REUTERS | Vijay Mathur
February 23, 2021

Contract interpretation – who has commercial common sense?

REUTERS | Vijay Mathur
February 23, 2021

Contract interpretation – who has commercial common sense?

The dust is slowly settling over the arguments about how contracts should be interpreted. We know that “this is not a literalist exercise focused solely on a parsing of the wording of the particular clause” and that “[t]extualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation” (as stated by Lord Hodge in Wood v Capita Insurance Services Ltd). That means the factual background (matrix of fact) and commercial common sense still have a role to play where the plain meaning of the words is not clear (which is usually the reason why there is a dispute in the first place).

Identifying the relevant factual background presents its own challenges, but I am interested in how you identify what makes commercial sense. We are familiar with the reasonable man on the Clapham omnibus, do we now need to look for his sister, the commercially reasonable business woman on the Waterloo & City line (when not working from home)? Continue reading →

REUTERS | Shamil Zhumatov
February 16, 2021

Parties beware: ensure your jurisdictional challenge is clear and appropriate to avoid waiver

Earlier this month, Scotland beat England in the Six Nations at Twickenham for the first time in 38 years. When it last happened (in 1983), Michael Jackson’s Billie Jean was number one and Octopussy was the latest James Bond movie (which we all know is not in my top five movies of the 1980’s).

I mention this only because Scotland’s courts are also currently ahead of the English courts in terms of published adjudication enforcement judgments in 2021. For that reason, this week I’m looking at two of them: Hochtief Solutions AG and others v Maspero Elevatori S.p.A and Barhale Ltd v SP Transmission plc (I realise Hochtief is from late December, but we shouldn’t let that fact get in the way of an amusing intro!).

Both cases concerned jurisdictional issues but with very different outcomes. Continue reading →

REUTERS | Regis Duvignau
February 10, 2021

The VAT reverse charge is coming soon. So what else is new?

If the Brexit deal, ongoing Covid-19 developments and updates on the Building Safety Bill and the Corporate Insolvency and Governance Act isn’t enough to keep those in the construction industry on their toes, the latest guidance from HMRC is that the VAT reverse charge on construction services will commence from 1 March 2021.

In our previous blog on the VAT reverse charge in September 2019, we discussed what the VAT reverse charge is, why it is being introduced and the major effects it will have on how VAT is handled in the construction industry. The key message is that the reverse charge will require a recipient (the employer), rather than the supplier, of specified building and construction services to account for VAT. The new rule will apply unless the recipient is an “end user” or an “intermediary supplier” or is not required to report payment under the Construction Industry Scheme, in which case the normal VAT rules apply. Continue reading →

REUTERS | Kham
February 9, 2021

Disputes across the horizon: arbitration in Qatar

This post is the second part of a series covering issues that frequently arise in international arbitration, each with a specific regional focus. This article examine two categories of issues that frequently arise in construction arbitrations related to Qatar:

  • The enforcement of arbitral awards.
  • The potential liability of arbitrators and experts practising in the region. Continue reading →
REUTERS | Mike Hutchings
February 3, 2021

You must adjudicate before you can arbitrate

I often wonder how much time parties spend on looking at the dispute resolution clauses in their contracts.  Before work starts they might ponder whether they want to arbitrate or litigate at the end of the day (and draft the contract accordingly), but do they really pay attention and debate the benefits of a tiered dispute resolution clause? You know the sort of thing I mean, where the parties agree to having senior individuals meeting, or mediating (or both), before they refer a dispute to adjudication or get embroiled in court/arbitration proceedings.

I realise that tiered dispute resolution clauses might not work so well if the parties are parties to a construction contract, since they have a right to refer a dispute to adjudication “at any time” but, just having the right to do so, shouldn’t stop parties trying to agree to resolve their differences before any notice is served.

However, regardless of whether the parties are parties to a construction contract, if they have a tiered dispute resolution clause in their contract, one thing they shouldn’t do is jump in at the deep end, missing out a step or two on the way. We know the judges don’t like this and Lady Wolffe (in The Fraserburgh Harbour Commission v McLaughlin & Harvey) is the latest to pass judgment on this type of behaviour. Continue reading →

REUTERS | Brian Snyder
January 28, 2021

Enforcing adjudicators’ decisions in Scotland and the impact of D McLaughlin v East Ayrshire Council

It is well known that the Construction Act 1996 does not provide for a method for the enforcement of a disputed adjudicator’s decision. Those of you practicing south of the border may be familiar with what happens there, but less familiar with how enforcement is dealt with in the Scottish courts.

