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Albania

Under Albanian law, a construction contractor is solely responsible for its commercial liabilities towards third parties (ie, its subcontractors). However, in certain circumstances, the contractor's employees or subcontractors which are engaged in the performance of works or services for the benefit of the principal may make direct claims to the principal for the payment of moneys.

The Law on Local Taxes, one of two laws providing for construction-related taxes in Albania, has now been abolished – although it is not yet clear whether this is a planned tax reduction for construction-related activities or simply an administrative oversight. Either way, developers should consider whether they can accelerate procedures for obtaining construction permits and thus benefit from the reduction.

Before obtaining a construction permit, applicants must pay the local authority a tax equal to 1% of the value of the investment for the project. These funds are used to finance urban studies by the local government. However, under new Law 10119/2009 - which has yet to come into force - this tax will be repealed.

Australia

The long-awaited amendments to the Building and Construction Industry Security of Payment Act 2002 have come into force in Victoria in respect of construction contracts entered into on or after March 30 2007. Many of the changes make the act unique in Australia and very different from the construction industry payment legislation in other states.

The recent bans imposed on contractors preventing them from tendering for federal government-funded construction projects serve as a reminder of the importance of complying with the National Code of Practice for the Construction Industry. Three companies were precluded from tendering for government work for three months following a breach of the principle of competitive behaviour.

The Victorian Supreme Court has given further support to superintendents and contract administrators granting an extension of time under Australian Standards 2124 and 4300 when they decide it is just and equitable to do so, even if the extension of time claim would otherwise be time barred.

A recent decision demonstrates how a latent conditions claim can be pursued successfully by the contractor against the principal under the Trade Practices Act. It also highlights the broad nature of potential relief for contractors and liability for principals under Sections 82 and 87 of the act.

The Queensland government has implemented the Queensland Building and Other Legislation Amendment Act 2006. The act amends the Building Act 1975, consolidating provisions set out in various pieces of legislation to establish a framework for the process of making, assessing and ruling on a building application through to the certification of building work.

It is illegal for a union to threaten or take action with an intent to coerce or apply undue pressure to make or prevent a collective agreement. If an employer in the building industry considers that it has been the target of such action, it can notify the Australian building and construction commissioner to apply for an order against that union.

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Belgium

Belgium has no comprehensive framework of rules to ensure that minimum fire safety standards are observed in the construction of industrial buildings. A three-tier classification system, expected to come into force in 2009, will set basic requirements for new buildings and certain extensions, but is expected to lead to a rise in construction costs.

Reformed rules for Belgian architects give them greater equality in respect of their European counterparts and the other parties to a building project by allowing them to take out professional liability insurance through their company. In addition, the rules ensure better protection for principals by imposing mandatory insurance coverage for architects.

Canada

The Ontario Court of Appeals recently released its judgment in the Kennedy Electric Case. The decision is expected to give rise to debate over the extent to which the supply of certain types of machinery, assembly line and process equipment is lienable.

In any construction tendering process a balance must be struck between ensuring that the process is competitive and yet remains fair to all participating parties. In a recent decision regarding the tendering process, the courts were once again called upon to examine the fairness of the construction tendering process.

Latent defects or deficiencies in buildings may be discovered long after the construction project is complete, thereby potentially exposing parties to indefinite liability. However, the Limitations Act 2002 sets out a new legislative regime, under which a party must commence a lawsuit within 15 years of the act or omission, regardless of when the negligence was discovered.

Within the construction industry there is always a potential tension between a general contractor and a subcontractor regarding the scope of work for which the subcontractor is responsible. If the parties to a contract are unable to resolve a conflict over one party's scope of work, the courts may be called upon to interpret and make the final decision regarding the parameters of a contract.

As the trend towards design-build construction projects continues, questions are being raised regarding the ability of members of a design-build team to make claims against the owner in respect of the owner's actions during the tender stage. The Federal Court of Canada recently reviewed the owner's duties to a design-build team when the owner fails to award the tender to the lowest compliant bidder.

A recent decision by the Ontario Superior Court of Justice examined the reasonableness of a general contractor's objection to and ultimate dismissal of the electrical subcontractor that was initially carried in the general contractor's tender to the owner.

