Category: Europe

1
Will construction companies have an easier way to reach settlements with public investors in Poland?
2
German Caselaw: When will warranty claims for rooftop solar power stations be time-barred?
3
Interim Payments – No Automatic Entitlement to Interim Payments Beyond the Last Date in the Agreed Payment Schedule
4
Modern Slavery and Human Trafficking in the Construction Industry
5
Welcome to the 32nd Edition of K&L Gates’ Arbitration World
6
BREXIT: Is Your Business Prepared? Construction & Engineering
7
New Bill Planned for the Development and Funding of Offshore Wind Energy in Germany
8
FIDIC Update: The Employer’s Claim to Liquidated Damages and Performance Security under the Yellow Book
9
Implementing Building Information Modelling (BIM) in Germany
10
FIDIC Update: Termination and the Employer’s Obligations under the Red Book

Will construction companies have an easier way to reach settlements with public investors in Poland?

By Joanna Łagowska and Łukasz Gembiś, K&L Gates, Warsaw

In Poland, for years now we have seen a steady increase in the number of commercial disputes referred to the common courts. According to the information provided in April 2016 by Undersecretary of the Ministry of Infrastructure and Construction, Jerzy Szmit, the value of the claims that contractors brought to the court, or intend to bring, amounted to approximately €2.5 billion, covering 5000 cases (only regarding road construction disputes).

Although the efficiency of the Polish courts has improved in the last few years, the average duration of court proceedings in Poland is still very long. Amicable dispute resolution is one method to deal with the resulting delays (for example by way of conciliation or mediation procedures etc.). However, unfortunately, despite various initiatives to promote such methods by both the Ministry of Justice and the Ministry of Development, government bodies and state budgetary units only occasionally make use of procedures for the amicable settlement of disputes arising under civil law. It appears that the main factor preventing public investors from wider use of such amicable dispute resolution methods is a fear of incurring liability for breach of public finance discipline.

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German Caselaw: When will warranty claims for rooftop solar power stations be time-barred?

By Christoph Mank, K&L Gates, Berlin

The question of when warranty claims are time-barred according to the German Civil Code, may differ from contract to contract. Often, warranty claims are time-barred two or three years after transfer of risk; however, for construction works, longer periods of four or five years may be applicable, starting with the completion and acceptance of the works.

The civil division of the German Federal Supreme Court (“BGH“), which is ─ inter alia in charge of construction law, had to decide a case recently in which rooftop solar panels were installed subsequently on the roof of an indoor tennis center. Three years ago, another civil division of the BGH ─ which is in charge of the law related to sale and purchase agreements ─ had to decide a very similar case in which rooftop panels were installed on a barn. In the case of 2013, the BGH ruled that warranty claims for the solar panels, which were only delivered and not installed by the vendor, are time-barred two years after delivery. According to that decision, the rooftop solar power station is not a building or a “structure,” which it needs to be considered to qualify for the five-year warranty period. Only the barn is a building, and the solar power system is not relevant for the construction and the continued existence of the building; the solar power system is only used for generating electricity.

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Interim Payments – No Automatic Entitlement to Interim Payments Beyond the Last Date in the Agreed Payment Schedule

By Nita Mistry, K&L Gates, London

In Grove Developments Limited v Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC), the contract (JCT Design and Build Contract, 2011 edition with bespoke amendments) contained an agreed schedule of 23 interim valuation and payment dates. The last date in the schedule coincided with the date of practical completion. The works completed after the contractual date for completion of the works. The contractor issued an interim application number 24. This interim application was outside of the agreed payment schedule. The contract did not contain a provision regarding payment beyond the 23 scheduled payments. The employer argued that the contractor was not entitled to issue further applications beyond interim application 23, and the judge, Mr Justice Stuart-Smith, agreed. The contractor was not entitled to further interim payments.

