Construction lawyer Anthony Albertini explains how enterprises in Europe can resolve construction disputes.
For participants in European projects, construction continues to bring risks of disagreements. Following consecutive recessions, the UK is currently seeing economic growth, but other regions of Europe remain in the doldrums and are concerned about prospective Eurozone withdrawals by Greece and other countries. These characteristics enhance the risk of confrontation between parties and can lead to disputes.
New opportunities arise as a result of the economic recovery, but what are the legal pitfalls and market concerns you must contend with? Legal expert Anthony Albertini, a partner at Clyde & Co, discusses the hazards of doing business across Europe with companies based in the UK and Europe. Albertini identifies some of the most prevalent reasons for disagreements, as well as possible solutions.
A lack of economic buoyancy in Europe has sparked tensions throughout the continent. Many infrastructure corporations have encountered financial hardship, which has prompted them to toe a harsh contractual line. Due to the tightening of credit and delays in payment cycles and cash inflows for contractors and suppliers alike, many projects are put on hold or cancelled altogether. Defaults, non-performance of contracts, and insolvencies occur in worst-case scenarios.
The methods for resolving disagreements have come under intense scrutiny as a result of their increasing frequency. Fast and inexpensive interim conflict resolution is available in the UK through statutory adjudication, which was implemented in the late 1990s and has shown to be quite successful. Adjudication entails limited periods for bringing and defending claims, and strives to ensure security of payment. Although an adjudication decision is binding on the parties, it may not be a final determination of the disagreement; a party may still take the same dispute to court or arbitration.
In Europe, adjudication has not yet gone beyond the United Kingdom. Indeed, arbitration continues to play a significant role in construction dispute settlement on the Continent. Parties to multi-tiered dispute resolution arrangements may include provisions for submitting disputes to arbitration at the request of one of the other parties. These tend to require the parties to seek to resolve their disagreement peacefully through discussions, including mediation, before a referral to arbitration occurs.
Arbitration provides a dispute resolution forum where parties can agree on the arbitration seat and the legislation that would apply to any disagreement in cross-border transactions, which are frequent in Europe. This offers a level of confidence to employers and contractors alike, especially where the appropriate legal system is less evolved in dealing with complicated construction disputes.
The International Chamber of Commerce and the London Court of International Arbitration, based in Paris and London respectively, can aid in administering international arbitrations, and they continue to be the most popular arbitral tribunals for European construction disputes.
FIDIC contracts, widespread to portions of Europe, offer for numerous dispute resolution processes geared to address issues on multinational projects. It is possible for engineers or employers to make a preliminary decision that is then taken up in front of a DAB, followed by an amicable resolution procedure, and then arbitrated. On larger European projects, the usage of DABs has increased, and many people want DABs more heavily involved in the “dispute avoidance” process, particularly in the form of informal (non-binding) opinions.
Additionally, civil and common law court systems in Europe each have their own procedures for handling construction-related disputes. Some are more effective than others. Disputes involving building projects can be handled in administrative and civil courts in France, England, and Wales, all of which have special “pre-action protocol” procedures requiring all parties to “lay its cards on the table” before proceedings begin.
In order to conduct business in any European country, stakeholders must be aware of the jurisdiction’s court and arbitration procedures and the associated legal risks. For example, bar one or two instances, it is rare in most European countries to have a court dedicated to construction disputes. Therefore, presiding judges may have little or no understanding of what is going on in the business. Further, some countries may be less favourable to the arbitration process, evidenced by increased judicial participation in the arbitration process, and the court’s reluctance to enforce arbitral rulings.
To complicate matters further, different countries in the region have different “limitation periods” for bringing legal action. A failure to comply with the time restrictions may time-bar a party from making a claim. It takes three years from the day the claim first arose in Romania for the claiming party to bring their claim through all dispute procedures to court or arbitration; in contrast, in the UK, it normally takes six years from the date of the violation to bring a claim for breach of contract (but in some cases, this is extended to 12).
European infrastructure markets may be some distance away from full recovery, and conflicts are expected to continue to prevail. As always, it is vital to investigate the legal landscape of the project’s site and the law of the contracts, before committing to a project.