Middle East conflict: force majeure poses contractual risk for bidders

Where this disruption occurs before a power purchase agreement (PPA) or water purchase agreement (WPA) is signed, bidders have no contractual route to seek relief or amend their proposals. Procurers continue to enforce strict bid validity and bid bond requirements, meaning bidders carry the risk of volatility without adjustment mechanisms unless they can successfully negotiate an uplift or adjustment to time in their negotiations with procurers.

This creates a structural imbalance in the tender process, where geopolitical risk is increasing but bidder obligations remain fixed to the bid submission documents.

Understanding this gap is essential to avoid exposure.

Contractual requirements for relief

In general under UAE and KSA civil law, legal doctrines such as force majeure or hardship typically presuppose the existence of a concluded contract. They therefore do not usually provide a practical or reliable basis for relief from obligations arising solely from participation in a tender process. Relevant procurement laws, IPP/IWP and PPP laws also do not provide any relief for the impact of the current regional crisis during the tender phase.

This means bidders cannot claim force majeure or hardship relief under the law before executing the relevant project/concession agreement. Even if an event clearly qualifies for relief as a force majeure after signature of the contract - for example, due to war blockade, supply chain collapse or other circumstances which may fall within the contractual definition of force majeure - none of those reliefs apply while the bidder is still in the tender phase, including during the preferred bidder stage but prior to contract signature.

Bidders therefore remain bound by the requirements of an invitation to bid (ITB) or request for proposal (RFP) regardless of circumstances outside their control. This includes price, programme and offer validity obligations. Tender‑stage force majeure concepts simply do not exist under the civil codes.

Similarly, although UAE and KSA PPP frameworks identify force majeure as a risk to be allocated under the eventual project agreement, they do not provide any statutory force majeure relief during the procurement phase. These laws govern process and approvals, not interim bidder protections.

This means that even though force majeure will ultimately sit within the PPA risk allocation, until the PPA is signed, bidders have no leverage or legal basis to request relief. Bid validity, bid bonds and offer assumptions remain fully at bidder risk. This gap makes early engagement and clear documentation of assumptions important.

Why letters of award are not enough

While a letter of award confirms preferred bidder status, it does not amount to a binding contract as essential elements - such as any relief for force majeure or exceptional circumstances - and formalities have not been agreed or executed.

The current UAE civil code - Article 141 of Federal Law No. 5 of 1985 (as amended) – makes it clear that a contract only forms when subject matter and obligations are settled, and formal requirements are met. As a result, none of the protections under the project/concession agreement for force majeure, change in law, or insurance provisions apply at the letter of award stage.

This means bidders remain in a pre‑contract phase that carries no statutory or contractual protection, and reliance on letters of award for force majeure relief is not supported under UAE law.

How the new code impacts good faith

The new UAE civil code - Federal Decree Law No. 25 of 2025 - will come into effect on 1 June 2026, repealing and replacing the current system.

The new UAE civil code now codifies good faith obligations during negotiations. Article 121 imposes a duty to negotiate in good faith, including a prohibition on deliberately withholding material information relevant to the conclusion or validity of the contract.

While article 121 does not create any entitlement to time, cost, or other relief for bidders affected by regional conflict or operational disruption before contract execution, it does clarify expected conduct during the tender stage. This means that although bidders cannot obtain contractual or statutory relief prior to signing the project/concession agreement, there is at least an expectation that both sides approach negotiations in good faith and take account of material circumstances that may affect the feasibility of the proposed contract.

Exposure risks for bidders

Bid validity periods - often 270 to 365 days - lock bidders into their price and programme assumptions, regardless of external market conditions. The ITB and bid bond set out the specific conditions for withdrawal, and in most cases any attempt to revise or withdraw during the validity period will result in forfeiture of the full bid bond.

However, some ITBs and forms of bid bond may permit withdrawal without forfeiture where the parties are genuinely unable to finalise the contract despite engaging in good‑faith negotiations. There are some particular issues in this area parties should be aware of to ensure the smoothest dialogue possible.

Firstly, given the absence of force majeure relief, bidders should raise material disruptions with the procurer early - particularly in relation to insurance availability, mobilisation timelines, EPC price movements and shipping constraints.

While this will not amend the ITB, it ensures transparency and supports the obligation under article 121 of the new UAE civil code. It also reduces the risk of later disputes about baseline assumptions that were significantly affected between bid submission and project/concession execution. Procurers are more likely to work constructively where issues are flagged promptly.

It will also be important to show that the bidder has sought to mitigate the effects of the current crises, for example by exploring alternative routes for materials, alternatives suppliers and so on.

Meanwhile, as relief only becomes available after the project/concession agreement is executed, bidders must ensure that force majeure, political force majeure and change‑in‑law clauses adequately address the current regional environment. This includes confirming whether force majeure gives time‑only or time‑and‑cost relief, particularly around financing issues. It also means confirming how insurance interacts with force majeure, and what obligations exist around notice and mitigation.

Bidders should also assess whether sovereign‑action risks or regulatory instructions fall under force majeure or change‑in‑law regimes. Weak drafting here will leave bidders exposed post‑signature. Strong drafting now will help avoid disputes and protects bankability.

Finally, once contracts are concluded, the successful bidder must provide relevant notices in accordance with the contractual mechanism. This will mean continuously monitoring the ongoing impact of regional crises to provide updated notices as required under the contract, and to ensure claims are preserved.

It will be important to maintain a baseline from which changes in costs and time can be measured. The successful bidder will need to be able to demonstrate that the force majeure directly caused the relevant increase in costs and time, in accordance with the contractual notice and valuation machinery. General indexation is not implied. The successful bidder must also demonstrate it has mitigated to minimise costs and time impacts.