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Modern Slavery and Human Trafficking in the Construction Industry

By Camilla A. de Moraes, K&L Gates, London

Background

With an estimated 35.8 million people enslaved today,[1] it is undeniable that modern slavery and human trafficking is a significant global problem.  The construction industry in particular, with its high demand for migrant labour and complex procurement processes, has the potential for exploitation, and there have been high-profile cases such as in relation to the construction work for the 2022 football World Cup in Qatar.  However, in recent years, steps have been taken, both domestically and internationally, to tackle such human rights abuses.

In the United Kingdom, the Modern Slavery Act 2015 (the “Act”) is now in force and an Independent Anti-Slavery Commissioner has been appointed as a result.  There have also been amendments to the UK Companies Act 2013, which requires companies quoted on the London Stock Exchange to report on their human rights performance, and a new Immigration Act, which proposes changes to the way the current Gangmasters Licensing Authority operates.  On the European stage, the EU Non-Financial Reporting Directive requiring disclosure of human rights policies is in force, with member states required to bring into force laws to comply with it by 6 December 2016, and globally, a target to end modern slavery and human trafficking has been included as Target 8.7 of the Sustainable Development Goals, which will help shape development policy worldwide.

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Welcome to the 32nd Edition of K&L Gates’ Arbitration World

Welcome to this 32nd edition of Arbitration World.

To view Arbitration World, click here.

To download a printable PDF of the publication, open the link above and click on the fourth icon from the right in the magazine toolbar at the top of the page.

We are very pleased to include in this edition, as part of our series of guest contributions from expert witnesses, an article by Howard Rosen and Noel Matthews of FTI Consulting, regarding how “country risk” can affect the value of investments and the approach towards this issue in damages calculations in international arbitration.

We review recent developments in arbitration in Qatar, including court decisions regarding the validity of arbitration agreements and the enforcement of arbitration awards. As part of a series of articles related to so-called “Bermuda Form” liability insurance policies, we look at the process of formation of the arbitral tribunal in Bermuda Form policies and whether such insurance policies may conflict with certain U.S. state laws regulating insurance.

We report on a recent decision of the English Commercial Court regarding enforcement of a tribunal’s order for a provisional payment, as well as a recent UK Privy Council decision on the meaning and effect of permissive arbitration clauses. We review the new mediation rules of the Vienna International Arbitration Centre (VIAC) and report on the work of an International Bar Association (IBA) Subcommittee in assessing how states have defined the public policy exception under the New York Convention.

We review some recent decisions of the Federal Supreme Court of Switzerland on arbitration award set-aside applications in the past year. We are also very pleased to include a guest contribution from Ben Beaumont, a barrister from Thomas More Chambers and Chairman of the Arbitration Club, regarding a recent decision of the Federal Supreme Court of Switzerland on the role of a Dispute Adjudication Board (DAB) under the FIDIC Red Book regime.

We also provide our usual update on developments from around the globe in international arbitration and investment treaty arbitration.

We hope you find this edition of Arbitration World of interest, and we welcome any feedback (email ian.meredith@klgates.com or peter.morton@klgates.com).

BREXIT: Is Your Business Prepared? Construction & Engineering

By Matthew E. Smith and Inga K. Hall, K&L Gates, London

It seems unlikely that the UK’s exit from the EU will result in significant legal or regulatory changes for clients investing or working on construction or infrastructure projects in the UK in the short term.

The uncertainty over where Brexit will take both our UK and international construction clients in the medium to longer term is however likely to be reflected in an uptake in disputes, particularly in adjudication, and some UK projects and/or foreign investment decisions put on hold (or remaining on hold) until the picture becomes clearer.

Click here to read the full article on K&L Gates HUB.

New Bill Planned for the Development and Funding of Offshore Wind Energy in Germany

By Christoph Mank, K&L Gates, Berlin

An introduction of bidding processes for determining the amount of funding for the generation of electricity from onshore wind turbines, offshore wind turbines and large photovoltaic systems is planned with an amendment of the German Renewable Energy Act (Erneuerbare-Energien-Gesetz).

