THE RESTRICTIONS ON QATAR - IMPLICATIONS ON SHIPPING UPDATE FOR MEMBERS IN THE UAE, SAUDI ARABIA, QATAR AND BAHRAIN

Introduction

This further Guidance Note has been prepared to take into account recent developments and to provide some answers to Members in respect of their position under UAE, Saudi, Qatari and Bahraini law. We focus on these four jurisdictions given that they are at the heart of the current restrictions. It remains unclear as to how long the current transportation restrictions may be in place, or whether their scope may change.

Current scope of the main Restrictions

Saudi Arabia, the UAE and Bahrain:

1. have closed their airspace to Qatari airlines and airlines from the restricting countries may not fly to Qatar; and
2. are refusing all Qatari flagged or owned vessels from using their ports or sailing through their waters.

Saudi Arabia has restricted all carriers from shipping cargo "to or from Qatar".

Any goods bound to or coming from Qatar are also restricted from going through Saudi waters. It is unclear at this stage whether the Saudi restrictions extend to all carriers shipping goods to or from Qatar, regardless of whether they go through Saudi waters.

Saudi Arabia has closed its land border with Qatar.

Bahrain has suspended all marine navigation to and from Qatar. Vessels bound to or coming from Qatar may not stop at Bahraini ports or sail through Bahraini waters.

Previously, the position in the UAE was that any vessel coming from or going to Qatar was not allowed in UAE waters/ports (regardless of flag or ownership). However, following the latest circular by the UAE Federal Transport Authority ("FTA"), non-Qatari owned or flagged vessels coming from or heading to Qatar may be able to sail through the UAE and call at UAE ports so long as they do not:

1. load or unload cargo of "Qatari origin"; or
2. load any cargo of "UAE origin" bound for Qatar.

The FTA's circular does not define what qualifies as cargo of UAE or Qatari "origin". We have been informally advised that this refers to all cargo shipped from the UAE or Qatar, including cargo manufactured in the UAE or Qatar. Please note that the FTA's circular is not yet uniformly applied throughout the UAE, although we feel there is a move to have it adopted throughout the territory shortly.

Egypt is reported to have closed its airspace and sea ports to "all means of Qatari transport". What is meant by "Qatari transport" has not been defined, but is likely to include Qatari-owned or registered means of transport. Qatari vessels may not, therefore, stop at Egyptian ports.

However, it appears that transporting goods between Egypt and Qatar is still possible if done onboard vessels/crafts which are not Qatari. Similarly, Egypt has not yet restricted access to its waters (as opposed to its ports) to Qatari vessels. Qatari vessels, as any other vessels may, therefore, still sail through Egyptian territory, including through the Suez Canal.

It is important to note that the current Restrictions are not meant to operate as sanctions or as a blockade/embargo. In other words, there is no blanket restriction on dealing/contracting with Qatari entities (unless they are specifically targeted by the restrictions).

If my contract of carriage is governed by English law, to what extent am I exposed to local liability regimes in case of a dispute?

Members operating in Bahrain, Qatar, the UAE and/or Saudi Arabia, are potentially exposed to disputes or claims being referred to Courts in these jurisdictions. In fact, it is important to note that, generally, local Courts will accept and retain jurisdiction over any dispute brought before them if one of the parties is local and/or the underlying contract was performed in whole or in part in their jurisdiction. This is regardless of any jurisdiction clause, which may have been contractually agreed. There are potentially exclusions to this general principle, but these would have to be considered on a case by case basis.

Where a dispute is referred to local Courts, such Courts may apply local laws (and liability regimes), regardless of any agreement to the contrary between the parties.

Can I abandon the carriage?

In most cases, the answer is no. Regardless of any clause in a bill of lading or underlying contract of carriage, we would not recommend abandoning cargo at an intermediate port, from a local law perspective.

Typically, laws in the region exonerate the carrier for delay or loss arising out of acts of government or other force majeure events. However, local Courts usually refuse to uphold contractual terms that give additional protection or comfort to the carrier. As such, a contractual term allowing cargo to be abandoned at an intermediary port in case of difficulty or delay may not be upheld by local Courts, if challenged.

There may be a possible alternative if performance of the contract is entirely impossible due to the current restrictions on Qatar (e.g. contract of road carriage of cargo from Saudi Arabia to Qatar). In this case, local law may allow unilateral termination on the grounds of force majeure. Ideally, this should be attempted by application to Court, mainly because force majeure is not commonly argued in the region. It is, therefore, not yet clear whether (or under what circumstances) local Courts will consider that the restrictions on Qatar constitute force majeure. Hence, in unilaterally terminating a contract for force majeure, without Court intervention, Members expose themselves to a possible counterclaim for repudiatory breach, i.e. "unlawful termination".

A final possibility, of course, is to terminate or amend the contract by mutual agreement between the parties. This may be the most favourable commercial solution, whereby the cargo's destination can be re-arranged and/or customers can take steps to ensure onwards shipment.

Can I make alternative arrangements for the carriage?

As previously advised, there may be opportunities for Members to re-route carriage to avoid or minimise the disruption. The TT Club understands that a number of the major shipping lines are already considering the available options in this respect, with Oman currently appearing to be the most popular destination. TT Club Members are likely to be bound by the decision of those lines.

If, however, Members are able to take control of and re-route cargoes, then the terms of the TT B/L give them an argument that they are entitled to do so, and also to recover the costs of such re-direction from the customer. Again, the recovery of these costs may not be straightforward and is not guaranteed.

Also, as previously stated, local laws will typically exclude Members' liability for delay/loss caused by government action or other force majeure events. Therefore, regardless of the local applicability of any contractual term, Members may be able to rely on local law to avoid liability for delays or losses arising out of re-routing, so long as such re-routing arises out of the Qatari restrictions and was reasonable in the circumstances.

The above may be subject, however, to the current restrictions in Saudi Arabia, which appears to be restricting shipment of any cargo to or from Qatar, as well as the transit thereof through Saudi waters. In other words, currently, it appears that any cargo stated as coming from or going to Qatar cannot pass through Saudi Arabia.

Conclusion

Please note that the position is still very much developing and still prone to change. We are monitoring the situation but it is also important that Members do so as well, for instance through local points of contact (e.g. at relevant ports or customs), as the Restrictions may develop without notice.

It is important that Members continue to talk to their customers and keep them updated. Furthermore, in considering how to deal with any disruption, Members should give thought to the terms of the relevant contracts, the value of the cargo being carried or services being provided, and also the importance of the customer and the commercial relationship. There is no right or wrong answer. The decision is ultimately an operational one for each Member, but the TT Club is, of course, available to discuss these options or any other issues that may arise. If Members need to appoint local lawyers the Club is happy to make suitable recommendations.

If you have further questions please contact your TT Club representative.