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China

The Ministry of Construction and Ministry of Commerce have issued the Implementation Rules to the Administrative Regulations on Foreign-Invested Construction Engineering Design Enterprises. The rules relax the requirements on foreign service providers' qualifications under the Administrative Regulations on Foreign Invested Construction Engineering Design Enterprises.

The problem of non-payment of contractors has long plagued China's construction industry. Owners often start construction work on a project before they have sufficient funds to ensure its completion; contractors in a fiercely competitive market often have no choice but to agree to fund the construction of the project, even though they may have no guarantee of payment once the project is completed.

Finland

The new Land Use and Building Act has devolved planning approval procedures to local authorities and has introduced a more open and interactive approach to planning.

The Finnish Association of Building Owners and Construction Clients has endorsed the general conditions for building contracts that became available in March 1998.

France

The Supreme Court has marked a change in its jurisprudence by restricting the scope of constructor liability under the 10-year guarantee provided to owners regarding building works in connection with 'evolutionary damage'. The effect of this decision should be to restrict the instances in which the court will allow evolutionary damage to fall within constructor liability.

Germany

The Federal Court of Justice recently ruled that a contractual penalty provision in a client's general terms of business which fixed a contractual penalty payable for culpably exceeding an interim deadline at no more than 5% of the total order sum was null and void. The ruling means that in any contractual penalty provision for interim deadlines, the upper limit must be based on the amount that has been earned up to that point only.

The new Act to Combat Delayed Payments in Business Transactions, which is now in the consultation stage, will force clients to check and pay invoices from contractors more quickly in future. If they fail to do so, the financial costs arising from the delay will increase. It will also be easier for a contractor to enforce costs arising from the recovery process.

The Brandenburg Higher Regional Court recently ruled that a contractual penalty provision stipulating that the contractor must pay 0.2% of the net invoice amount for each working day of any delay, up to a maximum of 10% of the net invoice amount, in the general terms of business of a client places the contractor at an unreasonable disadvantage and is therefore null and void.

It has long been disputed whether fire safety planning is an additional service by the architect which must be remunerated separately, or whether it is part of the basic service to be rendered by the overall building planner. A recent Federal Court of Justice decision has not completely settled this dispute, but leans strongly towards fire safety planning falling under the remit of the building planner.

In a recent ruling, the Federal Court of Justice again stated its fundamental position on the correct invoicing of several technical service installation groups according to the Ordinance on the Schedule of Services and Fees for Architects and Engineers. The court also clarified that there is no minimum rate protection under the schedule if the maximum amounts in the table of fees are exceeded.

If Part B of the Standard Building Contract Terms provided by the client is not agreed as a whole in the construction contract, Section 16(3)(i) of Part B will not stand up to an isolated judicial examination of the terms. This means that the remuneration becomes due with acceptance and receipt of the final invoice. The client then falls into default at the latest 30 days after the final invoice.

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Hong Kong

A recent case confirms that a pay-when-paid clause is not a condition precedent to a subcontractor's right to be paid. Provided that the subcontractor has carried out its work satisfactorily under the terms of its subcontract, it is entitled to payment within a reasonable time of completion of the work, notwithstanding a pay-when-paid clause and the question of whether the main contractor has been paid.

A recent case involving two building contractors provides a reminder that the plaintiff has the burden of proving its allegations on the balance of probabilities. It also confirms the long-held view that the costs of preparing and submitting a tender are not generally recoverable unless the work performed has gone beyond the normal ambit of what was expected or would normally be done on a gratuitous basis.

Following a judgment by the Court of Final Appeal, the term 'practical completion' in Hong Kong building contracts is arguably a legal term of art which means a state of affairs in which the works have been completed free from patent defects other than those to be ignored as trifling. Employers and contractors should be aware that the court's interpretation sets a higher standard than is usually applied.

The Court of Appeal recently considered the true construction of a building contract where there were inconsistencies between the bills of quantities, special conditions and standard method of measurement. The case is a timely reminder of the importance of checking for inconsistencies between all contractual documents.

In a recent case a tenderer sued the Hong Kong government for breach of tender contract for failing to award it a construction contract. The plaintiff claimed that as it was the only one of five tenderers to comply with a special condition of the tender, it should have been awarded the contract. Alternatively, it alleged that the government had failed to comply with the Agreement on Government Procurement.

