In this alert, we examine the allocation of risk in commercial contracts and marine insurance frameworks in the context of armed conflict affecting Gulf trade routes. Disruptions to shipping, port operations, and cargo transit during periods of hostilities expose structural weaknesses in force majeure clauses, war risk cover, and liability regimes that are often drafted for peacetime conditions. These issues arise across shipping and logistics arrangements, terminal operations, freight forwarding structures, and cross-border trade contracts, where parties rely on standard form provisions and insurance clauses that may not adequately respond to conflict-driven losses.
When armed conflict affects Gulf trade routes, halts port activities, or damages cargo during transit, the resulting commercial consequences are not evenly allocated. Instead, they are concentrated among parties with the least favourable contractual terms, limited insurance protection, or inadequately constructed force majeure provisions. Commercial contracts fracture along the fault lines of poorly negotiated force majeure clauses, inadequate war risk cover, and liability frameworks calibrated for peacetime. In our experience handling marine insurance claims the patterns of failure are consistent, avoidable, and expensive.
Typically when a conflict event strikes, every affected party faces the same initial question: does our contract excuse us from performance, and if so, on what basis? The answer involves two distinct legal doctrines that operate in sequence, not in parallel. Force majeure comes first because it is a creature of contract, agreed in advance, with defined events and defined consequences. Frustration comes second the court-imposed fallback for parties whose contracts said nothing useful, or whose force majeure clauses were lost through procedural failure.
Force majeure is perhaps the most misunderstood provision in commercial contracts. Operators, shippers, traders, terminal concessionaires, freight intermediaries routinely treat it as a catch-all provision i.e. if something catastrophic happens and we cannot perform, the clause saves us. It does not. If the clause is poorly worded, or omits the event in question, the party seeking relief is left with the far more demanding doctrine of frustration: a remedy so narrow that courts have refused to apply it even when a vessel was requisitioned during wartime.
Three conditions must be established for force majeure to succeed. First, the event must fall within the clause’s defined list and “war” or “armed conflict” is not always there. Boilerplate clauses listing “act of God, fire, flood, earthquake” followed by a vague catch-all of “events beyond reasonable control” create immediate arguments about whether an international armed conflict qualifies. Second, the event must have caused the non-performance: not accompanied it, not made it more expensive, but rendered it legally or physically impossible. Courts have consistently refused to excuse performance where an alternative costlier, slower, riskier remained available. Third, the claiming party must demonstrate active mitigation. Most force majeure clauses require notice within 48 to 72 hours of the triggering event. A missed notice provision does not merely weaken the force majeure claim it may extinguish it entirely. Cargo claims have failed not on the merits, but on a notice provisions.
If the force majeure fails because the clause was absent, defective, or procedurally lost the claiming party turns to frustration. This is a doctrine that English courts have spent over a century making deliberately difficult to invoke. The test is not whether performance became impossible but whether the supervening event rendered performance radically different in nature from what was undertaken at the time of contracting. Not harder not more expensive but radically different. The reason courts set this bar so high is institutional. Frustration asks a court to override a freely negotiated contract on the basis of subsequent events. Courts regard that as an exceptional power, to be exercised only when the contract has genuinely ceased to be the agreement the parties made not merely when one party finds performance inconvenient or unprofitable.
Foreseeability compounds the difficulty for Gulf operators specifically. Frustration cannot be invoked for events that were foreseeable at the time the contract was made. It is arguable that Armed conflict in the Gulf is not unforeseeable since it has happened and more than once. A court will readily say that parties entering shipping, terminal, or trade contracts in or through the Gulf contracted against a background of known regional instability. If they wanted protection against armed conflict, they should have written it in. Silence is treated as acceptance of the risk not as ignorance of it.
The Iraqi invasion of Kuwait in 1990 was a stress test applied to hundreds of commercial contracts, insurance policies, and liability frameworks across the region. That classification determined which insurance exclusions were triggered, which Protection & Indemnity (“P&I” )Club war cover rules applied, and which Institute Clauses came into play. Both frustration and force majeure arguments were made by parties. The frustration arguments largely failed the courts and tribunals applied the foreseeability principle with particular force to parties who had been trading in the Gulf for years and could not credibly claim that armed conflict was outside their contemplation. The force majeure arguments succeeded where the clauses were specific.
Across the Middle East freight forwarders frequently operate on International Federation of Freight Forwarders Associations (“FIATA”) Model Rules. FIATA Model Rules 2018 version defines force majeure broadly as circumstances that could not be avoided and the consequences of which could not be prevented and they do not enumerate armed conflict, war, hostilities, or governmental seizure as specific qualifying events. FIATA rules, like most standard freight forwarding conditions, were drafted on the assumption that the forwarder’s obligations arise in a functioning commercial environment. Similarly Terminal operators carry an exposure that is even starker. Their duty of care to goods in their custody survives the commencement of hostilities. Standard terminal conditions importing the Hague-Visby scale(liability caps) were calibrated for commercial normality not occupation, bombardment, or governmental seizure.
The most consequential misunderstanding is the assumption that marine insurance and force majeure occupy the same space. They are parallel systems, governed by different instruments, with different trigger events, different notice requirements, and different consequences for failure to comply. The market-wide standard terms on which marine cargo insurance is written come from standard form cargo insurance clauses produced by the Joint Cargo Committee a technical committee of the Lloyd’s Market Association and the International Underwriting Association of London. They are not legislation nor are they mandatory. But they are so universally adopted that they function as the de facto global standard for marine cargo insurance. A cargo underwriter in Dubai, Singapore, or New York writing a marine cargo policy will almost invariably use these clauses as the base form. Nevertheless a War exclusion already exists within the standard clauses. Hence a separate set of clauses was developed specifically to cover armed conflict i.e. the Institute War Clauses(“IWC”) Cargo 1982 edition. War risk cover must be purchased separately under IWC and it is priced and scoped entirely differently.
When a vessel is detained in a Gulf port by government order during hostilities, is that a war risk loss or a marine peril? When cargo is looted from a terminal under occupation, which clause responds? When a ship is diverted to avoid a conflict zone and the cargo arrives weeks late and deteriorated, does the war risk insurer pay, the cargo underwriter pay, or does the loss fall into the gap between them? These are not theoretical questions. They are the questions we have navigated on behalf of cargo interests, and the answers turn on the specific wording of specific policies, the specific sequence of specific events, and the specific notices given or not given at specific times. Generic cover is rarely adequate. Generic advice is never adequate. The contracts drafted in peacetime are the ones contested in wartime.