The German government sees the transition to bidding processes as being a central instrument for attaining the goals laid down by policy makers regarding the development of the share of renewable energies in the production of electricity. The political goal is to increase the share of renewables in the amount of electricity generated to between 40% and 45% by 2025, between 55% and 60% by 2035 and at least 80% by 2050. In real terms the increase in the contribution of renewable energy to the electricity production in Germany has gone from 25.3% in 2013 to 28% in 2014 and 32.6% in 2015. It is the political will of the current government not to fall below or exceed this established scope for expansion. For this purpose the aim is to fix the tendered quantities at a level that is as accurate as possible on the one hand; on the other hand, a high realisation rate needs to be achieved with regard to the projects awarded in the context of the bidding process.

A further goal of the general introduction of bidding processes for establishing the amount of funding is to limit the funding to a level that is economically essential. In order to ensure that this amount is determined correctly by means of the planned bidding processes, a high level of competition must be achieved for these.

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FIDIC Update: The Employer’s Claim to Liquidated Damages and Performance Security under the Yellow Book

By Camilla de Moraes, K&L Gates, London

The English courts have recently considered a number of cases involving the FIDIC suite of contracts (see here, here, and here for our previous blog posts).  The most recent case of J Murphy & Sons Ltd v Beckton Energy Ltd [2016] EWHC 607 (TCC)arises out of a contract based on FIDIC Conditions of Contract for Plant and Design Build for Electrical and Mechanical Plant and for Building and Engineering Works designed by the Contractor First Edition 1999 (FIDIC Yellow Book) with amendments.

The court was required to consider the relationship between two clauses in the Contract, namely Sub-Clause 2.5 (Employer’s Claims) and Sub-Clause 8.7 (Delay Damages and Bonus) with reference also to Sub-Clause 3.5 (Determinations) and 4.2 (Performance Security).  The issue in dispute was whether determination by the Engineer of the contractor’s liability for liquidated damages was a pre-requisite to recovery of liquidated damages by the Employer.  The court held that the clause entitling the Employer to liquidated damages operated outside of the regime in Sub-Clause 2.5 and therefore the Engineer’s determination was not a pre-requisite to the Employer’s entitlement.  This case also confirms the traditionally held view that obtaining injunctive relief preventing a beneficiary from calling on a performance bond will rarely be possible.

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Implementing Building Information Modelling (BIM) in Germany

By Christoph Mank, K&L Gates, Berlin

In recent years, numerous issues have accumulated in connection with the realisation of large building projects planned and financed by the public sector, such as the new international airport in Berlin, the Elb-Philharmonie in Hamburg and the Stuttgart 21 train station project. In particular, issues included delays, huge cost increases and communicating the projects and the attendant problems affecting the public. The ensuing discussions in the German public triggered the formation of a reform commission by the Federal Ministry of Transport and Digital Infrastructure (Bundesministerium für Verkehr und digitale Infrastruktur), called “Bau von Großprojekten” or “Large-Scale Construction Projects”. One recommendation in the reform commission’s final report is that Building Information Modelling (BIM) should be implemented in Germany.

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FIDIC Update: Termination and the Employer’s Obligations under the Red Book

By Mike R. Stewart, Mary E. Lindsay, and Nita Mistry, K&L Gates, London

A Privy Council case last year provided some important guidance on the provisions in the FIDIC Red Book in relation to Employer’s financial arrangements and claims.  Whatever your perspective might be, when negotiating or managing a contract based on the FIDIC Books, employers and contractors should be aware of the Privy Council’s findings in NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago) [2015] UKPC 37.

The Contract
National Insurance Property Development Company Ltd (Trinidad and Tobago), the Employer, employed NH International (Caribbean) Ltd, the Contractor, to construct a hospital in Tobago under a contract in the form of the FIDIC Red Book.

On 2 November 2006, the Contractor terminated the contract pursuant to Clause 16.2.  The Employer did not agree the termination was valid but the parties proceeded as if the contract had been terminated.  A number of issues arose during the Engineer’s assessment of the work to the date of termination and these matters, including the validity of the termination, were referred to arbitration.

The arbitrator’s decisions in relation to Clauses 2.4 and 2.5 and Clause 16.1 were later appealed first to the High Court and the Court of Appeal in Tobago and then to the Privy Council.

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