ENERGY & INfRastRuctuRE THE SMART ConTRACTing BULLETIN ... · “concurrent delay” was...

ENERGY & INfRastRuctuRETHE SMART ConTRACTing BULLETIN - FEBrUary 2018

02 The SmarT ConTraCTing BulleTinFebruary 2018

coNtENtsQuick guide to the updated FIDIC 2017 “rainbow Suite”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .03

Concurrent delay: what the parties say goes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06

Updated guidance on the Modern Slavery act 2015: the noose tightens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .08

Implied terms: courts reaffirm rigorous test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

DIFC Courts as a conduit jurisdiction: the end of the road? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

BEIS issues updated guidance on decommissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

amending key dates in construction contracts: pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Public tender proceedings under German and EU law – what every bidder needs to know. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Contract interpretation has its limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Firm news and events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


Quick guide to the updated Fidic 2017 “RaINbow suItE”at its annual conference in London in december 2017, Fidic released the long-awaited new edition of the “Rainbow suite” of contracts – the Red, Yellow and Silver Books. it is the first attempt to modernise the fIDIc forms since the first Edition of the Yellow Book was published in 1999. the core aim of the 2017 revision has been to provide a higher degree of clarity and certainty, reduce the risk of disagreement on interpretation and increase the probability of successful projects. this has resulted in a re-draft of most provisions and considerably lengthier and more prescriptive forms of contract. there are detailed step-by-step project management and procedural mechanisms for the employer, contractor and engineer and an enhanced focus on the dispute board, dispute avoidance and the engineer. Whilst on the one hand several provisions have been made reciprocal and more balanced, the contractor now carries more design risk and the employer more risk for his financial arrangements. users will need to be aware of the changes when considering whether to use one of the new forms or when reviewing, amending or negotiating them.Structure and terminologyOverall structure: the overall structure of the forms is unchanged, but there are now 21 (rather than 20) clauses and some clauses have been restructured or moved to more suitable locations.

Force Majeure> Exceptional Events: the force majeure clause has been renamed Exceptional Events in order to limit the risk that it is interpreted in the light of

background law in certain civil law jurisdictions in which “force majeure” is a separate legal concept.

Employer’s Risks: the categories of what used to be referred to as Employer’s risks have been expanded and incorporated into a redrafted indemnities clause.

New “Contract Data” concept: there is also a new key concept of “Contract Data” (rather than “appendix to Tender”), similar to an NEC contract.

Definitions: there are several new definitions and abbreviations, for example “Claim”, “Delay Damages”, “Extension of Time”, “DNP”, “EOT”. The definitions are now in alphabetical order.


key changesThe below is a brief overview of some of the key changes in the 2017 rainbow Suite, with a focus on the yellow Book.

Split of claims and disputes; focus on dispute avoidance; standing daaBClaims have been separated from Disputes and arbitration in a new clause. Contractor’s Claims are on a par with Employer’s Claims. There is a new dispute avoidance function for a renamed Disputes avoidance/ adjudication Board (“DaaB”), which is a standing board in all three forms. Whilst these changes have been made with the aim of helping the parties deal with claims appropriately and promptly in order to avoid disputes, there is a risk that early involvement of the DaaB will increase the risk of disputes.

Enhanced Engineeras a consequence of the key role of the Engineer in FIDIC contracts, its role has been strengthened and clarified. For example, it is now explicit that the Engineer must be neutral and there is no requirement for it to obtain the Employer’s consent before making determinations. as a result of feedback from Contractors, there are new deeming provisions if the Engineer does not act, for example if he does not consent, provide a clarification or issue the Performance Certificate.

More time periods; notices; time bars and deeming provisionsThere are far more notice requirements, deeming provisions and time bars in the 2017 versions than in the 1999 editions. a new “Notice of No-objection” replaces approvals and consents. If not diligently managed, a party may be caught out by these new provisions and lose the right to a Claim or to approve or object to something.

More detailed project management procedures and mechanismsThe new forms include several enhanced and clarified project management procedures and mechanisms. Similar to the NEC suite of contracts, there is now an “advance Warning” system: a new requirement to give advance warning of future events which may have an adverse effect on performance of the Works, increase the Contract Price or delay execution of the Works. There are also more

detailed programme requirements, new management meetings, an updated quality management system, a new specific health and safety manual and new suggested special provisions for milestones.

Users will need to implement processes to manage these enhanced procedures and mechanisms.

New indemnity for contractor’s design errorsa new provision requires the Contractor to indemnify the Employer against all errors in the Contractor’s design which result in the Works not being fit for purpose. The obligation is subject to the indirect/consequential loss exclusion and aggregate liability cap. Notably, there was no exclusion or cap in the 2016 pre-release version and it was only after substantial criticism from contractors that it was included. Contractors should consider whether the potential additional risk from this new indemnity for design defects is acceptable.

No solution for concurrent delayafter lengthy discussions, the 2017 version does not adopt a rule for concurrent delay as no agreement could be reached on the issue. Instead, it encourages the parties to include rules and procedures in special provisions.

Latent defects; review of defects remedy proposala new provision provides that the Contractor’s liability for latent defects ends two years after expiry of the Defects Notification Period. Employers should consider whether this new time limit is adequate.

