David Brynmor Thomas QC, with Niraj Modha, recently advised a contractor on the successful settlement of claims for time and money arising from delay and disruption to a major energy project in the UK, caused by the COVID-19 epidemic.
It has been well discussed that COVID-19, and government responses to it around the World, have had a significant impact on the progress of works at construction sites.
It is increasingly appreciated that contractors are markedly prejudiced if the effects of COVID-19 are only treated as force majeure, however described in different contract forms. Most standard-form construction contracts, including FIDIC, JCT, and ICE, entitle a contractor to extra time for the works, and consequently relief from the payment of liquidated damages for delay. However, critically, they do not entitle the contractor to recover money, in particular loss and expense, for that delay. That can give contractors significant problems, in terms of cashflow and the overall profitability of COVID-19 affected projects.
In many cases, project delay and increased cost are caused by government intervention and regulations to deal with COVID-19, because of the on-site and off-site inefficiencies they impose, rather than the direct effect of the pandemic. In those circumstances, contractors may advance claims for a change in law, rather than force majeure, the benefit being that such claims can entitle the contractor to extensions of time and payment of loss and expense and other costs. However, these are not straightforward claims, as they are specific to the facts of a given project and the laws and regulations that affect work on site.
In advising a major energy contractor, David Brynmor Thomas QC and Niraj Modha, instructed by in-house counsel and working with expert programming and quantum consultants, developed arguments that certain executive actions taken by government agencies in England amounted to changes in law under the relevant contract form. This was despite the absence of relevant primary legislation in relation to COVID-19 and the inapplicability of much of the secondary legislation promulgated by the government in England in 2020-2021, which purported to “help” the construction industry by exempting it from many provisions. Those claims were recently acknowledged and settled for a very significant payment by the owner and the grant of an extension of time.
Whilst contractors have found that there are no easy solutions to the delay and disruption caused by COVID-19, detailed work, integrating primary and secondary legislation, further regulations, the chronology of work on site and the precise effects suffered by a project can lead to a successful claim for time and, critically, money being properly assembled and settled between parties to COVID-19 affected projects.
Please contact Mark Winrow, Senior Practice Manager, for further information.