A recent Court of Appeal decision examined the duties owed by a registered structural engineer (RSE) to an employer. The court held that defective stone cladding did not constitute part of the structural works of a project and was therefore not the RSE's responsibility, despite the fact that the RSE had certified and forwarded drawings containing cladding details to the Building Authority.

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India

Including: Government Initiative; Common Projects; Important Agreements; Funding Construction Projects; Primary Legislation; Relevant Government Initiatives; Credit Ratings

In a recent case the Supreme Court of India examined important concepts relating to tolls, which are often used to recoup the costs of constructing (and maintaining) roads and bridges in India.

In a recent decision, the Andhra Pradesh High Court followed the lead of the Supreme Court of India in determining whether government tender guidelines were reasonable.

A recent case affirms the right to call on bank guarantees where a construction contract has been frustrated.

Iraq

The Coalition Provisional Authority has issued Order 87 on Public Contracts. Prior to its issuance, public tenders were regulated by two instruments, both of which are now expressly suspended. The government's public contract policy will now be coordinated by the Office of Government Public Contract Policy.

Construction contracts are governed by Articles 864 and following of the Iraqi Civil Code, which lay down general rules governing contracts for works. According to Article 870, the architect and contractor are jointly and severally liable for 10 years for the total or partial collapse of any building or other fixed works erected by them.

Ireland

The Building Control (Amendment) Regulations 2013 have been recently signed into law. The regulations introduce a substantial number of changes, including the revision of the commencement notice and the introduction of three new types of mandatory certificate. The most controversial elements have been removed. Notwithstanding the changes, the new regulations still present a challenge to the construction industry.

The Irish High Court has upheld the binding nature of a conciliator's recommendation and acknowledged the mandatory nature of conciliation as a first step in the dispute resolution process under the Royal Institute of the Architects of Ireland (RIAI) contract. The judgment is a seminal decision in Irish construction law since there is little precedent on the RIAI form of contract.

With the downturn in the economy, the construction sector has had to deal with the fall-out of key stakeholders finding themselves in real financial difficulties, which many have been unable to survive. So what are the issues that parties should be aware of when a developer or contractor goes bust? How do the standard form contracts manage such a scenario? What rights or obligations does an employer or contractor have?

The Public Works Contracts in Ireland adopt an approach which seeks to pass as much risk as possible to the contractor for checking the accuracy of all information which may be provided. Changes made in the latest version of the Public Works Contracts have reinforced this philosophy. Contractors will need to be mindful of this additional risk and will now have the additional challenge of factoring this into their pricing.

At times when money and resources are constrained, legal costs are at the forefront of clients' minds. However, there are some ways in which parties to construction and engineering contracts can reduce their potential costs exposure when dispute resolution proceedings are unavoidable. Alternative dispute resolution and early case settlement strategies should be promoted at every possible juncture.

Construction contracts commonly used in Ireland do not normally include any express reference to latent defects or state the period for which a contractor shall be liable for them. When a party suffers loss or damage arising from a latent defect to a building or structure, it may pursue damages by either suing in contract or tort, or pursuing claims under both the law of contract and negligence.

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Lithuania

In order to prevent abuses of the planning system by developers, illegal buildings must be demolished, regardless of whether such constructions are allowable in a particular area. However, proposed amendments to the Construction Law advocate a reasonable punishment of illegal developers and would allow for the regularization of buildings that meet planning, environmental and other criteria.

Portugal

It is the owner's duty to verify whether works are in the agreed condition and free of defects before accepting them. As such, the inspection of the works is a right, but also a burden that the law imposes on the owner, since failure to carry out the inspection implies acceptance of the works without reservation. Inspection must occur within a reasonable period of time.

Under Portuguese law, contractors can revise the price quoted in public works contracts in case of unforeseen changes to the circumstances on which the contract is based. A new regime extends the scope of this mechanism to private works agreements and public goods and services purchase agreements - a timely development, given recent increases in steel prices.