Contractors should be aware that they now are required to submit a proposal for the remedy of defects to the Engineer for review. as the Engineer’s approval or consent is not explicitly required, it is not entirely clear what impact this review is intended to have.

extensive revisions to VariationsThe Variations clause has been extensively revised, including a split between methods for initiating Variations by Instruction and by request for Proposal.


care of the Works and indemnities provisions substantially unchanged Whilst significantly redrafted, the substance of the provisions relating to care of the works and indemnities remains largely unchanged.

“profit”=5%Where the Contractor is entitled to Cost Plus Profit the amount of profit is now as a default set at five per cent. If users object to this level, they must ensure a different amount is inserted in the Contract Data.

performance Security; employer’s financial arrangementsIf the Contract Price changes by more than twenty per cent as a result of a Variation, a request for an increase or decrease in the amount of the Contractor’s Performance Security can be made.

The Employer’s financial arrangements are to be described in the Contract Data. If the Employer intends to make a material change to these arrangements it must give notice to the Contractor. also, if the Employer instructs a Variation of a value in excess of ten per cent of the accepted Contract amount, or if the Contractor does not receive payment or is aware of a change in the Employer’s financial arrangements, it can request evidence that financial arrangements are in place to enable the Employer to pay. It is expected that certain Employers will view this as too onerous and request amendments.

Rewritten Insurance clauseThe insurance provision has been completely re-written and parties should consult their insurance advisers in respect of the changes.

New carve outs from consequential loss exclusion and aggregate capDelay Damages and intellectual property indemnities are now carved out from the indirect/consequential loss exclusion. In line with the practice, and law, in many civil law jurisdictions – and increasingly in common law governed contracts - gross negligence is carved out from the aggregate cap. The Employer has a new termination right if the Delay Damages cap is exceeded.

all users should consider the gross negligence carve out which, even if it may appear just, risks leading to increased disputes. Contractors should also consider whether the carve out of Delay Damages from the aggregate cap and the termination right if the Delay Damages cap is reached is acceptable.

New termination rightsIn addition to the Employer’s termination right if the Delay Damages cap is reached, the new forms include additional termination rights for both parties, including if the other party fails to comply with a binding agreement or final and binding determination of the Engineer or decision of the DaaB, providing the failure constitutes a material breach.

Martin sandgren Partner, [email protected]

Martin Sandgren is co-lead of FIDIC’s Renewables Contract Initiative – a new industry-wide task group set up by FIDIC last year to develop contracts specifically adapted for the renewables industry, initially offshore wind.


coNcuRRENt DELaY: wHat tHE PaRtIEs saY GoEscan parties to a construction contract expressly allocate the risk of concurrent delay to the works?

the answer from Mr Justice fraser in North Midland Building Limited v Cyden Homes Limited [2017] eWhc 2414 (tcc) is a crystal clear “yes”.Background – the prevention principle and concurrent delayThe interplay between the prevention principle and concurrent delay frequently creates significant uncertainty. Parties are therefore increasingly seeking to overcome this uncertainty by making express provision in their contracts.

The “prevention principle” provides that no party may require the other to comply with a contractual obligation in circumstances where that party has itself prevented such compliance.

If an employer has prevented a contractor from carrying out works by the contractual completion date and there is no effective mechanism in the contract for the time for completion to be extended, the original completion date falls away and time is put “at large”, meaning that the contractor must instead complete the works within a reasonable time and the employer cannot in these circumstances levy liquidated damages for delay.

“concurrent delay” was straightforwardly described by Mr John Marrin QC, a distinguished practitioner and author in this field, as “ ... a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency” (Concurrent Delay Revisited, Society of Construction Law paper 179, 2013).

Construction contracts typically provide that contractor delays to completion entitle an employer to liquidated damages. On the other hand, a delay for which an employer is responsible would usually entitle a contractor to an extension of time and prolongation costs because the contract provides a mechanism for extending time or claiming extra costs or by operation of the prevention principle putting time at large. However, situations of concurrent delay are very often not adequately addressed in many construction contracts.

Contractors frequently allege concurrent delay and assert that because an employer itself has delayed the works, its failure to grant an extension of time gives rise to the prevention principle, meaning that time is “at large”. However, the matter is far from clear cut. Not only are cases of true concurrent delay on the facts rare, but the application of the prevention principle to cases of concurrent delay is to be increasingly doubted in light of comments in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) (a case handled by Ince & Co) and Jerram Halkus Construction Ltd v Fenice Investments Inc (No.4) [2011] EWHC 1935 (TCC). as expressed by Coulson J in Jerram Halkus:

“ ... for the prevention principle to apply, the contractor must be able to demonstrate that the employer’s acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway, because of concurrent delays caused by the contractor’s own default, the prevention principle will not apply.”

North Midland Building Limited v Cyden Homes Limited [2017]Both authorities were cited with strong approval by Fraser J in North Midland Building Limited v Cyden Homes Limited, which has been the most important authority dealing with these matters for some time.


factsCyden Homes Limited (the Employer) engaged North Midland Building Limited (the Contractor) to construct a sizeable property under the JCT Design and Build Contract 2005 edition, as amended.

