ARBITRATING CONSTRUCTION DISPUTES
CD: Could you provide an overview of key trends and developments impacting the construction sector over the past 12-18 months?
Yamamoto: Over the past 12 to 18 months, we have seen continued impact on the construction sector from the ongoing coronavirus (COVID-19) pandemic and associated global supply chain disruption. Critical supply chains, already weakened during the initial stages of the pandemic, have struggled to withstand distortions, including logistical bottlenecks and ‘lumpy’ supply, caused by shortages in skilled labour and raw materials, sharp rises in shipping costs and shipping delays caused by periodic port shutdowns. Together, these have generally resulted in higher prices for inputs which have in turn raised the cost of delivering construction services, making it difficult for contract counterparties to honour their contractual commitments. Force majeure and hardship claims have often resulted, albeit not always with success.
McWilliams: On the earlier side of the pandemic, many immediate issues concerned force majeure and similar contractual claims centred around the inability of counterparties to perform as originally contemplated. Many such claims resolved as sufficiently safe methods of work evolved. Thereafter insolvency in the construction sector rose in many places, although this was far from even. Differing insolvency risk was at least partially the result of uneven corporate support packages made available at the national level in various countries, something felt particularly in global construction projects. More recently, global supply chain issues began to bite in 2021 and these and inflationary costs continue into 2022, often causing tensions for parties in long-term contracts. While this fuelled some disruption and disputes, as the pandemic eases, we have begun to see renewed enthusiasm for the largest of construction, renewable energy and infrastructure projects, driven by macro events in play for some time.
Apr-Jun 2022 issue
Ashurst LLP
Bradley Arant Boult Cumming LLP
Gibson, Dunn & Crutcher LLP
Hogan Lovells
Quinn Emanuel Urquhart & Sullivan, LLP