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UAE severs diplomatic ties with Qatar

  • Singapore
  • Other

21-06-2017

Current Position

The governments of the UAE, Egypt, Saudi Arabia, Bahrain, Libya, Yemen, Jordan, Mauritius, Mauritania and the Maldives are all reported to have severed diplomatic ties with Qatar last week (week commencing 4 June 2017).

In a press release issued by the UAE Ministry of Foreign Affairs (MOFA) website on 5 June 2017, it was stated that the UAE is taking this decisive measure as a result of, amongst other reasons:

  1. the Qatari authorities’ failure to abide with the Riyadh Complementary Arrangement (entered into in 2014 in an effort to create more unity amongst GCC member states, their interests and future of their people); and
  2. Qatar’s “continued support, funding and hosting of terror groups..”

MOFA also confirmed that: 

  • Qatari diplomats are required to leave the UAE by 7 June 2017;
  • Qatari nationals will be prevented from entering the UAE or crossing its points of entry;
  • Qatari nationals and visitors in the UAE have 14 days to leave the country for precautionary security reasons;
  • UAE nationals are banned from traveling to or staying in Qatar or transiting through its territories;
  • UAE airspace and seaports will be closed for all Qataris;
  • all Qatari means of transportation, coming to or leaving the UAE, from crossing, entering or leaving the UAE territories will be banned; and
  • the UAE will take all legal measures in collaboration with friendly countries and international companies with regards to Qataris using the UAE airspace and territorial waters, from and to Qatar, for national security considerations.

The press release was removed from the MOFA website, just a day after it was released, indicating that this is a fast moving landscape.

Currently, Saudi Arabia, Egypt, Bahrain and the UAE have suspended flights to and from Qatar and Qatar Airways are prohibited from using airspace belonging to these four countries.

The largest port terminal in the Middle East (Jebel Ali, Dubai, UAE) has issued a circular confirming the restriction of all Qatar vessels and cargoes from any of its terminals.

In the UAE, criminal sanctions may be imposed against anyone expressing sympathy towards Qatar.

It is not clear what is required for restrictions to be lifted or how long will be in place. On 6 June 2017, the UAE state minister of foreign affairs tweeted “We need a guaranteed roadmap to rebuild confidence after our covenants were broken".

What this means for your business

As a business, you should consider the following:

  • Expatriation of Qatari nationals – in order to comply with the directives issued by the UAE, Saudi Arabia and Bahrain, business should consider expatriating all Qatari nationals if this has not been done already. Qatari nationals have until 18 June 2017 to leave the UAE. Citizens of the UAE, Saudi Arabia and Bahrain may be required to leave Qatar, although this has not been confirmed.
  • Travel - There will be significant disruption to travel. As of 6 June 2017, the land border between Qatar and Saudi Arabia was closed. All flights between Qatar and Saudi Arabia, United Arab Emirates, Egypt and Bahrain are suspended until further notice. UAE residents (as opposed to UAE ‘nationals’) wanting to fly to Qatar can still do so, but they will have to take an indirect route e.g. through Oman or Kuwait and should be issued with a visa on arrival as normal. Qatari residents (not nationals) wanting to travel to the UAE will need to be obtain visas in advance either on-line or through a UAE Embassy (outside of Qatar). If you have employees travelling for business, you should ensure that there are sufficient controls in place to approve any business travel, in light of the current situation.
  • Absenteeism - Due to the uncertainty of the situation, employees may request flexible working arrangements or leave to return to their home countries. Businesses should ensure that they have adequate resources to ensure that business may continue as usual.
  • Policy communications - You should consider issuing regular updates so that all employees are kept up to date with any current developments. In particular, it may be prudent to issue guidance to all UAE employees in respect of the recent suggestion that a jail term of up to 15 years may be imposed if anyone expresses any sympathy towards Qatar or objects to the UAE’s position.
  • Safety Measures - Now is a good time to review your business contingency plan to ensure that any duties to protect your employees are covered.

Business

  • Performance of contracts – If you or anyone you have contracted with have contractual obligations that cannot be performed as a consequence of this recent development you will need to consider the ramifications. Force majeure is a recognised concept in many jurisdictions and provides parties with flexibility in dealing with certain situation outside of the parties control.
  • Mitigation – if any business as usual at your business is impacted by this current situation, you should consider notifying any effected parties to reserve rights and consider agreeing to a way forward. Records of communication should be kept, as this may be helpful if a dispute later arises.
  • Import/Export – there is likely to be an increase in transport costs for goods/supplies going to/coming from Qatar. A significant portion of goods/supplies current travel to and from Qatar via Saudi and alternative longer routes will now have to be used.
  • Counterparties – you should consider if any of your counterparties may be in breach of any representations or undertakings as a result of any affiliations with any of the individuals or organization listed in the joint statement issued by Saudi Arabia, the UAE, Egypt or Bahrain.

Banking

  • Banking Services – According to various press releases, the UAE’s Central Bank has issued two circulars based on UAE Cabinet resolution 18/2017 requiring banks and financial institutions operating in the UAE to undertake certain steps as a result of the restrictions. The first requires banks and financial institutions to search for and freeze accounts, deposits or investments held by any of the 59 individuals or 12 entities designated as terrorists or terrorist organisations on the related Cabinet Resolution list. The second requires them to apply enhanced customer due diligence for any accounts held by any of the following six Qatari banks: Qatar Islamic Bank, Qatar International Islamic Bank, Barwa Bank, Masraf al Rayan, Watar National Bank and Doha Bank.
  • Investor funds - any investment into or from Qatar should also be closely monitored and reviewed. Please note that there is not currently any guidance given in respect the safeguarding of any investments.
  • Debts – you should consider the level of any debts, guaranties, indemnities and performance bonds that your business may be exposed to if any obligations secured by them cannot be performed as a consequence of this situation.
  • Trade Finance – trade finance transactions may be effected due to the logistical restrictions in respect of airspace and sea space.

Eversheds Harry Elias managing partner, Philip Fong, commented:

‘The current situation is unlikely to have a major impact on Singaporean businesses. However, if other countries in the Middle East join the boycott then the position could deteriorate rapidly. Singapore businesses would need to re-route goods and passenger travel through Kuwait or Oman. It should also be noted that there is at least one leading Singaporean multinational which operates a waste management plant, a treatment plant and a shipyard in Qatar, and which employs a number of Singaporean nationals.  

While Singaporean exports to Qatar are small, oil imports from Qatar comprise about 5.5 per cent of total oil imports into Singapore.

Singaporean businesses with interests in Qatar are well advised to monitor the situation closely and prepare their contingency plans.’

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