The parties had amended clause 2.25.1.3, which dealt with the calculation of an extension of time where there was concurrent delay caused by both the Contractor and the Employer, to read: “any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account”. It should be noted that “Relevant Events” included acts of prevention by the Employer.

The Contractor was delayed in completing the works and argued that the Employer had caused a proportion of the delay – i.e. there was concurrent delay.

argumentThe Contractor brought proceedings seeking declarations as to the meaning and effect of clause 2.25, requesting that the court interpret the clause as setting

time at large, arguing that the risk allocation regarding concurrent delay under the contract was impermissible because: (i) the contract did not provide for an extension of time where the Employer contributed to the delay, so the prevention principle would be triggered; and (ii) the Employer would receive liquidated damages for a period when the Employer itself had been responsible for the delay.

DecisionJackson J held that parties are free to allocate risk as they wish. The contract wording was “crystal clear” and the prevention principle simply was not triggered: “ ... there is no rule of law of which I am aware that prevents the parties from agreeing that concurrent delay be dealt with in any particular way ... ”. The liquidated damages would not fall away as a result of an extension of time having been agreed by the parties to be calculated in a particular way.

practical implicationsThe decision is currently under appeal, due to be heard by the Court of appeal in July 2018. Pending the outcome, contracting parties can feel confident that express contract wording will be given its literal meaning and now have an example of judicially approved wording. We can therefore expect to see an increase in parties, particularly employers, seeking routinely to include express provision in contracts for what should happen in cases of concurrent delay. Contractors should have this in mind as they allocate and assess risk.

chris KiddHead of Shipbuilding and Offshore Construction, [email protected]

Mette duffyManaging Associate, [email protected]


uPDatED GuIDaNcE oN tHE MoDERN SLaVeRY act 2015: the NooSe tighteNSModern slavery and human trafficking remain hot topics since the coming into force of the Modern Slavery act 2015 (the “act”). the home office published updated guidance in october 2017 (the “2017 guidance”) and it is reported that one third of businesses affected by the act have not prepared a modern slavery statement, in spite of the legal requirement for them to do so.The extremes of modern slavery may be obvious but the legislation is structured so that there are many shades of grey that could catch out anyone not keeping an eye on this issue. We previously reported on the cases of the offshore supply vessels MV Malaviya Seven and MV Malaviya Twenty where it was sufficient for the non-payment of crew wages to get the attention of the authorities. Whilst no slavery investigation relating to the incident has been reported on, it nevertheless attracted much negative publicity for the oil and gas industry in the UK, and in particular the oil companies that had used the vessel. The vessel was out of action for over a year and was eventually sold to pay the crew’s wages.

During straitened times in the oil and gas sector, symptoms of financial difficulties may have wider repercussions for the unwary.

the 2017 guidanceSection 54 of the act requires businesses that have a global turnover above £36 million and that operate in the UK, to produce an annual statement detailing the steps they have taken to ensure that there is no modern slavery in their own business and supply chains. The original 2015 guidance set out the Home Office’s expectations for such statements. It is unclear whether an organisation caught by section 54 must also account for the operations of non-UK subsidiaries but best practice would suggest that it should. See paragraph 3.13 of the 2017 Guidance:

“If a parent company is seen to be ignoring the behaviour of its non-UK subsidiaries, this may still reflect badly on the parent company. As such, seeking to cover non-UK subsidiaries in a parent company statement, or asking those non-UK subsidiaries to produce a statement themselves (if they are not legally required to do so already), would represent good practice and would demonstrate that the Company is committed to preventing modern day slavery. This is highly recommended, especially in cases where the non-UK subsidiary is in a high-risk industry or location.”

The 2017 Guidance makes clear that the statement is not just a box ticking exercise but must reflect a conscious effort to tackle the risks posed by modern slavery and trafficking. There is still no prescribed deadline for compliance such that the expectation remains that statements should be published within six months after year end.

although much of the 2017 Guidance remains unchanged, two main points of note are:

> a suggestion that organisations falling below the £36 million turnover threshold may find it helpful to make a voluntary statement if they are bidding for contracts against businesses that do have one. Such organisations may already be responding to supply chain due diligence queries asking if they have a statement or policy setting out their approach to tackling modern slavery.

http://www.incelaw.com/en/knowledge-bank/modern-slavery-act-2015


> an indication that it is best practice to include in the statement the items set out in section 54(5) of the act, addressing the sort of information that “may” be included in an organisation’s statement.

On this second point we would particularly highlight the provisions of section 54(5)(d) of the act:

“An organisation’s slavery and human trafficking statement may include information about –

(d) the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;”

For anyone dealing with local content requirements, particularly in high risk countries and in market conditions where profit margins are stretched, the obligation no doubt looks like an onerous burden that is tempting to turn a blind eye to. But section 54(5)(d) does emphasise the need for closer scrutiny of where local labour is sourced from and, in particular, proper due diligence into the players involved in the extensive supply chains that exist in a typical, large project.

Looking ahead – the Modern Slavery (transparency in Supply chains) Bill 2017 (the “Bill”)assuming the Bill becomes law, important changes to the act that are of relevance to our clients in the energy and infrastructure sectors include:

> Section 54(5) of the act would no longer be best practice examples of what to include in the statement: they would be mandatory, thus reinforcing the element of self-policing of compliance and making it easier for apparently minor breaches to occur which might tip off authorities to the need to investigate in more detail.

