Swiss law is commonly used for construction contracts and is generally considered to be a safe option for good reason. But Swiss law does have some particularities that international parties might not expect. This article sets out five points that international parties should look out for when signing a Swiss law construction contract. With some forethought, parties can opt to contract out of these particularities or adequately address the allocation of risk that they entail.
The 2019 Conditions of Contract for Underground Works (Emerald Book) is a new standard form specifically for underground works that is the result of a lengthy collaboration between the International Federation of Consulting Engineers and the International Tunnelling and Underground Space Association. The Emerald Book contains several features aimed at addressing geotechnical uncertainty, including geotechnical baseline reports and mechanisms to adjust the time for completion and contract price.
New Swiss arbitration rules that are intended specifically for construction disputes contain several notable changes that may foreshadow the evolution of international construction arbitration procedures. Some or all of these innovations, which are aimed at improving efficiency and facilitating settlements, may prove to find widespread adoption among parties negotiating international construction contracts and arbitral institutions revising their rules.
Terminating a construction contract is the last resort for employers frustrated by delays, defects or other problems. Three recent Supreme Court cases illustrate some of the pitfalls of termination for employers. In all three cases, the employers' attempt to terminate for cause was construed as termination for convenience, exposing the employers to significant liability towards the contractors, including for lost profits.
Clauses that require a contractor to obtain the employer's pre-approval of the cost of any additional works are increasingly common in lump-sum construction contracts. According to a recent Federal Supreme Court decision, these pre-approval clauses will be applied strictly, subject to certain exceptions. In its decision, the court enforced such a clause to deny a contractor's claim to recover the cost of additional works performed by a subcontractor.