Dollar/Dirham De-pegging: A Possible Contractual Remedy
Type
E-journal
Date
14 Jun 2010
Jurisdiction
United Arab Emirates, USA
Taxonomy
International Banking, Payment & Payment Systems
Copyright
LexisNexis
Legal reference
Federal Law No. 10 of 1980
Analysis
Against a background of persistent speculation that the current peg between the US Dollar and the UAE Dirham may be removed or changed, it is worth considering what contractual rights or remedies might be available if this were to occur. Michael Webb reports
In brief:
Under typical sophisticated long-term supply contracts, a removal or amendment of the Dollar/Dirham peg may be capable of amounting to an “event of government action or inaction” (as defined)
To the extent that such event of government action or inaction reduces the revenue received by a party, such party may be entitled to claim an adjustment of the payments made to it under the contract so as to maintain its net economic return
Any such claim(s) would be subject to procedures set out in the contract, including any de minimis rules.
Introduction