International construction law : a guide for cross-border transactions and legal disputes / editors, Wendy Kennedy Venoit [and others].
2009
K891.B8 I578 2009 (Map It)
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Title
International construction law : a guide for cross-border transactions and legal disputes / editors, Wendy Kennedy Venoit [and others].
Published
Chicago : American Bar Association, [2009]
Copyright
©2009
Call Number
K891.B8 I578 2009
ISBN
9781604426175 (pbk.)
1604426179 (pbk.)
1604426179 (pbk.)
Description
xxxi, 435 pages ; 26 cm
System Control No.
(OCoLC)436358469
Note
Other editors: Arthur D. Brannan, D. Robert Beaumont, Andrew D. ness and Douglas S. Oles.
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Added Author
Table of Contents
About the Editors
xv
About the Chapter Authors
xix
Preface
xxxi
ch. 1
Introduction
1
ch. 2
Globalization of Construction / Roberto Hernandez-Garcia
5
I.
International Construction: An Overview
5
II.
The International Construction Boom
6
III.
Locating the Work: Hunting with Aggressiveness, Plus Caution
8
IV.
Working in a Foreign Country: What Is the Dress for Success?
9
V.
Private Contracts and Government Contracts: A Very Significant Difference
11
VI.
Cultural Considerations: We Are All the Same, but Different in Many Ways
12
VII.
International Construction: A Challenge for Many Actors
12
ch. 3
Practical Considerations and Risks for U.S. Companies Contracting Across Borders / Carina Y. Ohara
13
I.
Introduction
13
II.
Potentially Applicable Laws
13
A.
Local Laws
14
1.
Local Laws Governing Business Transactions
14
2.
Local Laws Governing Contracts
15
3.
Local Taxes, Tariffs, and Duties
16
4.
Local Requirements to Obtain Licenses and Permits
17
5.
Local Currency Regulations and Limits on Foreign Investment
18
6.
Local Trade-Restriction Laws
19
7.
Local Employment Laws
19
8.
Visa Restrictions
20
B.
U.S. Laws
20
1.
U.S. Export Control Laws
21
2.
U.S. Anti-Boycott Regulations
22
3.
U.S. Foreign Corrupt Practices Act
24
4.
U.S. Employment Laws
27
C.
International Laws and Compacts
27
1.
International Treaties and Organizations
27
2.
Bilateral Agreements
28
3.
Embargoes and Other Trade Restrictions
28
D.
Laws of Other Nations
29
III.
Labor Issues
30
A.
Hiring
30
B.
Customary Employment Benefits
30
C.
U.S. Employee Personal Income Taxes
30
D.
Use of a Labor Camp
34
E.
Cultural Integration Issues
34
IV.
Other Practical and Legal Concerns
35
A.
Availability of Materials and Equipment
35
B.
Political Risks and Political Risk Insurance
36
C.
Finding and Hiring Local Counsel or Consultants
37
D.
Resources for Finding Information
37
ch. 4
Selecting the Form of Business Organization / Stephen D. Butler
39
I.
Introduction
39
II.
Non-Collaborative Business Organizations
40
A.
Representative Offices, Liaison Offices, Branch Offices
41
B.
Domestic Subsidiaries
43
C.
Foreign Subsidiaries
44
III.
Collaborative Business Relationships
46
A.
General Observations
46
B.
Consortiums
47
C.
Equity Joint Ventures
48
IV.
Factors to Consider Before Choosing a Foreign Business Structure
51
A.
Tax Considerations
51
1.
Permanent Establishment Risk
52
(a).
Overview
52
(b).
Permanent Establishment Risk---Two Principal Concerns
52
(c).
Guidelines to Minimize Permanent Establishment Risk
53
2.
Foreign Branch
54
(a).
U.S. Tax Considerations
54
(b).
Host Country Tax Considerations
54
(c).
Additional Tax Issues and Considerations
56
3.
Foreign Subsidiary
57
(a).
U.S. Tax Considerations
57
(b).
Host Country Tax Considerations
59
(c).
Additional Tax Issues and Considerations
60
4.
