LNG disputes emerge after disruption at Ras Laffan, Strait of Hormuz: Key considerations

Industry sources estimate that in 2025, more than 80 million tons of liquefied natural gas (LNG) transited the Strait of Hormuz, the vast majority originating from Qatar's Ras Laffan complex. Recent events at Qatar's Ras Laffan Industrial City, combined with the effective closure of the Strait of Hormuz, have brought the global LNG market into unprecedented territory.

For the first time in decades, one of the world's largest baseload gas suppliers has been forced to halt production and declare force majeure on significant portions of its long-term LNG contracts. While a two-week ceasefire between the United States, Israel, and Iran was announced on April 8, 2026, developments since then – including renewed restrictions on shipping and reports of increased US naval measures affecting Iranian ports – have meant that LNG tanker traffic through the Strait of Hormuz has not yet resumed in a sustained way.

For dispute resolution practitioners, the implications are immediate and significant. LNG contracts sit at the intersection of long-term contractual certainty and acute geopolitical risk. When liquefaction facilities are damaged and the sole maritime export route becomes impassable, questions of force majeure, hardship, sanctions, and contractual risk allocation move rapidly from the abstract to the urgent.

This article examines how the disruption centred on Ras Laffan and the Strait of Hormuz is translating into LNG disputes, and how arbitral tribunals and courts – particularly under English law and in international arbitration – are likely to approach claims arising from interrupted gas supply, stranded cargoes, and cascading force majeure declarations. It also considers how the April 8, 2026 ceasefire – and subsequent intermittent reopenings and renewed restrictions on transit – may complicate rather than resolve the disputes now emerging.

 

Gas operations at Ras Laffan and the Strait of Hormuz

Ras Laffan Industrial City is the operational heart of Qatar's LNG sector and one of the key nodes in the global gas system. Qatar supplies roughly one-fifth of global LNG, with the overwhelming majority of that volume liquefied at Ras Laffan and exported by sea through the Strait of Hormuz.

Gas, and LNG in particular, is structurally less flexible than oil. Once liquefaction is halted, storage capacity fills quickly, and production must stop. Unlike crude oil, LNG cargoes cannot easily be rerouted or stored indefinitely at sea, and long-term LNG supply chains are tightly synchronized across upstream production, liquefaction, shipping, and downstream regasification.

The recent missile and drone strikes affecting Ras Laffan, coupled with a significant reduction in LNG tanker traffic through the Strait of Hormuz, therefore represent not merely a price surge but also a physical interruption to performance across the LNG value chain. That distinction is central to recent disputes.

 

Force majeure in LNG contracts: What tribunals may scrutinise

Dual triggers: Infrastructure damage and shipping impossibility

Many LNG contracts contemplate force majeure events arising from war, hostilities, or acts of state. What distinguishes the Ras Laffan situation is the physical damage to liquefaction infrastructure and the effective impossibility of shipping LNG cargoes through the Strait of Hormuz due to security risks and the withdrawal of war-risk insurance.

From a disputes perspective, evidence that LNG transits through the Strait of Hormuz fell to near zero for a sustained period materially strengthens force majeure arguments that performance was physically prevented, rather than merely rendered more expensive or inconvenient. Sellers are therefore likely to contend that non-performance resulted from circumstances beyond their reasonable control that prevented performance altogether, as opposed to cases involving economic hardship or price volatility alone. The April 8, 2026 ceasefire does not necessarily resolve this position. Public reporting and market data in the period following the announcement suggested that transit through the Strait of Hormuz remained subject to significant security, insurance, and operational constraints, with LNG carriers either reversing course, remaining idle within the Gulf, or waiting outside the Strait pending security clearance and insurance cover. Shipping analysts have cautioned that war-risk insurance is unlikely to normalize quickly and that the limited duration of the ceasefire itself raises the risk of vessels becoming trapped again should hostilities resume.

Key issues tribunals may examine

Arbitral tribunals considering LNG force majeure claims may focus on several recurring questions:

1. Prevention versus difficulty: Was performance truly prevented, or could alternative shipping routes or mitigation measures reasonably have been adopted?

2. Scope of force majeure: Did the event prevent liquefaction, loading, shipping, or all three? How does the contract allocate risk across those stages?

