UAE Project Disruption and Geopolitical Risk — Key Contractual Considerations

The military conflict ensuing in the Gulf region following the events of 28 February 2026 has direct impact on developers, sponsors, lenders, contractors and insurers and their infrastructure projects in the region. This alert sets out certain key issues parties should be considering now.

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The military conflict ensuing in the Gulf region following the events of 28 February 2026 has direct impact on developers, sponsors, lenders, contractors, and insurers and their infrastructure projects in the region. This alert sets out certain key issues parties should be considering now. Is there a qualifying event? UAE infrastructure and energy projects are typically governed by detailed, bespoke project agreements that contain express force majeure and government action provisions. Unlike English common law frustration, these clauses do not operate automatically. A party seeking relief must satisfy each limb of the applicable definition, which typically requires that the event is beyond the affected party's reasonable control, could not have been prevented or avoided through the exercise of reasonable diligence, was not reasonably foreseeable at the contract date, and actually prevents performance of the relevant obligation, or pre-completion, materially delays the critical path, or causes material additional cost. The foreseeability limb warrants particular attention in the current context. For projects entered into before the onset of the current conflict, this threshold is more readily satisfied. For projects contracted after hostilities commenced, parties should assess carefully whether the event in question was already foreseeable at the contract date, as this may preclude reliance on force majeure altogether. Parties should address the scope of force majeure expressly in any new contracts entered into during the current period. Critically, many project agreements contain an enumerated list of sanctioning states, whose sanctions or embargoes can constitute a qualifying government action event. Any sanction or embargo imposed by a state not on that list will typically fall outside the definition entirely, leaving the affected party without contractual relief regardless of the practical impact on the project. Parties should accordingly map their specific situation against the applicable contractual language before assuming that relief is available. Supply chain and import prohibition exposure. UAE law prohibits the importation of goods and services from countries with which the UAE does not maintain diplomatic relations and goods or services linked to persons from such countries. This obligation sits with the developer and its contractors. Where a key equipment supplier or subcontractor is located in or linked to a jurisdiction affected by the current geopolitical situation, the project faces both a legal compliance exposure and a potentially acute procurement crisis, with the risk of delay and additional cost falling to the developer's side. Increased costs alone, whether arising from supply chain disruption, rerouting, or freight and insurance premium increases, will not usually, by themselves, constitute a force majure or government action event unless the contract clearly allocates that risk. However, where a qualifying force majeure event is properly established, a contractor may be entitled not only to an extension of time, but also to additional cost recovery depending on the nature of the event and the applicable contractual provisions. Parties should not assume that economic disruption, without more, provides a basis for relief, but should not overlook the potential to claim costs where a qualifying event is established. Separately, where increased costs or supply chain disruption, even if falling short of a force majeure threshold, have rendered performance of a UAE governed contract unduly burdensome as a result of exceptional and unforeseeable circumstances. Article 249 of the UAE Civil Code provides a hardship remedy allowing courts to intervene to restore contractual equilibrium. This remedy may be available independently of contractual force major provisions. What level of impact is required? Project agreements distinguish carefully between events that prevent performance, typically a high threshold, often approaching impossibility, and those that hinder, impede or delay it, a lower threshold. The relief available and the mechanism through which it is claimed will differ depending on which limb is engaged. Parties should identify with precision what is actually prevented or delayed and why, before invoking any clause. Where UAE law governs the contract, an important distinction applies between contractual and statutory relief. Article 273 of the UAE Civil Code extinguishes an obligation only where performance has become objectively impossible, a materially higher threshold than the prevention standard typically found in contractual force majure clauses. A party that successfully establishes a contractual force majeure claim should not assume that it has automatically satisfied Article 273 for the purposes of statutory discharge of its obligations. A premature assertion of impossibility may constitute a repudiatory breach and should be approached with caution. Notice and procedure. A critical gateway. Relief under force majeure and government action provisions is invariably conditional on strict compliance with contractual notice requirements. Failure to comply with the applicable notice deadline can remove entitlement to relief entirely, regardless of the underlying merits of the claim. This is not a formality, it is a substantive condition precedent. Under many standard form contracts, notice deadlines are short and operate as absolute bars to entitlement. Parties should review their specific contractual notice provisions urgently and serve protective notices promptly where there is any credible basis for a claim, even where the full extent of the disruption is not yet known. Liquidated damages. The cost of an unprotected position, where time relief is unavailable, because a qualifying event cannot be established, or because notice obligations have not been met, liquidated damages regimes continue to apply at material daily rates. For financial exposure from even a modest unprotected delay can be very significant. Parties should not assume that relief will be available and should model their LD exposure across realistic disruption scenarios without delay. Prolonged disruption and termination rights, where a force major event persists over an extended period, termination rights may arise under the contract. The applicable thresholds and consequences will depend on the specific terms of the project agreement, and parties should review their contracts carefully to understand when these rights arise, what they entitle each party to, and what obligations arise on termination. A decision to terminate or to resist termination is one of the most significant a party can take in this context, and specialist advice should be sought before any such step is made. Recommended next steps. Project companies may wish to consider the following steps in response to current geopolitical disruption. Locating and reviewing the precise force major, government action, sanctions, change in law, insurance, suspension, and termination provisions in all relevant project documents. Mapping the disruption to the relevant obligation, identifying precisely what is prevented, hindered or delayed, and why, with reference to the applicable contractual definition. Serving protective notices where there is any credible basis for a claim, strictly in accordance with the contractual notice provisions and within any applicable deadlines, while reserving all rights. Preserving evidence, carrier and supplier communications, port and logistics advisories, internal operational records, critical path analyses, and site reports should all be maintained contemporaneously. Auditing the supply chain for import prohibition exposure, including equipment origins, subcontractor nationalities, and the routing of goods and services. Beginning to track and aggregate costs attributable to geopolitical disruption, with a view to satisfying any applicable aggregation threshold for price adjustment claims and supporting any additional cost recovery under applicable force majeure or hardship provisions. Reviewing insurance placements and engaging brokers regarding terrorism, political violence, and political risk cover. Conducting a sanctions and export controls review before implementing any workarounds that could create independent compliance exposure. Assessing whether UAE hardship provisions under Article 249 of the Civil Code may be available where contractual relief is not. And separately considering the high threshold required to establish impossibility under Article 273. The appropriate course of action will depend on the specific terms of each project company's contracts and the nature of the disruption experienced. Our projects and infrastructure and finance teams are closely monitoring developments and are well placed to support clients on contract analysis, notice strategy, supply chain compliance, lender engagement, and dispute preparedness. Please do not hesitate to contact us if you would like to discuss the implications for a specific project or transaction.