Domestic Subsidiary
61
(a).
U.S. Tax Considerations
61
(b).
Host Country Tax Considerations
61
(c).
Additional Tax Issues and Considerations
61
5.
Joint Venture
62
(a).
U.S. Tax Considerations
62
(b).
Host Country Tax Considerations
62
(c).
Additional Tax Issues and Considerations
62
B.
Structuring In-Country Business Relationships
63
V.
Selecting the Form of Business Organization---A Process-Oriented Approach
64
A.
Basic Operational Considerations
64
1.
Domestic Activity
64
2.
Current International Activity
64
3.
Proposed Foreign Activity
65
B.
Top-Down and Bottom-Up Analysis
65
1.
Top-Down Analysis
65
2.
Bottom-Up Analysis
67
C.
Making Decisions
68
ch. 5
Contract Forms and Project Delivery Systems for International Projects / E. Jane Sidnell
71
I.
Project Delivery Systems
71
A.
Traditional Design-Bid-Build Approach
72
B.
Contractor Providing Preconstruction Services
73
C.
Multiple Prime Contractors; Owner as General Contractor
75
D.
Construction Management
75
E.
Design-Build and EPC
77
F.
Build-Operate-Transfer
78
G.
Alliancing
79
II.
Contract Forms
81
A.
FIDIC Forms
81
1.
Background of FIDIC
81
2.
The FIDIC Rainbow of Standard Forms
81
3.
The New Red Book: Conditions of Contract for Construction
83
(a).
When to Use the New Red Book and the MDB Form
83
(b).
Structure and Risk Allocation
84
(c).
Role of the Engineer
85
(d).
Dispute Resolution
85
4.
The New Yellow Book: Conditions of Contract for Plant and Design-Build
86
(a).
When to Use the New Yellow Book
87
(b).
Structure and Risk Allocation
87
(c).
Role of the Engineer
87
(d).
Dispute Resolution
88
5.
The Silver Book: Conditions of Contract for EPC/Turnkey Projects
88
(a).
When to Use the Silver Book
88
(b).
Structure and Risk Allocation
89
(c).
Role of the Engineer
89
(d).
Dispute Resolution
90
6.
The Green Book: Short Form of Contract
90
(a).
When to Use the Green Book
90
(b).
Structure and Risk Allocation
90
(c).
Role of the Engineer
91
7.
Further Resources
91
B.
Other Contract Forms
91
1.
Introduction and Summary
91
2.
Association of Consulting Engineers of Canada (ACEC)
93
3.
Canadian Construction Association (CCA)
94
4.
Canadian Construction Documents Committee (CCDC)
95
5.
Canadian Design-Build Institute (CDBI)
97
6.
Canadian Construction Owners Association of Alberta (COAA)
97
7.
Engineering Advancement Association of Japan (ENAA)
98
8.
European Construction Institute (ECI)
98
9.
Institution of Civil Engineers (ICE)
99
10.
International Chamber of Commerce (ICC)
100
11.
International Pipeline & Offshore Contractors Association (IPLOCA)
101
12.
Joint Contracts Tribunal (JCT)
101
13.
NEC Contracts
106
14.
Royal Architectural Institute of Canada (RAIC)
107
III.
Significant Provisions of the Contract
107
A.
Time for Completion
108
1.
Time for Completion under the FIDIC Forms
108
2.
Time for Completion under the ENAA Form
110
B.
Force Majeure
111
C.
Escalation Clauses
113
D.
Change in Law
114
E.
Differing Site Conditions
115
F.
Price and Payment Provisions
117
1.
Price
118
(a).
Price---FIDIC New Red Book
118
(b).
Price---FIDIC New Yellow Book and Silver Book
119
(c).
Price---ENAA Form
119
(d).
Price---Other General Provisions
119
2.
Payment Provisions
120
(a).
Payment---ENAA Form
120
(b).
Payment---FIDIC Forms
121
G.
Damages and Limitations of Liability
122
1.
Damages
122
2.
Limitation of Liability
124
H.
Applicable Standards and Changes in Standards
125
I.