3. Causation: Was non-performance caused by the force majeure event itself or by pre-existing operational or commercial decisions?

4. Notice and mitigation: Were contractual notice requirements strictly complied with, and did the affected party take reasonable steps to mitigate the effects of the disruption?

The fact that multiple buyers have issued back-to-back force majeure notices under downstream gas sale and purchase agreements (SPAs) illustrates how disputes may be likely to multiply along the LNG supply chain.

 

Hardship and price re-openers in long-term LNG SPAs

While force majeure may excuse non-performance temporarily, the Ras Laffan disruption also raises longer-term issues of hardship and contractual rebalancing.

Many long-term LNG SPAs, particularly those governed by civil law, contain hardship clauses or price review mechanisms triggered by fundamental changes in circumstances. The prospect that damaged LNG trains may take several years to repair, combined with sustained constraints on reliable LNG transit through the Strait of Hormuz, may support arguments that the contractual equilibrium has been fundamentally altered.

In arbitration, parties may seek renegotiation of pricing formulas, temporary suspension or reduction of take-or-pay obligations, or judicial or arbitral adaptation of contractual terms. These claims are fact-intensive and will turn on the precise drafting of the relevant clauses, but Ras Laffan provides a rare example of a disruption that may satisfy even stringent hardship thresholds.

 

English doctrine of frustration

Under English law, the doctrine of frustration sets a notably high bar. Performance must be rendered radically differently from what was contemplated at the time of contracting, not merely more expensive or less profitable.

Buyers affected by the Ras Laffan shutdown may nevertheless seek to invoke frustration, arguing that the closure of Hormuz and the destruction of key LNG infrastructure destroyed the contractual foundation of long-term supply arrangements. Sellers, in turn, may resist such arguments by contending that the disruption, however severe, is temporary and falls within the contractual risk allocation already agreed between the parties. The announcement of a ceasefire, however fragile, may in practice bolster sellers’ resistance to frustration claims by reinforcing the characterization of the disruption as a temporary interruption rather than a permanent alteration of the contractual landscape.

English courts have historically been reluctant to find frustration in energy supply contracts affected by geopolitical events. As a result, while frustration arguments could be advanced, their prospects of success remain limited, particularly where detailed force majeure and risk allocation clauses already exist.

 

Sanctions and compliance-driven disputes

An additional layer of complexity arises from sanctions and regulatory compliance. Where LNG supply disruptions intersect with sanctions regimes or export controls, parties may face competing obligations: contractual duties to deliver gas and regulatory constraints that may restrict, delay, or render performance unlawful.

Disputes in this space often hinge on whether sanctions constitute a force majeure event under the contract; whether continued performance would expose a party to secondary sanctions or other compliance risk; and whether payment obligations are suspended, deferred, or discharged.

The Ras Laffan disruption, occurring in the context of heightened sanctions risk, provides fertile ground for sanctions-related disputes alongside more traditional contractual claims. It is worth noting that Iran has publicly sought sanctions relief as part of its broader negotiation position, although no such relief has been agreed to as part of the ceasefire arrangements to date. Any future movement on sanctions would add a further layer of uncertainty for contracting parties who may have relied on sanctions as a basis for suspending performance or withholding payment.

 

Procedural consequences in LNG arbitration

Beyond substantive claims, the Ras Laffan situation could generate significant procedural activity in arbitration. Parties may seek emergency relief to address, for example, stranded cargoes and title risk, interim suspension of take-or-pay obligations, or preservation of evidence in fast-moving conflict conditions.

Given that many LNG SPAs provide for confidential arbitration, much of the resulting jurisprudence may develop out of public view. Nevertheless, these proceedings are expected to shape how future tribunals approach force majeure and hardship claims arising from geopolitical disruptions.

 

Ceasefire developments and the renewed restrictions of the Strait of Hormuz

Under ceasefire arrangements announced on April 8, 2026, Iran indicated in principle that coordinated vessel passage through the Strait of Hormuz could resume. In practice, subsequent developments – including continued security threats, heightened naval activity, and ongoing insurance and operational constraints – have resulted in extremely limited commercial LNG traffic. Disagreements over the scope of the ceasefire, reports of further military incidents in the region, and uncertainty as to the durability of the truce have reinforced market caution. Shipping experts have cautioned against expecting any rapid return to normality, and disruption arising from vessel congestion, security constraints, and insurance availability is expected to persist well beyond the ceasefire period.