> a requirement that reasons are given when a statement is published confirming no steps have been taken to ensure modern slavery and human trafficking is not occurring in any part of their business or supply chains.

> an obligation on the Secretary of State to publish a list of all commercial organisations that are required to publish a statement, in a place and format that is easily accessible.

There is no proposal in the Bill to amend the sanctions for non-compliance with section 54 of the act. The threat of adverse publicity and likely impact on credibility of reputation and so prospects for tenders to succeed, plus the fact that a lack of compliance may well provide the genesis of suspicion that leads to a full investigation into a company’s operations around the world, remain the serious consequences likely to arise.

conclusionsOrganisations will need to pay heed to the “best practice” section 54(5) requirements, which are likely to become mandatory in the near future.

In light of the 2017 Guidance and the proposed legislative changes, it is worth taking the time to review your own position and ensure the section 54 requirements have been complied with to the fullest extent possible.

simon HemsPartner, [email protected]

anna Joscelyne Managing Associate, [email protected]


IMPLIED tERMs: couRts REaffIRM RIGoRous tEstpersuading an english court that it should imply a term into a contract, especially where the parties are sophisticated, well-advised companies, is a difficult task for any lawyer.

In order to succeed it is necessary to satisfy the test which was set out clearly in BP Refinery (Westernport) Proprietary Ltd v Shire of Hastings (Victoria) [1977] UKPC 13, and then refined by the Supreme Court in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2015] UKSC 72. a term will only be implied if:

I. it is necessary to give business efficacy to the contract (business efficacy test); or

II. it is so obvious that it goes without saying (officious bystander test); and

III. it is capable of clear expression; and

IV. it does not contradict any express terms of the contract.

Three recent cases illustrate how the courts apply this stringent test in practice.

Sparks v Biden [2017] eWhc 1994 ch The two parties signed an Option agreement in respect of the purchase of a piece of land which provided, inter alia, that overage (an additional payment on top of the original sale price to be paid on the occurrence of a specific event), would be paid by the buyer for each sale of newly constructed dwellings. The Claimant seller, Mr Sparks, was successful in arguing that the Option agreement contained an implied term which imposed an obligation on the buyer to market and sell the newly developed houses within a reasonable period of time.

The High Court concluded that such a term ought to be implied as a matter of business efficacy as without such a term, the Option agreement lacked practical or commercial coherence. In particular, the obligations on the buyer (i) to use all reasonable endeavours to obtain planning permission, (ii) to begin construction as soon as practicable, and (iii) to pay overage on the sale of the new houses, led to the conclusion that the aim of the Option agreement was for the realisation of the full value of the development. The fact that the buyer was obliged to sell the constructed houses was so obvious that it went without saying that such a term should have been included in the agreement. as a result both the business efficacy and the officious bystander tests were satisfied.


Takeda Pharmaceutical Company Limited v Fougera Sweden Holding 2 AB [2017] eWhc 1995 (ch)Fougera agreed a Sale and Purchase agreement (SPa) with Takeda for the sale of a Danish company. There was an issue as to whether the Danish company owed any taxes to the Danish tax authorities. The SPa contained an indemnity in favour of Takeda in respect of any such taxes that became payable, subject to a cap and a time limit for resolving the dispute. Takeda argued that it needed information on the ultimate investors in Fougera’s parent company in order to negotiate a settlement of the tax liability. The High Court refused to imply a duty on Fougera to cooperate with, or at least a duty not to obstruct Takeda’s efforts to provide information to, the tax authorities. The court was not persuaded that such a term was necessary to make the contract workable.

The reason for this decision was, firstly, the lack of an express provision to provide the information and, more importantly, the fact that a duty to cooperate was not necessary to give life to the SPa, therefore failing the business efficacy test. There were other express duties of cooperation within the SPa and therefore the lack of an express one regarding the provision of this specific information could not easily be implied.

The court also refused to imply a duty not to obstruct Takeda’s efforts to procure the information because it was not necessary and, in the absence of a positive obligation, the court felt that it could not imply a negative one. The fact that the contract was negotiated and drafted by well-informed and advised parties was also a factor in the court’s decision.

Kason Kek-Gardner Ltd v Process Components Ltd [2017] eWca civ 2132The rules on implied terms have also recently been re-examined by the Court of appeal. In this case, a company had gone into administration and the company’s administrators entered into two asset Sale agreements, including the sale of IP rights, one with Kason Kek-Gardner (KKG) and the other with Process Components.

chris KiddHead of Shipbuilding and Offshore Construction, [email protected]

Margot wastnage Consultant Associate, [email protected]

In parallel, Process Components agreed to licence some of the acquired IP rights to KKG. This Licence agreement included a confidentiality obligation. The shares in KKG were subsequently sold and, during the due diligence process, the Licence agreement was disclosed.

KKG argued that a term had to be implied into the Licence agreement to the effect that it was allowed to disclose the agreement for reasonable business purposes, and that this would include the disclosure to a potential purchaser of KKG’s shares. The Court of appeal rejected the proposed implied term on the basis that it was too wide to meet either the business efficacy or the officious bystander tests. In particular, the court’s justification entailed that “the necessity required by the test is necessity for the business efficacy of the contract, not some wider business purpose of a contracting party”. In this case, the business purpose of the Licence agreement was to enable KKG to operate the relevant business, not to sell it, and therefore the term was not necessary to that agreement.


