UAE Trends and Developments Contributed by: Amir Alkhaja, Areen Jayousi, Gulsun Ozmen and Alia AlMarzooqi, Habib Al Mulla & Partners
modification if it operates unfairly against the adhering party. The Old CTL contained no direct equivalent. For businesses operating under standard-form con - tracts, this is a significant development that may affect the enforceability of contractual provisions that pur - port to limit or exclude the statutory protections avail - able under the force majeure and hardship provisions. Pre - contractual obligations and disclosure The New CTL introduces express pre-contractual obli - gations that did not exist in the Old CTL, including a duty of good faith in negotiations (Article 121) and a duty to disclose material information (Article 122). These provisions affect the force majeure and hard - ship analysis: where a party was aware at the time of contracting of circumstances that would give rise to a future hardship or force majeure event and failed to dis - close them, it may find that this undermines its ability to rely on those doctrines after the event materialises. Transitional considerations Contracts entered into before the New CTL came into force will generally remain governed by the Old CTL, meaning that Articles 249 and 273 of the Old CTL will continue to apply to existing long-term agreements for many years to come. Parties renegotiating, novat - ing or extending such contracts should carefully con - sider whether the parties intend the New CTL to apply going forward, and should address this expressly in any amendment agreement. For new contracts, Articles 224 and 236 of the New CTL will apply, and the expanded court powers under those provisions, particularly the right to order rescis - sion in hardship cases, should be reflected in the drafting of any hardship renegotiation clause. Practical considerations for businesses operating in the UAE Review your existing contracts Contracts entered into before the New CTL came into force should be reviewed to identify which ver - sion of the law applies and whether the force majeure and hardship provisions are adequate for the current risk environment, including risks such as geopolitical conflict, trade sanctions, energy price volatility and AI-driven supply chain disruption. Contracts entered
into after the New CTL took effect should be reviewed for consistency with its new provisions, including the expanded judicial powers under Articles 224 and 236. Draft for the UAE legal environment Force majeure and hardship clauses drafted for com - mon law jurisdictions do not translate seamlessly into UAE-governed contracts. Key differences to address include: • the threshold of impossibility (not mere difficulty) required for statutory force majeure; • the court’s power under Article 249 of the Old CTL (and Article 224 of the New CTL) to revise or rescind onerous obligations, going beyond what is available in most common law systems; • the notification requirements and the consequenc - es of failing to notify; and • the good faith obligations that govern conduct before, during and after a disruption event. Include a hardship renegotiation mechanism Best practice for UAE-governed commercial contracts is to include a bespoke hardship clause that specifies the triggering conditions, the renegotiation process, the timeframe for negotiation and the consequences if negotiation fails (which may include referral to an expert, mediation or litigation). This provides a struc - tured pathway for managing disruption without imme - diate recourse to the courts. Consider the choice of law and forum Businesses operating in the UAE have a meaningful choice between the onshore civil law system and the common law regimes of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). Force majeure and hardship operate differently in each system: the DIFC and ADGM courts apply English common law principles, under which force majeure is a creature of contract (there is no general common law doctrine of force majeure equivalent to Article 273 of the Old CTL or Article 236 of the New CTL), and hardship as a ground for judicial price revision or rescission does not exist in the same form. The choice of governing law and dispute resolution forum is therefore a substantive commercial decision, not merely an administrative one.
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