Our thinking

Transformation in the construction industry: Keeping pace with change

What's inside

Three pillars are at the heart of global efforts to boost sustainability and make our built environment cleaner, greener and more socially responsible: construction, energy and technology. These three industries have come to be intricately connected in an era of transformation on a scale never seen before.

Foreword

Across the world, leading construction industry players are developing innovative projects and deploying new technology to transform the way we live and work. 

Meanwhile, energy and mining  & metals companies in rural Africa are increasingly installing generating assets and distribution facilities to ensure continuity of energy supply for their operations. 

The predicted increase in flexible working may well result in a more widespread move to the development of "smart cities," with technology built into the heart of daily life. 

All this is happening amid the fallout from the COVID-19 pandemic, which has shifted perceptions of how the world may look in the future. 

But the pandemic has also forced project owners, developers and contractors to look at their contractual terms more closely, as budgets are cut and works are interrupted due to government restrictions. 

This compendium of articles, written by colleagues from offices across the world covers a wide range of issues, examines some of the key topics relating to the shifting relationship between the construction, energy and technology sectors in our rapidly changing world. 

It looks at the role the construction industry is playing in the development of distributed energy projects in the US and battery storage in the UK. 

In the Middle East, the boom in the construction of smart cities has led to the use of new project structures to embed energy -saving measures within the developments. In Africa, renewable energy projects driven by public procurement programs have attracted investors and developers from around the world, drawn by the vast opportunities on the continent. 

Increasing work in a volatile environment, however, means that risk allocation and mitigation are more important than ever. Courts in regions as diverse as Russia, India, Latin America, the Middle East and the UK have all been examining force majeure and risk clauses within contracts. Industry players would be wise to take note of these decisions and trends as markets are beginning to return to post-coronavirus normality.

Insolvency can also be another resultant risk, with recent reforms in the UK, Australia and Singapore affecting the construction sector if contracts are not carefully reviewed and, potentially, redrafted to reflect the new rules. 

Although the current environment may have raised awareness of risk in construction projects, there is no doubt that the recent disruption and focus on innovation, new technology and sustainability is bringing immense opportunity to the industry around the world with a real chance of lasting impact.

“Focus on innovation, new technology and sustainability is bringing immense opportunity to the construction industry around the world” 

Construction considerations in the US distributed energy market

Microgrids are an increasingly attractive means to provide reliable electricity, generated on-site, customized for the needs of the individual location and sensitive to the environment.

construction arbitration square US Distributed energy

Untangling a failed energy startup

The commissioning and startup phase of any energy project—liquefied natural gas, power, renewables, petrochemical—represents an important, and potentially perilous, transitional period during the construction process.

construction arbitration square US Untangling

Impact of COVID-19 restrictions on Mexico’s construction industry

The coronavirus pandemic has had, and will continue to have, profound effects on the global construction industry. There have been and will continue to be substantial delays and cost impacts as a result of labor shortages, disruption to supply chains and financial pressure.

construction arbitration square Mexico- Case study

Bankability of contractor performance security in Latin American construction projects

Delays in construction projects are common and even more so at the moment, and so the question of ensuring that there is a mechanism for the prompt payment of damages in the event of a contractual breach is arguably now more important than ever.

construction- arbitration square atAm Bankability

Impact of insolvency reform on the construction industry

With the threat of increased insolvencies as an effect of the COVID-19 pandemic remaining very real, the construction sector needs to be aware of the impact of changes to insolvency laws.

construction arbitration square UK Insolvency

UK case law emphasises need for clear drafting in descoping and vesting of goods

In 2020, the UK courts heard two significant cases with an impact on the way construction contracts and subcontracts are drawn up and carried out, affecting employers, contractors and subcontractors to major projects.

construction arbitration square UK descoping

Opportunities and challenges in battery storage

By Richard Hill, Sofia Lambert and Kit Goodfellow

Increased battery storage capacity can and is being encouraged in order to facilitate the move towards the decarbonisation of electricity generation and can contribute to greater resilience and efficiency of integrated grids. 

construction arbitration square uk-battery storage

Opportunity and risk in African construction contracting

By Matthew Richards and Rhulani Matsimbi

Investment in infrastructure in Africa has soared in recent years, and construction activity has risen with it.

construction arbitration square africa contracting

Finding an appropriate contractual bedrock for procurement of mining & metals projects in Africa

With its huge mineral potential, Africa is likely to see a number of mining projects move from exploration and feasibility to construction. 

construction arbitration square africa mining and metals

Risk allocation in recent construction projects in Russia

By Chris Duncan and Daria Plotnikova

The past few years have seen a shift in the way contracts for construction projects in Russia have been drawn up and scrutinized in response to growing awareness of risk.

construction arbitration square russia risk allocation

A sustainable future: Smart cities in the Middle East

Urban environments are in the middle of a revolution. The powers of technology and data are being harnessed to make cities safer, more efficient and more sustainable.

construction arbitration square middleeast smartcities

Saudi Supreme Court clarifies COVID-19 effects on contractual arrangements

COVID-19 has had a significant effect on construction projects around the world, delaying work and forcing many parties to go back to their contracts and examine whether there is scope for a claim, and Saudi Arabia was no exception.

construction arbitration square ksa supremecourt

Navigating through construction disputes in India

Where large projects exist, disputes will often arise. The Indian construction sector is no exception, but the lack of a standard form contract and the option of several forms of dispute resolution means that resolving disputes can be complex.

construction arbitration square india construction disputes
construction -arbitration hero india construction disputes

Navigating through construction disputes in India

Where large projects exist, disputes will often arise. The Indian construction sector is no exception, but the lack of a standard form contract and the option of several forms of dispute resolution means that resolving disputes can be complex. 

