad. Hostilities between states can qualify as an armed conflict even if no formal declaration of war has been made. Modern conflicts often begin without any official announcement that "war" exists.

Commercial contracts, however, are usually interpreted according to their wording and commercial context, not technical legal definitions drawn from public international law. As a result, courts and arbitral tribunals typically approach the issue from a practical perspective. They may ask a straightforward question:

Would reasonable commercial parties describe the situation as "war"?

The answer may not always be obvious. For example, a full-scale military conflict between states would almost certainly qualify. But situations involving limited strikes, regional escalation, or indirect hostilities may be more difficult to classify. Different decision-makers may reach different conclusions depending on the circumstances. This uncertainty highlights a fundamental point: the interpretation of force majeure clauses depends primarily on the wording chosen by the parties.

The Real Test: Does the Conflict Prevent Performance?

Even if a situation qualifies as "war" under the contract, that does not automatically mean force majeure applies. This is a common misconception that I regularly see in my practice. Most force majeure clauses contain an additional requirement: the event must prevent performance of the contractual obligation. This is an important threshold.

In many contracts, a party must show that the relevant event makes performance impossible, not merely difficult, expensive, or commercially unattractive. In practice, this means the company invoking force majeure must demonstrate a direct connection between the event and the inability to perform.

Situations where force majeure may apply include circumstances where:

• ports or terminals are closed due to military activity
• shipping routes are blocked or inaccessible
• pipelines, facilities, or infrastructure are damaged
• critical operations are shut down as a result of hostilities

In these situations, performance may genuinely be impossible.

By contrast, force majeure typically does not apply where performance remains technically possible but has become more burdensome.

Examples may include:

• a sharp increase in transport or insurance costs
• higher energy or commodity prices
• general regional instability or political tension

In such cases, all of which we see at the moment, the event certainly affects the economics of the contract, but it does not necessarily prevent performance altogether.

As a result, many disputes ultimately focus not on whether war exists, but on whether the contractual obligations could still have been performed despite the disruption.

Determining whether force majeure applies often depends on the exact wording of the contract and the factual circumstances affecting performance. If your company is currently facing supply disruptions or uncertainty around contractual obligations, you may submit a brief query here.

Why This Matters for Malaysian Companies

Malaysian businesses are deeply integrated into global supply chains. Companies across sectors – including energy, commodities, manufacturing, shipping and logistics – regularly enter into cross-border contracts with partners around the world. Many of these agreements were drafted years ago, often using standard force majeure wording that has changed little over time.

In today's environment, however, geopolitical disruptions can take many forms that were not necessarily contemplated when these clauses were drafted. For example, conflicts may disrupt shipping routes, affect infrastructure, or trigger regional instability without fitting neatly into the traditional concept of "war." For instance, when there are pirates operating in the Red Sea, they may attack ships, but they certainly do not engage in "war." When missile debris is hitting a hotel, leading to an explosion, it is questionable whether this is "war."

When such disruptions occur, parties may discover that their contracts do not clearly address the situation they are facing. That can lead to uncertainty and, in some cases, disputes over whether force majeure has actually been triggered.

Practical Lessons for Businesses

Recent events provide a useful reminder that force majeure clauses deserve careful attention. There are several practical steps Malaysian companies may wish to consider.

Step 1: Review Existing Contracts

Businesses should urgently review the wording of force majeure clauses in their existing agreements. If the clause refers only to a narrow list of events – such as "war" and natural disasters – it may not cover the full range of disruptions that modern geopolitical crises can produce.

Understanding how these clauses operate is essential before relying on them in practice.

Step 2: Update Drafting for Future Agreements

For future contracts, companies may wish to consider broader and more precise drafting. Some agreements now refer not only to "war", but also to events such as:

• armed conflict or hostilities
• military operations
• sanctions or embargoes
• government restrictions affecting trade or transport

Clearer drafting can help reduce uncertainty if disruptive events occur and this saves trouble and costs. For general tips on how to draft force majeure clauses, see Do's and Don'ts of Drafting Force Majeure Clauses.

Step 3: Document Operational Disruptions Carefully

If force majeure is invoked, it is important to demonstrate why performance has become impossible. Courts and arbitral tribunals typically require clear evidence showing how the event directly prevented performance. Companies should therefore ensure that operational decisions, logistical constraints, and external disruptions are properly documented.

Aside from being able to learn and prepare for future force majeure events – whether a pandemic, a military conflict or a solar storm (yes, they exist and can cause massive disruptions) – you should also keep in mind that if there is a fully-fledged dispute, the party prevailing may not be the one that's objectively right. It may as well be the party with better documentation.

The Bottom Line

Modern conflicts rarely resemble the traditional wars that many contracts still refer to. At the same time, geopolitical tensions can quickly disrupt supply chains and commercial relationships across borders. As recent events in the Middle East illustrate, these disruptions may lead companies around the world to consider invoking force majeure.

For Malaysian businesses operating internationally, the key lesson is straightforward:

whether force majeure applies will ultimately depend on the specific wording of the contract and the factual circumstances affecting performance.

Understanding those provisions before a crisis arises may help prevent significant uncertainty – and costly disputes – later on.

A Final Thought for Malaysian Businesses

Periods of geopolitical instability often expose weaknesses in commercial contracts that may have gone unnoticed for years. As recent developments show, questions around force majeure and business disruption can arise quickly and unexpectedly. For companies operating across borders, understanding how these clauses work – and whether they truly protect against modern risks – is becoming increasingly important.

Businesses that are uncertain about the scope of their force majeure provisions, or that are currently facing supply disruptions, may benefit from reviewing their contracts and legal position at an early stage.

The original article was published on Aqran Vijandran's website at [link].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.