Qatar

As part of the freedom of contract principle recognised by Qatari law, the parties to a construction contract can agree to include a clause providing for the payment of monetary compensation or liquidated damages in the event of a specified event or default. Despite the freedom of contract principle, a Qatari court can also adjust liquidated damages under certain circumstances.

Over the next decade, the construction sector in Qatar will continue to witness a boom in major infrastructure projects, both in preparation for the 2022 football World Cup and in other fields. Many voluminous and rather complex construction contracts have already been concluded or will be concluded in the near future – which means a substantial increase in complex construction disputes.

As construction activities continue to expand in Qatar, the implementation of the new Green Building Code presents both challenges and opportunities for companies hoping to participate in Qatar's forecasted growth. Although moving to sustainable construction practices will initially entail higher costs, the expectation is that it will also bring both short and long-term savings.

Following the announcement that Qatar will host the 2022 FIFA World Cup, significant growth is expected in the country, especially in the construction and infrastructure sectors. Several major projects are envisioned for the event. Therefore, the Qatari government has made important changes in its legal system.

Construction tenders issued by private or publicly listed companies in Qatar are governed by their internal rules and regulations. Tenders issued by government entities are governed by Law 26/2005, as amended by Law 22/2008 and Law 14/2010. These laws comprise the Tenders and Biddings Law, which establishes three types of tender: general tenders, local tenders and selective tenders.

There are four alternatives for foreign investors that wish to undertake construction-related activities in Qatar. They may set up a local company under the Commercial Companies Law, register a foreign branch, establish a local or an international engineering consultancy office or establish a trade representative office.

Romania

As a rule, the construction or structural alteration of a building requires a building permit and separate project authorization. Among other things, this update considers urban planning certificates, application requirements and the consequences of building without permission.

Russia

The terms and conditions of engineering, procurement and construction (EPC) contracts – which are not yet widely used in Russia – are well suited to public-private partnership projects. However, standard forms for EPC contracts are poorly adapted to the Russian legal system. Therefore, an adaptation of the contract to bring it into line with Russian law will be required.

Agreements to terminate construction contracts should be concluded and signed in a form similar to that of the contract itself, unless otherwise provided. However, if the parties fail to reach an agreement, both are entitled to file a court claim for contract termination. The Civil Code provides explicit guidance regarding claims for termination due to the contractor's violation of specified timeframes for performing work.

Contractors often insist on transferring completed works to the client even where these are not fully compliant with the contractor's agreement or are of low quality. So what should the client do if the works are inconsistent with the requirements of the agreement? This update outlines the available options.

A draft law proposes the use of design documentation that has already been developed and used in a foreign state, subject to the particular seismic and climatic requirements in Russia. It is hoped that the use of such reapplied foreign design documentation will boost investment in Russia's construction sector.

Clients often fail to meet their obligations to contractors - for example, by failing to provide necessary materials or documentation. However, in a bid to meet deadlines, a contractor will often neither notify the client in writing of the latter's failure to perform its obligations, nor suspend the works. Certain steps will give a contractor a stronger basis on which to repudiate the agreement and seek compensation for losses in the event of a dispute.

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Singapore

In a further test of the scope of liability of architects and contractors, the Court of Appeal considered whether purchasers of housing development property could sue a developer for defects caused by a failure in design or construction. It suggested that a constituent proprietor which does not have a contract with the developer can sue if the original purchaser lends its name to an action as a co-plaintiff.

The Singapore High Court recently considered the need for multi-party arbitration in construction projects in the Ho Bee Case. The case further demonstrates a need in the construction industry for a holistic approach to arbitrating construction disputes on the one hand and, on the other, the need to support the wishes of parties to resolve disputes between them in a manner of their choosing.

In 2004 the Building and Construction Authority published the Quality-Fee Selection Method (QFM) for the procurement of public projects. Since its publication, the QFM has been the standard reference for many public sector building and construction projects; recent revisions emphasize the importance of the tendering firms' quality criteria over their fee proposals.

The Singapore Institute of Architects recently issued the seventh edition of its standard-form, lump-sum building contract. The amendments introduced in the latest edition of the contractual conditions change the procedure and timelines governing interim payments by employers to contractors, taking into account the security of payment provisions in the Building and Construction Industry Security of Payment Act.

