Applicability of the Doctrine of Force Majeure During Unprecedented Times in Bahrain

The recent escalation of conflict between the United States, Israel, and Iran has caused severe disruption to commercial operations worldwide. The closure of airspace across GCC member states, combined with the inability of vessels to transit safely through the Strait of Hormuz—a critical artery for global trade and, in particular, the supply of oil—has had far-reaching consequences for businesses both within and beyond the region.

These developments have materially affected the ability of businesses to perform their contractual obligations, with a number of major enterprises now deeming performance impossible under current conditions. In Bahrain, several prominent companies in the energy, logistics, and industrial sectors, including Bapco and Alba, have invoked force majeure under their commercial contracts. This article examines the doctrine of force majeure under Bahraini law.

The Bahrain Civil Code

Under the laws of Bahrain, the doctrine of force majeure is governed by Decree No. 19/2001 Issuing the Bahrain Civil Code (the “BCC”).

Force Majeure and Impossibility (Article 165)

Force majeure under Article 165 of the BCC is a ‘foreign cause’ which is unforeseeable, unavoidable, and which renders performance of the contractual obligation impossible:

“Where a person proves that damages have arisen from a foreign cause beyond his control, such as force majeure, unforeseen incident or the fault of the victim or a third party, he shall not be liable for such damages, unless there is a provision to the contrary.”

For force majeure to apply, three essential conditions must be satisfied:

• Unforeseeablility Test: The event must have been unforeseeable at the time the contract was formed. National courts interpret this as an event which “exceeded what is ordinarily expected to have happened” (Bahraini Court of Cassation in Challenge No. 206 J.Y. 1995). The foreseeability test is objective. The event in question must not only be “unforeseeable to the debtor but also to the most alert and insightful of persons” (Bahraini Court of Cassation Challenge No. 145 J.Y. 2002). Examples of such events include wars, pandemics, earthquakes, or terrorism; routine or anticipated risks like market fluctuations do not qualify.
• Event is Unavoidable: The consequences of the event must have been unavoidable notwithstanding reasonable efforts to mitigate loss or damage.
• Impossibility of Performance: The event must render performance of the contractual obligation impossible, not merely more costly, or commercially burdensome. 

Article 145 of the BCC provides that in bilateral agreements, if a force majeure event renders performance of the contract impossible, the corresponding obligation is discharged and the contract is automatically terminated. However, in cases where the impossibility of performance is partial, the affected party has the option to either (i) demand enforcement of the agreement to the extent that the remaining obligations continue to be enforceable or (ii) terminate the agreement.

The same principle applies to unilateral contracts and is enshrined in Article 146 of the BCC.

Termination invoked pursuant to Articles 145 or 146, results in the parties being discharged from their obligations and returned to their pre-contractual positions. If a party is unable to restore the other to their pre-contractual position, the Bahrain courts may order the party to provide an equivalent performance instead. This is stipulated under Articles 142 and 147 of the BCC.

In addition to contract termination, force majeure may serve as a legal defence to liability. Article 216 of the BCC states that where specific performance by a debtor becomes impossible or is delayed, the debtor must compensate the creditor damages, unless such non-performance or delay was due to a foreign cause beyond his control. Accordingly, there is a presumption under Article 216 of the BCC, that the debtor is at fault and is therefore liable to compensate the creditor for losses suffered, unless the debtor invokes the defence of a foreign cause / force majeure event.

Relationship with Contractual Force Majeure Clauses

Where a contract contains a force majeure clause, said provisions will generally supersede the default statutory provisions under Article 165 of the BCC. Notably, and except in the case of fraud or gross fault, Article 218 and 219 of the BCC allow the parties to contractually agree to waive the defence of force majeure. However, in the absence of a contractual force majeure clause, parties can rely on statutory provisions to excuse performance. Bahrain Courts will interpret force majeure clauses like any other contractual term i.e. the wording of the clause is given its meaning, and if ambiguous, the intention of the parties when drafting the clause will be considered. Any contractual notice provisions must be followed.

Hardship vs. Force Majeure

Unlike force majeure, hardship - governed under Article 130 of the BCC - does not apply where performance of a contractual obligation has become impossible after formation of the contract. Rather it applies where performance is possible but has become more onerous due to events which were beyond the reasonable contemplation of the parties at the time of concluding the contract. The two doctrines are distinct and must not be conflated.  

Practical Considerations

The burden of proof lies with the party invoking force majeure, who must demonstrate that non-performance was directly caused by the force majeure event. A party's entitlement to payments or other contractual rights may be restricted where it has failed to take reasonable steps to mitigate its losses.

In assessing a defence of force majeure, the Bahrain courts adopt a case-by-case approach, while considering the contract terms, the nature of the disruption, and efforts made by the affected party to mitigate losses. Parties are also expected to strictly follow agreed contract provisions, including those relating to serving timely notices. 

Summary

The invocation of force majeure provisions under commercial contracts is likely to remain a significant issue in the weeks ahead as the conflict in the Middle East continues. Parties should carefully assess their contractual positions and determine whether their circumstances render performance impossible or merely more onerous. Parties are also encouraged to engage in open dialogue with their counterparties and to consider the possibility of renegotiating contractual provisions and mitigating losses to the extent possible.

It is essential that parties approach the administration of their contracts with diligence and in good faith. A party seeking to invoke force majeure must do so on a properly particularised basis, supported by a clear articulation of the specific contractual obligations affected and the precise manner in which the alleged event has prevented performance. Generic, unparticularised, or unsubstantiated assertions are unlikely to satisfy the requirements of the BCC or to withstand scrutiny before the Bahraini courts. Parties should ensure that any force majeure notice is comprehensive, accurate, and served in strict compliance with the contractual machinery.

Moreover, the impact of the alleged force majeure event must be assessed with rigour and specificity. It is not sufficient for a party to assert, in general terms, that performance has been rendered impossible by prevailing circumstances. The party invoking force majeure must be prepared to demonstrate that impact with concrete, contemporaneous evidence. This may include operational records, internal and external correspondence, financial data, supply chain documentation, and, where appropriate, expert assessments. The evidentiary burden is a substantial one, and parties should take care to compile and preserve relevant records from the outset.

Finally, it must be emphasised that the mere existence of circumstances capable of being characterised as a force majeure event is not, in itself, sufficient to excuse performance. There must be a demonstrable and direct causal link between the event and the party's inability to perform its specific contractual obligations. The Bahraini courts will examine whether the event in question was the proximate cause of non-performance, and whether any intervening factors—including the party's own conduct or failure to mitigate—may have contributed to or caused the alleged impossibility. A party that fails to establish this causal nexus will not succeed in a force majeure defence, regardless of the severity or notoriety of the external circumstances relied upon.