The Qatari restrictions: implications for the commodities sector, June 2017
As is well known, between 5 and 6 June 2017, eight countries severed diplomatic ties with the State of Qatar.
Saudi Arabia, the UAE and Bahrain closed their air space and territorial waters to Qatar. Saudi Arabia also closed its border with Qatar, which is Qatar’s only land border with another country. Egypt has also closed its airspace to all flights to and from Qatar.
As a direct consequence, certain ports in the region have blocked Qatari-flagged vessels, along with other vessels that are heading to and coming from Qatar. In particular:
The Petroleum Ports Authority in Abu Dhabi also issued a notice that Qatari-flagged vessels would not be allowed entry into Abu Dhabi Petroleum Ports Operating Co or IRSHAD, a subsidiary of Abu Dhabi National Oil Co.
Egypt has not yet indicated whether it intends to block Qatar-linked vessels/cargo from using the Suez Canal.
Practical implications
These developments mark an unprecedented change in Middle Eastern relations, which will undoubtedly affect companies with trade routes to or from Qatar.
Whilst all the aspects which may derive from the current restrictions on Qatar are not yet apparent, we envisage the following operational implications as likely to be the most immediate, all of which will have cost repercussions on the affected parties:
Traders, who think they may be affected, should look closely at the terms of their SPAs, and in particular at the Force Majeure (FM) provisions in their contracts. Well drafted FM clauses will provide a list of “FM events”. The party whose obligations are hindered by the FM event, may be given a period of time during which obligations are suspended. It is important in situations such as these for the formalities of “notices” to be closely followed.
The exposure of businesses to the current Qatari trade restrictions may be covered by insurance. It may also be managed through applicable contractual and local legislative provisions within the Middle East.
We expect to have more visibility on the operational and legal implications of the restrictions against Qatar as the matter unfolds.
For more information, please contact Richard Strub, Partner, Dubai on +971 4 423 0554 or richard.strub@hfw.com, or Damian Honey, Partner, London on +44 (0)20 7264 8354 or damian.honey@hfw.com, or your usual contact at HFW.
Download a PDF version of ‘The Qatari restrictions: implications for the commodities sector, June 2017’