DIfc couRts as a coNDuIt JuRIsDIctIoN: the eNd oF the Road? in this article we consider whether the recent judgment of the Dubai Judicial tribunal in the case of Endofa DMCC v D’Amico Shipping Italy (The Cielo Di Milano) (cassation No. 4/2017 (Jt) issued on 12 September 2017) marks the end of the road for the role of the diFc courts as a “conduit” jurisdiction to onshore enforcement of foreign arbitral awards and judgments in the united arab emirates (uae). The DIFC Courts are common law courts based in the Dubai International Financial Centre (DIFC) free zone. The DIFC Courts have consistently demonstrated a pro-enforcement approach applying the New york Convention to enforcement of foreign arbitral awards in the DIFC and common law principles to enforcement of foreign judgments in the DIFC. Contrast that with the UaE onshore courts, which only recently have started to refuse challenges to enforcement of foreign arbitral awards which are not based on the New york Convention. The position in relation to enforcement of foreign judgments in local courts has been and remains largely very difficult, unless there is an agreement between the UaE and the originating country for mutual recognition and enforcement of judgments.

The DIFC Courts have therefore been viewed as an attractive conduit jurisdiction to onshore enforcement in the UaE. a number of parties have been able to obtain judgments from the DIFC Courts to enforce foreign arbitral awards or judgments in the DIFC with the intention of then enforcing the DIFC Court judgment in the onshore Dubai Courts, which is a straightforward procedure ((1) Egan (2) Eggert v (1) Eava (2) Efa [2013] DIFC arB 002).

However, in 2016 the Judicial Tribunal for the Dubai Courts and the DIFC Courts (JT) was established by Dubai Decree No. 19 of 9 June 2016. The JT’s remit is to determine conflicts of jurisdiction between the DIFC Courts and the Dubai Courts. The JT is comprised of four Dubai Court judges and three DIFC Court judges.


The decisions of the JT are published on the DIFC website, which currently lists eleven published decisions. Seven of those decisions concern enforcement of a Dubai/foreign arbitration award or a foreign judgment in the DIFC as a conduit jurisdiction (i.e. where the defendant has no assets in the DIFC). Four of those cases involved an actual conflict between the proceedings in the DIFC Courts and the proceedings in the Dubai Courts. all these conflicts were resolved by the JT in favour of the Dubai Courts with the effect that the enforcement proceedings in the DIFC Courts had to be ceased (Cassation No. 1 of 2016 (JT), Cassation No. 2 of 2016 (JT), Cassation No. 3 of 2017 (JT), Cassation No. 1 of 2017 (JT)). In three other cases (Cassation No. 3 of 2016 (JT), Cassation No. 5 of 2016 (JT), Cassation No. 5 of 2017 (JT)) there were no parallel proceedings pending before the Dubai Courts and so the JT ruled that proceedings in the DIFC Courts could continue. as can be seen, there is a clear trend for the JT to find in favour of the Dubai Courts each time there are parallel proceedings in place.

In our view the latest case of The Cielo Di Milano (yet to be published) heralds the end of the DIFC Courts as a conduit jurisdiction with respect to the enforcement of foreign court judgments. In this case the claimant filed a case in the DIFC Courts for recognition of an English court judgment. The case had otherwise no connection with the DIFC. The defendant applied to the JT disputing the jurisdiction of the DIFC Courts. at the time of the defendant’s application to the JT no parallel proceedings had been started in the Dubai Courts but the defendant subsequently started such proceedings unconventionally seeking an order for refusal of recognition and enforcement of the English court judgment in the UaE. The JT found in favour of the Dubai Courts’ jurisdiction on the following basis:

Rania tadros Managing Partner, [email protected]

anna fomina Practice Development Lawyer, [email protected]

1. The Dubai Courts and the DIFC Courts are competing for jurisdiction in the same case and it is irrelevant when each of the proceedings were started. all that matters is that both proceedings are in existence at the time when the JT issues its judgment.

2. The fact that the defendant appeared before the DIFC Courts and expressed its intention to defend all of the claims in that forum does not infer the defendant’s consent to the jurisdiction of the DIFC Courts. Such consent must be express and in writing and cannot be inferred. In absence of such express written consent, the defendant could continue to challenge the jurisdiction of the DIFC Courts.

3. The Dubai Courts must be the competent courts to decide this case “because they have the general jurisdiction embodied in the procedural laws.”

It is clear therefore that (a) the JT will rule in favour of the Dubai Courts’ jurisdiction whenever there are parallel proceedings issued in the DIFC and Dubai Courts, and (b) the defendant can start parallel proceedings in the Dubai Courts at any point simply by seeking an order of refusal to enforce. This is nothing short of a death sentence to the DIFC Courts’ status as a conduit jurisdiction as it appears that any defendant has a simple means of derailing DIFC enforcement proceedings by starting a competing case in the Dubai Courts.


bEIs IssuEs uPDatED GuIDaNcE oN DEcoMMIssIoNING the uk government’s department for Business, energy & industrial Strategy (BeiS) has recently issued, in draft, an updated version of its Guidance Notes on the Decommissioning of Offshore Oil and Gas Installations and Pipelines (the “updated Notes”). the final version is expected in about april this year. in substance the updated Notes are fundamentally unchanged and have at their heart the uk’s commitment to the oSpaR 98/3 decision, which laid down the guiding principle that all installations and offshore infrastructure should be removed unless a derogation is granted. What the Updated Notes do seek to achieve is greater clarity regarding the obligations and expectations placed upon operators, marking an important point in the evolution of the decommissioning of the UK’s oil and gas infrastructure.