Applicable Language
126
J.
Currency Risk
126
K.
Indemnification
127
L.
Warranties and Defects Liability Period
129
M.
United Nations Convention on Contracts for the International Sale of Goods
131
N.
Changes/Variations
132
O.
Default and Termination
133
1.
Rights of the Owner
134
2.
Rights of the Contractor
136
P.
Taking Over or Acceptance of Plant
137
Q.
Dispute Resolution and Arbitration Clauses
138
R.
Choice of Law
141
S.
Forum Selection Clauses
142
T.
Summary
142
ch. 6
Special Considerations When Contracting with a Foreign Government / Glynn Walker
143
I.
Contracting with a Foreign Government
143
A.
Project Financing
143
1.
Financing Option 1: Vendor Equity
144
2.
Financing Option 2: Multilateral Financing
144
B.
Delivery System and Contractor Payment Terms Preferable for a Government Owner
145
C.
Competitive Bidding Process under Host Government Regulations
146
1.
European Union Procurement Rules
147
D.
Political Risk and Mitigation of Political Risk
148
1.
Political Risk
149
(a).
Expropriation, Nationalization, and Confiscation
149
(b).
Restrictions on Repatriation of Assets
151
(c).
Currency Inconvertibility and Volatility
151
2.
Mitigation of Political Risk
152
(a).
Allocation of Risk to the Host Government
152
(b).
Insurance
152
(c).
Bilateral Investment Treaties
153
II.
Ownership of Project Site
153
III.
Bribery and Corruption
154
A.
Foreign Corrupt Practices Act
155
B.
Sample Contractual Provisions
158
IV.
Ability to Enforce Contracts against Foreign Governments
161
A.
Litigation in U.S. Courts
161
1.
Sovereign Immunity
161
2.
Act of State Doctrine
162
B.
International Arbitration
162
ch. 7
International Financial Considerations / Erich Peter Eisenegger
165
I.
Introduction
165
II.
Bidding
166
A.
A Contractor's Goals and Determination When to Bid
166
B.
Structure of Bids
167
1.
Public versus Private Sponsors
167
2.
International Bidding Structures
168
C.
Globalization and the Standardization of Bidding Practices
168
D.
Costs of the Bid and the Proposal Process
170
III.
The Importance of Planning for Positive Cash Flow During the Life of a Project
172
A.
Staying Cash Flow Positive
173
1.
Structuring the Payment Schedule
173
2.
Temporary Financing
175
3.
Contractor-Financed Projects
176
4.
Assurance of Payment from Sponsor and Risk of Sponsor Insolvency
177
IV.
Availability of Financing to the Owner
178
A.
Traditional Lending Structures
179
B.
Export Credit Agencies
181
C.
Equator Principles
183
V.
Currency-Related Restrictions and Risks
184
A.
Exchange Controls: Inconvertibility of Currency
185
B.
Exchange Controls: Non-transferability and Registration of Loans
186
C.
Currency Devaluation Risk
187
1.
Allocating Risk to the Government
188
2.
Diversifying Debt Currency
189
3.
Dual Debt Amortization Schedules
189
4.
Hedging against Currency Devaluation Risk
190
ch. 8
Insurance for International Projects / John M. Wilson
193
I.
Introduction
193
II.
Political Risk Insurance
193
A.
Introduction
193
B.
Mitigating Risk with PRI
195
1.
Expropriation
195
2.
Political Violence
197
3.
Currency Risk
198
C.
PRI Providers
199
1.
Availability
199
2.
Scope of Coverage
200
3.
Term
200
4.
Stability
200
5.
Responsiveness
201
6.
Loss Prevention
201
D.
Conclusion
201
III.
Builder's Risk Insurance
201
A.
Introduction
201
B.
Typical Exclusions
203
C.
Special Considerations for International Construction Projects
203
IV.
Professional Liability Insurance
205
A.
Introduction
205
B.
Definition of "Professional Services"
206
C.
Typical Exclusions
208
D.
Coverage Triggers
209
E.
Multiple Errors/Deductibles
210
F.
