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Deal by Design
Welcome to this edition of Law Update, focusing on the evolving M&A landscape across the MENA region. With deal activity and value continuing to grow, the region is seeing increased investor interest alongside a changing regulatory environment.
This edition explores key legal and market developments affecting M&A transactions, including regulatory reforms, foreign investment, governance, due diligence and deal structuring across the region.
Hardship Under Bahraini Law: Distinguishing Exceptional Circumstances from Force Majeure
Recent regional developments, economic volatility, and disruptions affecting supply chains and commercial operations continue to raise important questions for businesses operating in Bahrain.
Many companies have already considered whether such developments may trigger force majeure protections under their contracts and/or under Bahraini law. Under Bahraini law, the doctrine of force majeure generally applies where an exceptional and unforeseeable external event renders the performance of contractual obligations impossible.
A practical question frequently arises, however: what happens when performance is not impossible, but has become significantly more difficult or commercially burdensome?
In such circumstances, Bahraini law may provide relief through the doctrine of Exceptional or Unforeseen Circumstances, commonly referred to as the doctrine of hardship.
While force majeure applies where an external and unforeseeable event makes performance impossible, Bahraini civil law also recognises situations where performance remains possible but becomes excessively onerous due to exceptional circumstances that could not reasonably have been anticipated when the contract was concluded.
In these cases, the doctrine of Exceptional Circumstances may apply. Rather than terminating the contract, the doctrine seeks to restore the contractual balance where unforeseen events fundamentally alter the economic equilibrium of the agreement and expose one party to disproportionate hardship.
Where the legal threshold is met, Bahraini courts may intervene to adjust the parties’ obligations to a reasonable level, including by modifying contractual obligations or financial terms in order to mitigate excessive loss while preserving the contractual relationship.
Businesses operating in Bahrain should carefully assess how unforeseen events may affect their contractual obligations. In particular, they should consider the following:
Our Dispute Resolution team can assist businesses in navigating contractual challenges arising from unforeseen events, including:
For further information or assistance, or to discuss how these issues may affect your business, please contact the key contacts.
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