The information now laid down regarding the decommissioning processes is primarily to be found in annex H to the Updated Notes, entitled Decommissioning processes and pathways. It sets out three pathways, being:

1. Pathway 1: the full removal of the installation, which pathway applies to all installations under 10,000 tonnes and to all others for which there is no potential for a derogation.

2. Pathway 2: applies in respect of all decommissioning programmes with the potential for an application for an OSPar derogation.

3. Pathway 3: applies in cases of pipeline decommissioning.

The three pathways are summarised, for the first time, in a flow diagram setting out the required process for each of the pathways. The general requirements for each pathway are then further set out.

The Updated Notes also provide developed guidance on what is required in the Environmental appraisal and greater clarity around specific requirements and definitions. a key area here concerns the information that an operator must provide to support decommissioning decisions, particularly where it is considering a leave in situ option for pipelines.

Finally, the Updated Notes have been developed so far as post-decommissioning activities are required. These set out a risk-based approach to monitoring and the need for a long term management plan for any infrastructure that will remain in place.

Clearly the Updated Notes are primarily targeted at the operators, being the parties bearing the primary responsibility for decommissioning the assets they have exploited during their productive life. But operators will not be equipped to manage the decommissioning process in isolation and the service company sector will have a crucial role to play in the success of decommissioning oil and gas installations and infrastructure in the UK whether that be in the design, engineering, analysis of options, in the physical decommissioning work itself or in the post-decommissioning monitoring and management. In that sense, the UK government’s decommissioning policies and the Updated Notes will have a bearing on how operators and contractors alike conduct themselves throughout the decommissioning process, so are something that all interested parties need to be aware of.

at the time of going to press, BEIS has just issued a consultation on proposed updates to its Offshore Renewables Decommissioning Guidance for Industry. We will comment on any developments in this area in a future update.

simon HemsPartner, [email protected]


aMENDING KEY DatEs IN coNstRuctIoN coNtRacts: PItfaLLs in the construction industry, speed is often one of the most significant concerns for both contractor and company. as such, debates about which party is responsible for construction delays are frequently abandoned in favour of completing construction works as soon as possible. this is especially the case in the oil and gas industry. When faced with delays in construction which may lead to a “carry-over” of works at sea (at considerable additional cost), parties often agree to delay the Ready for Sail away (“RfSa”) date so that these works can be completed at the yard.However, the recent case of HSM Offshore BV v Aker Offshore Partner Limited [2017] EWHC 2979 (TCC) highlights the dangers of amending timelines under a construction contract in isolation, without due regard to the impact such amendments may have on other clauses in the contract.

In HSM Offshore, the Company and the Contractor agreed that the original rfSa date of 10 May 2015 for two Process Modules under an amended LOGIC Sub-Contract (“LOGIC Sub-Contract”) would not be met, due to problems at the yard. The parties then entered into a Memorandum of Understanding (“MOU”) where it was agreed that the Contractor would use its “fullest endeavours” to achieve Mechanical Completion (“MC”) of the Process Modules by 1 July 2015. There was no mention of a new rfSa date in this MOU, but rfSa eventually occurred on 10 august 2015.

The Company subsequently claimed that rfSa should have taken place earlier on 19 July 2015 and claimed for liquidated damages provided for in the LOGIC Sub-Contract. This alleged new rfSa date was derived from a programme prepared by the Contractor as part of its obligations under the MOU, which predicted that rfSa was likely to occur on 19 July 2015.


The High Court rejected the Company’s claim for liquidated damages on the following grounds:

a. The original rfSa date of 10 May 2015 was no longer operative. Since the parties had agreed that the date of MC would be pushed back to 1 July 2015, logically the parties must have meant that rfSa (which is dependent on MC) could only occur after 1 July 2015.

b. By providing in the MOU that the Contractor would use its “fullest endeavours” to achieve MC on 1 July 2015, the parties had agreed that the Contractor was not under an absolute obligation to achieve MC on 1 July 2015. an absolute obligation in the LOGIC Sub-Contract in relation to MC was thus overridden by the Contractor’s more general obligation under the MOU to achieve MC.

c. as such, as long as the Contractor used its “fullest endeavours”, it would not even be in breach of contract, let alone liable for liquidated damages, whatever the actual date of MC.

d. The alleged new rfSa date of 19 July 2015 had no contractual status as it was derived from a programme prepared by the Contractor to meet its obligations under the MOU (i.e. to produce a programme showing MC on 1 July 2015). It was a date at which the Contractor hoped to achieve rfSa if it was able to achieve MC on 1 July 2015.

e. Given that there was no express provision for a new rfSa date in the MOU and rfSa was dependent on MC first being achieved, it thus followed that the Contractor was not obliged to achieve rfSa on any specific date.

f. In the circumstances, the Company’s only recourse would be to bring a claim in damages for delay, based on an alleged failure by the Contractor to use its “fullest endeavours” to achieve MC.