Interplay with Other Types of Insurance
211
V.
Commercial General Liability (CGL) Policies
211
A.
Introduction
211
B.
Mitigating Liability for Third-Party Bodily Injury and Property Damage
212
C.
CGL Exclusions and Limitations
213
1.
The Work/Product Exclusion
213
2.
Business Risk Exclusion
213
3.
Employee Liability Exclusion
213
D.
Duty to Defend in a Foreign Forum
214
E.
Occurrence and Claims-Made Coverage Triggers
214
F.
Attachment Point
215
ch. 9
Securing Payment and Performance on International Projects / Ian J. Houston
217
I.
Introduction
217
II.
Letters of Credit
217
A.
Introduction
217
B.
Terminology
218
C.
Theoretical Foundation
220
D.
Stand-By Letters of Credit
220
E.
The Principles of Independence (or Autonomy) and Strict Compliance
221
F.
The Fraud Exception
222
G.
Uniform Rules for Letters of Credit
224
III.
Bonds
225
A.
Use of Surety Bonds on International Construction Projects
225
B.
Types of Surety Bonds
227
C.
Bond Provisions
228
D.
Surety's Right to Investigate
230
IV.
Surety Bond or Stand-By Letter of Credit?
230
V.
Retainage
233
A.
Introduction
233
B.
Common Practice
233
C.
Warranty Retainage
234
D.
Release of Retainage
234
E.
Benefits
235
F.
Drawbacks to Retainage
235
G.
Variations on Retainage
236
VI.
Lien Laws
237
VII.
Parent Company Guarantees
238
A.
What Are They and When Are They Used?
238
B.
Common Provisions Contained in Parent Company Guarantees
239
C.
Enforcement of Parent Company Guarantees
239
VIII.
Subcontractor Default Insurance
240
A.
Introduction
240
B.
Typical Coverage
241
C.
Comparison of SDI and Surety Bonds
242
D.
Other Advantages and Disadvantages of SDI
243
IX.
Conclusion
245
ch. 10
Construction Dispute Resolution / William Karl Wilburn
247
I.
An Introduction to International Construction Dispute Resolution
247
A.
Preventative Measures
248
B.
Mandatory Negotiation
248
II.
Resolution by Engineers and Architects
249
III.
Standing Neutrals and DRBs
253
A.
Constituting the Board
254
B.
Advantages and Disadvantages
255
C.
Developing DRB Rules and Procedures
257
IV.
Dispute Adjudication Boards (DABs) and Combined Dispute Boards (CDBs)
260
V.
Expert Determinations
263
VI.
Mediation and Conciliation
266
A.
Definitions and Comparisons
266
B.
Mediation versus Alternative Forms of Dispute Resolution
267
C.
The Agreement to Mediate
268
D.
Rules Governing the Mediation Process
268
E.
Selecting an Organization to Administer the Mediation
269
F.
Selecting a Mediator
270
G.
Language and Use of Translators
272
H.
Cultural Differences
274
I.
Who Should Attend the Mediation?
275
J.
Use of Consultants
276
K.
Preparing a Client for Mediation
277
L.
Pre-Mediation Conferences
278
M.
The Mediation Conference
278
N.
Confidentiality
280
O.
Mediation Settlement Agreements and Their Enforceability
281
P.
Negotiating Strategies
282
VII.
Hybrid Dispute Resolution Processes: Mediation-then-Arbitration (Med-Arb) and Arbitration-then-Mediation (Arb-Med)
284
VIII.
Adjudication
287
A.
Scope of the HGCRA
288
B.
Statutory Adjudication Procedures
290
IX.
International Arbitration
296
A.
Benefits of International Arbitration
296
B.
Agreement to Arbitrate
298
1.
Goals for Drafting the Arbitration Agreement
298
2.
Drafting the Arbitration Agreement
298
3.
Arbitration as Last ADR Step
299
4.
Ad Hoc versus Administered Arbitration
299
5.
International Arbitration Organizations
300
6.
Applicable Rules
300
7.
Jurisdiction, Seat, or Place of the Arbitration
301
(a).