For LNG dispute practitioners, the ceasefire raises several immediate questions:

1. First, it is unclear whether the ceasefire terminates force majeure events already declared. Where transit through the Strait remains subject to ongoing security coordination and clearance requirements – where war-risk insurance has not been reinstated and where the physical backlog of vessels prevents any meaningful resumption of LNG trade – an affected party may legitimately maintain its force majeure notice. Tribunals may opt to examine whether, on the facts, the ceasefire restored the ability to perform or created the theoretical possibility of future performance.
2. Second, the ceasefire introduces new uncertainty around mitigation obligations. Buyers and sellers will need to assess whether the conditional reopening of the Strait requires them to attempt performance – and, if so, whether doing so in the face of ongoing security risks and insurance constraints constitutes reasonable mitigation or unacceptable commercial risk. Reports of additional transit conditions, heightened security coordination requirements, and increased costs associated with passage through the Strait further complicate this calculus, particularly where war-risk insurance is unavailable or priced at levels that render transit commercially or legally unviable.
3. Third, if the ceasefire collapses, parties who withdrew force majeure notices in reliance on the truce may find themselves in a significantly weaker position. Counterparties, arbitrators, and courts may scrutinize the timing and basis of any withdrawal and subsequent re-declaration of force majeure. Affected parties are encouraged to maintain existing force majeure notices, carefully document any steps taken to resume performance, and avoid premature withdrawal until the situation has genuinely stabilized.

 

Practical takeaways for LNG counterparties

LNG dispute counterparties may consider the following in light of the Ras Laffan experience:

1. Force majeure clauses matter: Boilerplate drafting may prove inadequate where multiple factors – such as shipping route closure, withdrawal of war-risk insurance, and physical infrastructure damage – interact to disrupt performance.

2. Shipping risk must be addressed expressly: LNG SPAs should consider not only production outages, but also the impossibility of transit through specific maritime chokepoints – rather than assuming global fungibility of cargoes.

3. Record-keeping is key: Contemporaneous evidence of causation, mitigation efforts, and strict compliance with notice requirements will often be decisive in any dispute.

4. Governing law and seat choices matter: Different legal systems offer very different tools for dealing with extreme geopolitical disruption. Some allow contracts to be adjusted for hardship, while others (such as English law) apply a much narrower approach, meaning the same events can lead to very different outcomes in disputes.

5. Ceasefire risk must be factored into contractual planning: The April 8, 2026 ceasefire demonstrates that temporary pauses in hostilities do not necessarily resolve force majeure events or restore normal trading conditions. LNG SPAs should address the consequences of partial or conditional reopenings of maritime chokepoints, and parties are encouraged to avoid contractual language that treats ceasefires as automatic triggers for the resumption of obligations.

 

Conclusion

The disruption centred on Ras Laffan and the Strait of Hormuz marks a turning point for the LNG industry. What was long treated as a theoretical chokepoint risk has crystallized into a concrete supply disruption, prompting force majeure declarations and setting the stage for complex, multi-layered disputes.

Ceasefire arrangements announced in early April 2026 have provided some intermittent and highly conditional relief, but have not yet restored normal trading conditions or contractual certainty. The conditional nature of the Strait’s reopening, ongoing insurance constraints, a substantial vessel backlog, and the risk that hostilities may resume mean that 1) significant uncertainty remains and 2) disputes arising out of this crisis could persist for years to come.

These disputes also sit against a backdrop of accelerating climate regulation and scrutiny of fossil fuel-related value chains. As a result, counterparties are increasingly considering not only delivery risk, but also regulatory, disclosure, and stakeholder risk linked to long‑term gas contracting.

For dispute resolution practitioners, the takeaway is clear: LNG SPAs are no longer insulated from geopolitical reality. As gas becomes an increasingly strategic commodity, arbitration and litigation are expected to play a central role in how risk is tested, reallocated, and ultimately resolved when the world's most significant energy infrastructure comes under strain.

If you have any questions, DLA Piper is available to assist in navigating the relevant rules and challenges. For more information, please contact James Carter, Andrew Mackenzie, Charles Allin, and Nadya Rouben.