MANAGING MULTIPARTY CONSTRUCTION DISPUTES

CD: Could you provide an overview of key trends and developments driving construction disputes? What are some common causes of dispute within the construction industry?

Yamamoto: As restrictions related to the coronavirus (COVID-19) pandemic ease across the Asia-Pacific region, we have seen the resumption of construction projects, particularly across emerging markets in the region. In addition, the fastest growing economies in the region such as Vietnam and the Philippines have increased their commitments to infrastructure spending in 2022-23 as part of their economic recovery model. The increase in construction activity as a result of both the resumption of existing projects and the commencement of new projects is naturally likely to lead to a greater number of construction disputes. Furthermore, inflationary pressures induced by supply shortages of both labour and raw materials continue to persist, squeezing profit margins for project owners and contractors alike. Added to the delays caused by the pandemic and the various government regulations restricting activity, many parties have suffered costs that were not foreseen at the time of contracting and are turning to dispute resolution mechanisms in an attempt to recover losses.

Stone: In recent years, we have seen global events play a part in a large number of disputes. For example, in early to mid 2020, we saw a large volume of work looking at whether delays and costs as a result of the COVID-19 pandemic would trigger force majeure clauses. Coronavirus-related questions, and disputes, have waned but they have not gone away completely. We are now also seeing issues arising from the war in Ukraine. For example, some contractors are looking to pass on the increased costs of fuel and materials to employers on the basis that these increases are a result of sanctions on Russia. They say that these costs are payable under force majeure or change in law clauses. They are also claiming relief for delays. Claims made on this basis are often difficult, but that has not stopped contractors from trying.

Jul-Sep 2022 issue

Ashurst LLP

Hogan Lovells International LLP

Mayer Brown