Insight
|
5 min read

Foreign investors generally prefer institutional arbitration; in contrast, Indian parties have traditionally preferred ad hoc arbitration involving retired High Court or Supreme Court judges serving as arbitrators

Construction is a major sector in India—indeed, it is the country's second-largest industry after agriculture. It is also the second-largest employer and the second-largest recipient of foreign direct investment, making up 9 percent of India's GDP. Forecasts predict that India will become the third-largest construction market globally by 2025.  

Currently, standard form contracts are not widely used for Indian construction projects. The FIDIC, ICE, NEC, JCT and ACA forms are sometimes used and government authorities, such as the National Highways Authority of India (NHAI), use their own bespoke contract form that reflects their requirements, particularly for public-private partnerships.

Resolving construction disputes in India

Construction disputes in India can be—and in practice are—resolved by the full spectrum of dispute resolution methods, although arbitration is generally the preferred route.

In construction disputes, it is quite common for parties to refer their disagreement for adjudication by a dispute board first, although the decision of the dispute board is generally not binding. Consequently, subject to any contractual requirements, a party dissatisfied with a dispute board's decision may refer the matter to arbitration.

The Arbitration and Conciliation Act 1996, which was amended in 2015, 2019 and 2020, governs arbitrations seated in India and provides the framework for the enforcement of foreign arbitral awards. The act covers both domestic arbitration and international commercial arbitration involving at least one foreign party, and deals with matters such as the appointment of arbitrators, interim relief and set-aside proceedings. 

Arbitrations involving Indian parties tend to be seated in India, while arbitrations involving at least one foreign party tend to be seated outside India.

Foreign investors generally prefer institutional arbitration using rules like those of the International Chamber of Commerce, London Court of International Arbitration or the Singapore International Arbitration Centre (SIAC). 

In contrast, Indian parties have traditionally preferred ad hoc arbitration involving retired High Court or Supreme Court judges serving as arbitrators. However, to promote institutional arbitration in India, the Mumbai Centre for International Arbitration (MCIA) was established in 2016. Since then, its caseload has grown steadily year on year. 

2025

Forecasts predict that India will become the third-largest construction market globally by 2025.

Indian parties are also increasingly turning to SIAC to resolve disputes— almost two-thirds of the record 1,080 cases filed with SIAC in 2020 involved an Indian party. 

The Arbitration and Conciliation Act 1996 also provides a framework for settling disputes through conciliation. If a settlement is reached through conciliation, it can be recorded in the form of an arbitral award and is enforceable in court. 

Historically, conciliation has not been used often in practice. However, recent trends indicate that the appetite for conciliation for resolving construction disputes has increased, particularly for road construction disputes involving public-private partnerships.

Mediation in India falls into two categories: judicial and private. For construction disputes, judicial mediation is rare because usually one of the litigants is a state entity and courts are hesitant to get involved. Private mediation is also rare, and generally used only for low-value disputes. 

In August 2019, India signed the Singapore Mediation Convention, which aims to facilitate the enforcement of mediated settlement agreements and may well lead to an increase in the use of mediation. 

When it comes to litigation before the courts, the hierarchy of civil courts in India is broadly divided into local civil courts, regional High Courts and the Supreme Court of India. 

Notably, India does not have a specialist construction court along the lines of the English Technology and Construction Court. Instead, the Commercial Courts Act 2015 enables state governments either to constitute commercial courts at the district level or designate a commercial division within existing High Courts to deal with construction disputes. The High Courts of Delhi and Mumbai have each set up a commercial court, as have several state governments.

India has also sought to establish "Special Courts" to deal with civil proceedings related to specific performance of construction contracts, sitting below the High Court within the court hierarchy. Their jurisdiction extends to all infrastructure projects within local territorial limits. So far, these Special Courts have been established in the states of Uttar Pradesh, Karnataka and Madhya Pradesh.

Foreign investors may be reluctant to agree to resolve disputes through litigation, due to the possibility of having to engage with an unfamiliar judicial process. They also often have concerns about the independence, impartiality and efficiency of the Indian court system.

The Indian construction disputes environment remains a patchwork, but there is steady progress toward system that provides better outcomes for users

Trends in Indian construction

A recent notable event in road construction was the issuance of a memorandum by the Ministry of Road Transport and Highways categorizing COVID-19 as a force majeure event for road construction contracts. The ministry announced reliefs for road construction contractors, including extensions of time, certain direct payments to subcontractors and relief from liquidated damages.

Separately, recent amendments to the Specific Relief Act 1963 prohibit Indian courts from granting injunctive relief in civil proceedings for specific performance of infrastructure projects, where that injunctive relief would impede or delay the progress or completion of the project. This covers roads, bridges, shipyards, airports, public transport, water and sanitation, and other social and commercial infrastructure.

Meanwhile the National Highways Authority of India, the government agency that tenders public road construction projects, has set up a Conciliation Committee of Independent Experts (CCIE) to settle long standing road construction disputes that have been mired in litigation or arbitration for several years. Conciliation before the CCIE is consensual and, if it fails, then the parties are free to pursue arbitration or litigation.

The Indian construction disputes environment remains a patchwork, but there is steady progress toward a system that provides better outcomes for users.

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2021 White & Case LLP

Top