51 MAY 2022 | WWW.LAWYER-MONTHLY.COM The typical mechanism would involve advancing claims to the counterparty pursuant to procedures in the contract first. If no agreement is reached, it is relayed to the engineer or the employer’s representative for decision; if the decision is objected to, then it is submitted to the dispute review/ adjudication board or combined dispute board, which will issue a non-binding or binding decision subject to terms. If one party is unsatisfied with the decision, it comes to the final tier which is frequently international arbitration. It has been observed over recent years that, as international construction arbitration takes quite a long time and is costly, there is an increase in parties’ selection of international commercial mediation to resolve disputes and for major projects procured by state entities, contractors have gradually started to pursue treaty protection and initiate investment claims against the state. What remedies exist for a breach of a construction contract? Generally, financial remedies in the form of liquidated damages are available to parties, like liquidated delay damages for the employer and liquidated payment delay damages for the contractor. In some instances, parties may agree on a sole remedy clause by limiting remedies to liquidated damages with a cap. This sole remedy clause should be tested by the governing law as there are often legal restrictions on the validity and enforceability of such clauses. For instance, it is not permissible to exclude liability for personal injury or death to the contractual counterparty and liability for property damages to the contractual counterparty resulting from wilful misconduct or gross negligence under Chinese law. Moreover, Chinese courts may adjust the liquidated damages on a party’s application (i) if the liquidated damages are significantly higher than the actual losses suffered by the complying party; or (ii) if the liquidated damages are lower than the actual losses suffered. Besides financial remedies, the complying party may take some courses of action as permitted in the contract, like suspension, termination, the employer’s withholding of payment and the employer’s notice to remedy defects, etc. For contractors, there may exist legal remedies of certain priority rights. For instance, under Chinese law, in the event of the employer’s failure to pay for the works, the contractor may claim priority right to compensation over such payment. In your own jurisdiction, what are the key laws and regulation governing largescale construction projects? Key laws in the Chinese construction sector include the Civil Code of the People’s Republic of China (PRC), Bidding Law of the PRC (2017 Amendment), Construction Law of the PRC (2019 Amendment), Urban and Rural Planning Law of the PRC (2019 Amendment); and Law of the PRC on Environmental Impact Assessment (2018 Amendment). The State Council further has issued several administrative regulations on essential aspects of the administrative side like Regulation on the Implementation of the Bidding Law of the PRC (2019 Revision), Regulation EXPERT INSIGHT The starting point at the negotiation stage should actually be to devise an effective mechanism for handling disputes.
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