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What to Know
- GCC force majeure clauses can determine whether regional conflict disrupts project revenues.
- Relief depends on contract language, political risk definitions and notice compliance.
- Missing force majeure notice deadlines can eliminate valuable contractual protections.
The escalation of hostilities between the United States, Israel and Iran, drawing in the wider Gulf region and placing the Strait of Hormuz under threat of closure, has prompted every developer with exposure to Gulf Cooperation Council infrastructure to do precisely what their predecessors did during the COVID-19 pandemic – reach for the force majeure clause in their concession agreements. The reflex is entirely understandable. The difficulty, as the pandemic made painfully clear, is that the devil is very much in the detail, the relief available being peculiarly specific to the contractual terms each project negotiated, differing materially from one jurisdiction to the next and from one procurer to another.
The Architecture of the Revenue Document
Every PPP concession in the GCC region is anchored by a primary revenue agreement (in the utilities sector, typically a Power Purchase Agreement, a Water Purchase Agreement, a Power and Water Purchase Agreement, or an Energy Conversion and Water Purchase Agreement) which functions as the economic heart of the project. It is in this document that the right to relief for a force majeure event is both granted and circumscribed. The force majeure clause in a GCC concession agreement is never a simple gateway to excuse non-performance. It is instead an intricate, multi-stage mechanism, each stage carrying its own conditions and its own capacity to bar the developer from relief if those conditions are not precisely met.
The clause typically opens with a general definition that the event must be beyond the reasonable control of the affected party and must prevent, hinder or delay performance. What follows includes carve-outs, specific notice requirements and corresponding time bars and post-cessation obligations, all of which need to be considered, met and duly discharged.
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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.
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