The arbitration clauses in Singapore's most commonly used standard-form construction contracts make no provision for tripartite arbitration involving an employer, an architect and a contractor. An employer in dispute with the other two parties may have no choice but to sue, as separate arbitration hearings by different tribunals would open up the possibility of inconsistent findings on the same issue.

Developers are commonly involved in disputes with contractors over defective works. However, once construction is complete and the units are sold, the developer no longer has a proprietary interest in the property and is arguably not the party who has suffered loss through the appearance of latent defects. Should the developer be allowed to claim for substantial damages in such situations?

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Switzerland

Switzerland has adopted a number of sanctions against Iran. These sanctions may affect construction contracts if, among other things, one of the parties is blacklisted or the construction contract concerns works falling under the restrictions imposed by the sanctions. Any breach of the sanctions would be considered to be illegal and entail the nullity of the contract.

The statutory time limit for warranty claims has been extended from one to two years. The two-year time limit is mandatory only for consumer contracts. Contracts between businesses may still provide for shorter limitation periods for warranty claims. In addition, a recent revision of the Unfair Competition Act allows tribunals to invalidate general terms and conditions that are unfair towards consumers.

The Federal Supreme Court recently confirmed that a main contractor can align the contractual time bars for warranty claims against its subcontractors with the time limits applying to warranty claims that the owner has against the main contractor. This decision is relevant for both main contractors and subcontractors involved in large construction projects.

The controversial issue in a recent court of appeal case was whether the contractor still had a claim for compensation, despite its failure to submit progress reports and have them signed by the owner. The court ruled that in the absence of the contractually agreed progress reports, the contractor was still entitled to compensation but should establish (the amount of) its claim by other means of evidence.

The Supreme Court recently confirmed that an owner may rescind a contract for works if the contractor is in default. Before doing so, the owner must put the contractor on notice and grant it a reasonable grace period. In the present case, the contractor failed to reach agreed-upon output requirements and its delivery of the works was late. The court held that no prior notice or grace period was required in these circumstances.

It is expected that the upper house of the Swiss Parliament, the Council of States, will approve an amendment to the Code of Obligations which will align Swiss law on warranties with the UN Convention on Contracts for the International Sale of Goods and the EU Sale of Consumer Goods Directive. Since the rules on warranties applicable to the sale of goods under Swiss law also apply to contracts for works, the extension of the time limit will also impact on Swiss construction law.

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Turks & Caicos Islands

Recently, a number of private island hotel developments in the Turks and Caicos Islands have been halted. Similarly, elsewhere in the Caribbean, a number of luxury resorts have been forced to stop construction as financing dries up and the market for holiday villas and condominiums shrinks. Parties entering into building contracts would be well advised to follow the advice provided in this update.

In the Turks and Caicos Islands, parties often begin building commercial or residential properties or engage in engineering works without taking legal advice on the appropriate form of building contract and without signing a formal building contract. This update provides advice to parties regarding their rights when engaging in building or engineering work in the absence of a formal written contract.

Ukraine

The Ministry of Regional Development, Construction and Housing and Communal Services has issued an order entitled "Requirements for Expert Organisations Engaged in the Examination of Construction Projects". Among other things, the document details the sectors in which organisations must maintain expertise within their staff.

Due to the rising number of occupational injuries in the construction industry, the State Service of Mining Supervision and Industrial Safety has introduced raids on construction sites. The forthcoming Euro 2012 football championships are a particular priority, with monitors from the state supervision organisation being appointed for each site or group of sites.

Ukraine's anti-crisis legislation to protect the construction and housing industry introduced a ban on individuals and legal entities terminating housing construction contracts, providing for 100% downpayment under such contracts, except where termination is by mutual agreement of the parties. A draft law would extend the prohibition by a further year to 2013.

The Cabinet of Ministers has issued Order 805, which sets out rules on the compulsory insurance of property risks in respect of agreements for participation in the government's construction financing fund. The coverage under a compulsory insurance agreement is determined by the amount of funding stipulated in the fund participation agreement.

Two recently approved laws are intended to expedite the procedure for approving new buildings for use. Although the reformed regime has a number of benefits, many critics within the sector find it difficult to believe that it will improve a time-consuming and heavily bureaucratic procedure.