Further, the High Court thought that even if it was wrong about its interpretation of the LOGIC Sub-Contract and MOU, it considered that the rfSa date was extended to 10 august 2015 by agreement. The Company’s conduct in failing to assert before the actual rfSa date of 10 august 2015 that the Contractor was in breach of contract or was liable for any delay beyond the alleged new rfSa date clearly showed that the Company did not consider that this was a claim open to the Company to make.

conclusionThe decision in HSM Offshore serves as a reminder that the English courts will be careful not to let parties cherry-pick particular parts of the background to a dispute favourable to the case each party now seeks to run, particularly in circumstances where each party blames the other for slower-than-expected progress in construction.

Parties should thus take care to consider and preserve specific rights and obligations under the original construction contract when drafting supplemental agreements which amend key dates found in the construction contract.

John SimpsonManaging Partner, [email protected]

hanyin FooAssociate, [email protected]


PubLIc tENDER PRocEEDINGs uNDER geRMaN aNd eu LaW – What eVeRY bIDDER NEEDs to KNow Many service providers and construction companies in the offshore energy business regularly participate in public tender proceedings, because many such tendered projects are owned and financed either directly by public authorities, state-owned entities or by private companies bound by public procurement law. in the energy industry you will typically come across private companies that are bound by EU Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors. this “Sector directive”, as it is commonly abbreviated, mandates that private companies providing essential services to the national production of energy and power, such as constructing and maintaining the grid connections for offshore wind farms, are bound by public procurement law. this directive was enacted into national german law in the form of the “Sector Regulation”, which gives full effect to the eu directive. as companies bound by the Sector regulation are privately or partially-privately owned companies, many bidders are unaware of the strict public regulation of tender proceedings conducted by these companies. Whilst their tenders might appear to be usual private tenders for a contract for works or services, their tender proceedings are in fact subject to a large number of public procurement law provisions. This has a significant impact on the required content of the tender documents, on the way these tender proceedings have to be formally conducted, on how the successful bidder must be chosen and on the legal remedies bidders may have if these provisions are not adhered to.


Required content of tender documentsWhen initiating tender proceedings that are subject to the Sector regulation, the tendering company needs to provide a number of tender documents to all potential bidders. These documents must contain details of how the tender will be conducted, what type of tender proceeding is being used, what the criteria for selection of the successful bidder are and what contract conditions the tendering company is proposing. Since the documents to be provided are quite elaborate, it is easy for tendering companies to make mistakes, rendering them in breach of the Sector regulation right from the start of the tendering process. For potential bidders it is essential to note that they only have 10 calendar days, starting from the publication of the tender documents, to notify and object to any mistakes, omissions or inaccuracies in the documents, after which their right to object lapses. Even if a mistake becomes apparent later and the tendering company does not correct that voluntarily, a bidder can no longer raise a formal objection with the local Procurement Chambers or the courts based on such mistake.

To give an example, the tender documents must not only specify the criteria according to which the successful bidder is chosen, they must also specify how these criteria are weighed in relation to each other and the standards by which it will be determined whether and to what extent a criterion is fulfilled. Some criteria (such as the requirement to provide certificates which are specific to the country in which the tendering company is incorporated or carries on its business, but are unavailable in other EU countries) are inadmissible and including them would thus amount to a mistake in the tender documents (sections 28, 29, 31 and 32 of the Sector regulation). The same applies to certain requirements as to the quality of the works provided, which would be considered discriminating in accordance with section 46 of the Sector regulation and thus also inadmissible.

eckehard Volz Partner, [email protected]

anna-Sophie SpießAssociate, [email protected]

Formalities of the tender proceedingsas a next step, the tendering company must strictly adhere to the type of proceeding it chose to employ. The whole process must be completely transparent and all bidders must be given equal opportunity to take part and be given equal access to information. The tendering company must also adhere to statutory deadlines (such as deadlines for receipt of the bidder’s questions, offers or side offers), which may only be shortened under very specific circumstances.

In our experience, many tendering companies use the complicated requirements and specific provisions of public tender proceedings to their advantage when dealing with bidders who are unfamiliar with the details of German and EU public procurement law. Quite frequently a bidder realises that he has been unlawfully excluded from the tendering process or been discriminated against in favour of another bidder after the deadline for an objection has already passed. Since these deadlines are so short and there is a myriad of mistakes to be made or opportunities to be missed, we would always advise to consult with lawyers experienced in the field of public procurement from the start when taking part in a tender, whether in Germany or elsewhere in the EU.


coNtRact INtERPREtatIoN Has Its LIMIts we are indeed “lucky enough to live in an age where there is a galaxy of high appellate guidance on how to interpret contracts”, as observed by Lord Justice Jackson in The Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Limited [2017] eWca 2196. applying such guidance to negotiated clauses which lack clarity nevertheless remains far from straightforward, as evidenced in this case in which the court of appeal and the tcc came to very different conclusions on the meaning of a contractual liability cap. at least the two courts agreed that the clause meant something, however, contrary to the claimant’s original arguments. facts and tcc decisionWe reported on the TCC’s decision in our last Bulletin. Briefly, the parties had entered into a contract for the provision by aTOS of an electronic document management system. The Trust terminated the contract, alleging failures in the system. The contract contained the following clause:

