Companies stuck in the Middle East mayhem must act swiftly

WHILE the headlines from north Africa and the Middle East speak of the human toll and the fate of Britons, the threat to British companies who have contracts in the region which generate substantial revenue remain near the top of company agendas.

Having spent 30 years working in Middle Eastern business and law, including in Baghdad during the Iran-Iraq war, I have noted that sometimes the brave commercial decision pays off in the end, even if subsequently companies have to negotiate through the legal and commercial consequences. Taking care of employees and their dependants is paramount and it is essential that companies operating in these environments take swift and decisive action to ensure they will not face action later. Apart from the detrimental effect on employees, the reputational damage to a company for failing to act or for acting ineffectually can be severe.

Companies doing business in the Middle East need to check employees’ employment contracts for responsibilities in these situations. The relevant provisions may be in a contingency plan or expatriate policy. Making sure that employees understand them and ensuring that everyone is prepared to act quickly is an important part of good practice in these scenarios. If companies do not have a plan they should get one in place very quickly. Ultimately, they need to be able to demonstrate they have acted reasonably in all circumstances.

The Foreign and Commonwealth Office (FCO) will give companies the latest status and regular updates of events in the affected country directly. Companies must ensure that the local British Embassy knows where employees and their dependants are based and the affected employees should be advised to stay in touch with the British Embassy at all times.

Insurance policies need to be checked to see if the current circumstances and the planned course of action in response to them are covered. If they are, the policy’s requirements for successfully making a claim should be followed to the letter and everything needs to be documented.

The question of when to evacuate personnel is always challenging. Legally, unless the contract allows a company to stop, the obligations to perform almost certainly continue and any decision to pull employees out of a country prematurely may be fraught with legal risk. Also, local customers and partners are unlikely to view an early departure favourably, even if the contract permits it.

Unfortunately, airlines rarely give much notice of flight suspensions and anyway the chance of getting seats at the last minute is slim to nil. Neighbouring countries can and will close their borders without taking a company’s employees’ needs into consideration. So companies must act when they have the chance, or the choice may be taken away from them.

After taking care of employees and their dependants, how should companies protect their commercial position when they can’t perform or are not being paid? First, examine the contract for terms that deal with insurrections, political unrest and a resulting inability to perform. These force majeure clauses may not list the exact event that has occurred, but most will excuse performance in the face of “events beyond a party’s reasonable control”.

Companies must notify their local customer or partner of the problem. There is a good chance the contract contains instructions on how to do this. The current poor communications with the affected countries means that companies should use more than one of the available means to notify them. The contract may also require that companies try to get the project up and running again as soon as possible and allow the other party to terminate after a stated period. Well negotiated contracts will also say that a failure to pay is not excused. My advice is to make clear to customers or partners that their obligation in this regard continues.

John Enstone is an international trade lawyer and Middle East expert with Faegre & Benson LLP in London.