Despite the transfer of construction licensing regulations to specific construction legislation, licensing has proceeded much as before. However, the licensing authority is now the State Architectural Construction Inspectorate and the Ministry of Construction and Regional Development has drafted a new list of construction works for which a licence is needed.

United Arab Emirates

Disputes over the valuation cost and time impact of variations remain a major feature of the UAE construction industry. Developers are procuring major commercial projects on a fast-track basis, with construction contracts being let long before finalization of the drawings and specifications.

For all its innovation and spectacular achievements, the construction industry in the United Arab Emirates has been slow to move on from its close relationship with the International Federation of Consulting Engineers Red Book. However, the Red Book, when read in the context of the applicable provisions of the Civil Code, might not have the meaning or the effect suggested by the actual words used.

The infrastructure and construction boom taking place in the United Arab Emirates is attracting lawyers to the region in droves. However, although the codified law of the United Arab Emirates is based on civil law, the overwhelming majority of new arrivals have been trained in common law jurisdictions and have scant knowledge or previous experience of civil law.

United Kingdom

The construction industry had become used to the harsh but fair operation of the Housing Grants, Construction and Regeneration Act 1996. However, Melville Dundas and Pierce Design have prompted and continued a debate about whether a clause in the 1998 Joint Contracts Tribunal contract complies with the payment provisions of the act and what the effect of the clause is.

The key changes introduced by the new Construction (Design and Management) Regulations include the replacement of the role of planning supervisor, the imposition of greater responsibilities on clients and the removal of the civil liability exemption in respect of civil actions by employees against employers.

In many construction contracts the contract administrator is called on to act as an interim settler of disputes. A Court of Appeal decision has shown that an engineer or architect is not bound by the rules of natural justice in this regard, provided that the contract provides for the parties to refer the decision to an arbitrator.

Partnering is no longer a new phenomenon and the number of projects procured through partnering has increased steadily in recent years. Endorsements from agencies such as the Office of Government Commerce and the National Audit Office, combined with a number of high-profile applications, suggest that the popularity of the partnering approach will continue.

The Royal Institute of British Architects (RIBA) has submitted ideas for improving the Building Regulations to the minister with responsibility for the regulations at the Department for Communities and Local Government for the review being undertaken by the department and the Cabinet Office. RIBA has developed six proposals for improving the regulations.

In the construction industry, variations are frequently ordered, programmes are changed and sometimes work is not completed on time. Ideally, contracts should include a mechanism to deal with this, but what happens if the extension of time clause is defective or non-existent, or liquidated damages have been held to be a penalty, but the parties wish to try to have the work completed?

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USA

Illinois law was already more favourable to contractors and subcontractors than that of most other states, but the Illinois legislature recently gave them a greater edge against lenders in failed construction projects. Contractors which are unpaid on a project now have priority on the value of the entire improvement – even the value paid for by the lender – and are not limited to the value that they themselves supplied.

An Illinois circuit court recently issued an opinion which illustrates some of the consequences of the Illinois mechanics' lien law and the perils that a real estate lender can face when working out a defaulted loan. In Illinois, a prior recorded mortgage has no priority over the mechanics' lien claims of contractors, subcontractors and material suppliers which supplied work and material for a construction project.

The American Institute of Architects has published the latest revisions to its standard forms of agreement to be used in the design and construction of projects in which architectural design plays a prominent role. Key changes have been made to the owner-architect and owner-contractor agreements.

The discovery of environmental contamination which must be remedied before construction can commence or proceed can lead to claims against the civil engineering firms that prepared pre-construction environmental reports. A recent Seventh Circuit Court of Appeals decision has clarified the issues surrounding the calculation of damages in such cases.

Subcontractors that have claims for economic damages against prime contractors frequently enter into agreements to pass those claims through the contractor in order to carry out a joint prosecution with the contractor against the project owner. Such agreements are popular in the United States as they allocate potential liability efficiently and avoid duplicate litigation.

The American Institute of Architects publishes form agreements which are widely used in the US construction industry and which influence the architectural and engineering forms used in other countries. The latest revisions will be released in both paper and electronic format in Autumn 2007 and make major changes to dispute resolution procedures.

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