Jurisdiction of the Tribunal and Arbitrators' Scope of Authority
301
(b).
Seat or Place of the Arbitration
302
8.
Language
303
9.
Choice of Law
304
10.
Selection of Arbitrators
304
(a).
Size of the Tribunal
305
(b).
Selecting Arbitrators
305
(c).
Impartiality and Other Qualifications
306
11.
Multiparty and Consolidated Arbitration
307
12.
Discovery
308
(a).
Absence of Discovery in International Arbitration
308
(b).
Discovery by Agreement
309
(c).
IB A Rules on the Taking of Evidence
310
13.
Costs and Attorney's Fees
310
14.
Enforceability
311
C.
Conduct of the Arbitration
312
1.
Commencement of Arbitration
312
2.
Pre-Hearing Issues
313
(a).
Preliminary Challenges
313
(b).
Challenges to Arbitrator Selection or Conduct
314
(c).
ICC Terms of Reference
314
(d).
Pre-Hearing Conference
315
(e).
Discovery
316
(f).
Expert Reports
318
(g).
Interim Measures
319
3.
Hearing
319
(a).
Adversarial or Inquisitorial
319
(b).
Briefs/Memorials
320
(c).
Confidentiality
320
(d).
Counsel
321
(e).
Evidence and Examination of Witnesses
321
(f).
Closing of Hearing
322
(g).
Costs and Fees
322
4.
The Award
322
D.
Enforcement of the Award
323
1.
Integrity of the Award
324
2.
Rules
324
3.
Conventions
324
E.
Helpful Resources
325
ch. 11
Commonly Encountered Legal Issues / Richard D. Austin
327
I.
Overview
327
A.
Similarities and Differences between Legal Issues Encountered on Domestic and International Construction Projects
328
B.
General Considerations on the Resolution of Commonly Encountered Legal Issues
332
1.
Resolution through Application of Contract Provisions
332
2.
Resolution through Application of "Governing Law"
333
(a).
Choice of Law and Choice-of-Law Disputes
333
(b).
Global Law---Reality and Illusion
334
(c).
Local Law
339
C.
Commonly Encountered Issues
340
1.
Choice of Law
340
2.
Force Majeure and Hardship
344
(a).
Force Majeure
344
(b).
Hardship
346
3.
Impracticability and Impossibility
348
4.
Changes in Local Law
348
5.
Labor and Materials Escalation
349
6.
Differing Site Conditions
350
7.
Payment Disputes
351
8.
Dispute Resolution
353
9.
Limitations on Contractual Liability and Consequential Damages
354
ch. 12
Ethical Considerations for a Multi-Jurisdictional, International Construction Practice / Michael Black
357
I.
Introduction
357
II.
Categories of Obligation
360
A.
Independence
361
B.
Confidentiality
363
C.
Conflicts of Interest
365
D.
Dignity of the Profession
367
E.
Loyalty to the Client
368
F.
Fees
369
G.
Competence
371
H.
Professional Courtesy
372
I.
The Rule of Law
373
J.
Self-Regulation
373
III.
Ethical Issues in Multi-Jurisdictional Transactional Construction Practice
374
A.
Ethical Issues Common to Domestic and International Transactional Work
375
B.
Ethical Issues Peculiar to International Transactional Work
378
IV.
Multi-Jurisdictional Dispute Resolution Practice
381
A.
Professional Independence, Client Confidentiality, and the Duty of Loyalty
381
B.
Conflicts of Interest
388
C.
Dignity of the Profession and Professional Courtesy
390
1.
Alleging Fraud
390
2.
Candor to the Court or Tribunal
390
3.
Media Relations
392
D.
Fees
392
E.
Professional Competence
394
F.
Respect for the Rule of Law
396
G.
Evidentiary Issues
398
1.
Evidence from Counsel
398
2.
Preparing Witnesses and Witness Statements
398
3.
Experts
399
4.
Illegally Obtained Evidence
401
5.
Improperly Obtained Privileged Documents
401
H.
Self-Regulation of the Profession
402
V.
Conclusion
403
Index
405