Originally from The MENA Leading Arbitrators’ Guide to International Arbitration

Preview Page

I. INTRODUCTION

Both common and civil law countries struggle with the same fundamental struggle that has been passed down through their shared Roman heritage: striking the proper balance between pacta sunt servanda (“contracts must be honored”) and rebus sic stantibus (“so long as circumstances remain the same”).  These concepts communicate the modern day tension between faithfully executing the terms of the contract and alleviating an unforeseen burden on the obligor that renders the carrying out of the obligation impossible, i.e., force majeure, or severely difficult, i.e., unforeseen events. The need to explore this tension within contractual relationships has only become more pronounced in light of the recent coronavirus (COVID-19) outbreak, which has caused severe public health and commercial disturbances across industry sectors. This chapter will examine the legal concepts of force majeure and unforeseen events in the Middle East and North Africa (MENA) and how they apply in the context of COVID-19.

The majority of Middle East jurisprudence is based on Shariah Law, where there is a presumption toward leaving the contractual bargain undisturbed. The Qur’an, embodying the spirit of pacta sunt servanda, orders: “O ye who believe! Fulfill (all) obligations!”  However, Shariah Law also recognizes the reality that obligations may be severely impaired due to external forces, relegating force majeure to an implied term:  if the performance under the contract becomes impossible, then the contract may be terminated without the obligor being liable for damages.  Shariah law also recognizes the doctrine of unforeseen events, where exceptional circumstances make it onerous on one party to continue performing their obligations and the judge has the discretion to modify the obligations of the contracting party.