This post looks at that procedure, and then goes on to discuss the impact of Lord Clark’s judgment in D McLaughlin & Sons Ltd v East Ayrshire Council and whether his discussion about the judgment in Hutton Construction Ltd v Wilson Properties (London) Ltd changes anything in Scotland. Continue reading →

REUTERS | Gilles Adt
January 26, 2021

FIDIC the disruptor: Liquidated damages to compensate the contractor for employer delay

Whether it’s the electric motor to the combustion engine or cryptocurrency to currencies, every industry seems to have a disruptor – perhaps we’ve found one in FIDIC for the construction industry and its re-imagining of the use of liquidated damages (LDs) in the soon-to-be published Green Book.

The special pre-release version of the new edition Green Book was revealed to delegates at the virtual FIDIC 2020 International Contract Users’ Event. The Green Book is for relatively small value projects – the World Bank recommends its use in projects valued up to US$10m (FIDIC itself sets no upper-limit). The key provisions of the Green Book, together with other exciting announcements from FIDIC are summarised in my colleague, Natalie Wardle’s, excellent blog, FIDIC contracts – a preview of what is to come.

The new edition introduces LDs to compensate the contractor for employer culpable delay alongside traditional “delay damages” to compensate the employer for contractor culpable delay. Should we now expect to see as commonplace LDs for, as FIDIC put it, “Prolongation Costs”? Continue reading →

REUTERS | Heinz-Peter Bader
January 25, 2021

Time to split? Signing deeds during a pandemic

COVID-19 opened the eyes of many to full-time working from home. Yet absent the integrated hubs that occupational premises provide, the prospect of assembling, distributing and executing legal agreements in hard copy has become taxing. Unsurprisingly, businesses have sought electronic alternatives.

E-signature platforms have boomed, as have virtual signings. The first category can be poorly optimised for the construction industry. That’s because major projects necessitate a large number of agreements, while works contracts can run to thousands of pages. These contexts are not particularly catered for by software providers, which can make the task cumbersome. The penchant for contracts to be made as deeds with a limitation period of 12 years, as opposed to six (together with the formalities this entails), adds to the difficulty.

Where a vital deed must be concluded in short order, proceeding through a virtual signing can be appealing. In an era of social distancing, however, it can lead to situations in which “split execution” occurs. Continue reading →

REUTERS | Fadi Al-Assaad
January 19, 2021

Conditional payment clauses in the UK and Middle East

Managing and securing the cash flow of any business enterprise is of paramount importance, and contracting parties in the construction industry are no exception to this. If regular cashflow from the main contractor to its subcontractors and the supply chain is disrupted, parties to the project may soon find themselves in difficulty. The purpose of a conditional payment clause is to help a main contractor guard against a cash flow “crunch” by making the downstream payment obligation conditional on receipt of payment from the upstream party.

Conditional payment provisions, stipulating that payment can be made only “when” or even “if” the main contractor is paid or upon the occurrence of certain events or actions, are prohibited in the UK and various other jurisdictions around the world, including New Zealand, Malaysia, and certain provinces/states in Canada, Australia and the USA. However, in some jurisdictions, particularly in the Middle East, “pay when paid” and even “pay if paid” provisions play a significant part in allocating risk on construction projects. In the Middle East, such payment clauses remain enforceable, though parties need to be aware of how the respective Civil Codes in the region affect their operation. Continue reading →

REUTERS | Kevin Lamarque
January 19, 2021

TCC refuses to enforce adjudicator’s decision due to material natural justice breach

Happy New Year to you all.

Although we are only in January, the beginning of December seems a long time ago, not least because much of the country was still in Tier 2 at the time. Restaurants and bars remained open and 1,000 lucky spectators attended Anthony Joshua’s latest defence of his heavyweight belts at Wembley Arena in London. Meanwhile, at the Rolls Building in London, judgment in another heavyweight clash was handed-down, namely the adjudication enforcement case of Global Switch Estates 1 Ltd v Sudlows Ltd. I say “heavyweight clash” because both sides had top solicitors and prize fighting silks, there was over £5 million in dispute and the matter was in front of the Judge-in-Charge of the TCC, Mrs Justice O’Farrell.  Continue reading →