“The aggregate liability of the Contractor in accordance with sub-clause 8.1.2 paragraph (b) shall not exceed:

9.2.1 for any claim arising in the first 12 months of the term of the Contract, the Total Contract Price ... ; or

9.2.2 for claims arising after the first 12 months of the Contract, the total Contract Charges paid in the 12 months prior to the date of that claim.”

http://www.incelaw.com/en/knowledge-bank/making-sense-of-limitation-and-exclusion-clauses


John SimpsonManaging Partner, [email protected]

clare fisherProfessional Support Lawyer, [email protected]

The TCC held that this clause was sufficiently certain to be valid and enforceable, but construed the clause as providing for a single aggregate cap on the contractor’s liability. applying the rules of contract interpretation, that was the interpretation that the TCC felt made commercial sense.

court of appeal decisionThe Court of appeal, however, reversed the TCC’s decision on this point and held that the clause imposed two separate caps on liability. Jackson LJ did not agree that the phrase “aggregate liability” pointed to there being one cap only, as it was equally possible that it meant the aggregate of the clause 9.2.1 and 9.2.2 amounts. Similarly, the word “or” between the two sub-clauses could be read conjunctively - each of 9.2.1 and 9.2.2 were mutually exclusive as each referred to a distinct period of time. The wording, in the Court of appeal’s view, “pointed emphatically” to there being two separate caps. In a contract where the early work was of a higher value, and the consequences of failure correspondingly high, it was not surprising that liability for the failure would also be higher. Even if a catastrophic failure occurred in the first year such that the contractor incurred a liability equal to the full contract amount, it did not follow that the contractor should then have a “free ride” for the remainder of the contract. The natural meaning of the words and business common sense were aligned.

commentas with many contracts in the oil and gas sector, this was a negotiated provision, and the Court of appeal acknowledged that this “homemade” clause would yield some “odd results” whichever way it was interpreted. However, as the parties had now accepted (unlike at first instance) that the clause was valid and enforceable, it had to be given a meaning.

Courts will clearly go to some lengths to find meaning in a clause negotiated by sophisticated commercial parties rather than striking it down even if, as here, it involves resorting to the meaning that produces the “least bizarre consequences”. The court will hold the parties to what it interprets their bargain to be based on the language which they have used. Therefore, clarity at the drafting stage is crucial.


FiRM NeWS aNd eVeNtSince & co recruits offshore oil and gas partner Ian Fisher has recently joined the firm’s Monaco office as a partner. His core practice focuses on dry shipping, international trade, shipbuilding and offshore oil and gas disputes. He also has significant non-contentious experience, in particular in relation to shipbuilding and offshore construction contracts. read more here.

energy & infrastructure partner appointed honorary Member of the uk-dRc chamber of commerce in LondonNuno Frota, head of the firm’s africa Group focusing on african transactions and projects, was recently appointed Honorary Member of the UK-DrC (The Democratic republic of Congo) Chamber of Commerce in London in recognition of the firm’s effort in strengthening the ties with investors in commodities mined in africa. read more here.

Recent sector press coverage Simon Hems has written an article for the February 2018 edition of World Pipelines magazine entitled “How did it all go wrong?” in which he discusses some lessons learned from pipeline EPC disputes.

Simon Hems has contributed to a roundtable discussion in the January 2018 edition of Corporate Disputes magazine on global arbitration in the energy sector.

If you would like further information about the above, please contact us.

smart contracting seminarsOur spring series of Smart Contracting Seminars will start shortly. Dates and locations are outlined below:

Dubai: 1 May 2018Houston: 25 april 2018aberdeen: Date TBC

If you are interested in attending a Smart Contracting Seminar please email [email protected]

http://www.incelaw.com/en/news-and-events/news/ince-and-co-recruits-shipping-and-international-trade-partner-in-monaco

http://www.incelaw.com/en/news-and-events/news/ince-partner-focusing-on-african-transactions-and-projects-was-appointed-honorary-member-of-the-uk-drc-chamber-of-commerce-in-london

ince & co is a network of affiliated commercial law firms with offices in Beijing, cologne, dubai, hamburg, hong kong, Le havre, London, Marseille, Monaco, paris, piraeus, Shanghai and Singapore.

e: [email protected] incelaw.com

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LegaL adVice to BuSiNeSSeS gLoBaLLY FoR oVeR 140 YeaRSThe information and commentary herein do not and are not intended to amount to legal advice to any person on a specific matter. They are furnished for information purposes only and free of charge. Every reasonable effort is made to make them accurate and up-to-date but no responsibility for their accuracy or correctness, nor for any consequences of reliance on them, is assumed by the firm. readers are firmly advised to obtain specific legal advice about any matter affecting them and are welcome to speak to their usual contact.

© 2018 Ince & Co International LLP, a limited liability partnership registered in England and Wales with number OC361890. registered office and principal place of business: aldgate Tower, 2 Leman Street, London E1 8QN.

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