Construction. in 35 jurisdictions worldwide. Contributing editor: Robert S Peckar

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1 Construction in 35 jurisdictions worldwide 2014 Contributing editor: Robert S Peckar Published by Getting the Deal Through in association with: AB & David Achour & Hájek sro Akıncı Law Office Alem & Associates Arzinger Atsumi & Sakai Borden Ladner Gervais LLP Buse Heberer Fromm Comad, SC Fenwick Elliott LLP Formosan Brothers, Attorneys-at-Law Foyen Advokatfirma AB George Etomi & Partners Gómez-Pinzón Zuleta Abogados Grandway Law Offices Hani Qurashi Law Firm in cooperation with Kilpatrick Townsend Kilpatrick Townsend Legal Consultancy Kleyr Grasso Associés Lalive Lalive in Qatar LLC Larraín Rencoret & Urzúa Abogados Lett Law Firm Magnusson Kancelaria Prawnicza Mäkitalo Rantanen & Co Ltd Motieka & Audzevičius OMG Ost Legal Peckar & Abramson, PC Pinheiro Neto Advogados Seth Dua & Associates Severijn Hulshof advocaten Shalakany Law Office Smith Violet Webb Henderson WongPartnership LLP

2 contents Construction 2014 Contributing editor Robert S Peckar Peckar & Abramson, PC Publisher Gideon Roberton Business development managers Alan Lee George Ingledew Dan White Account manager Megan Friedman Trainee account managers Cady Atkinson Joseph Rush Dominique Destrée Emma Chowdhury Media coordinator Parween Bains Administrative coordinator Sophie Hickey Trainee research coordinator Robin Synnot Marketing manager (subscriptions) Rachel Nurse subscriptions@ gettingthedealthrough.com Head of editorial production Adam Myers Production coordinator Lydia Gerges Senior production editor Jonathan Cowie Production editor Martin Forrest Chief subeditor Jonathan Allen Senior subeditor Caroline Rawson Subeditor Tim Beaver Director Callum Campbell Managing director Richard Davey Construction 2014 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: Fax: Law Business Research Ltd 2013 No photocopying: copyright licences do not apply. First published 2008 Seventh edition ISSN The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer client relationship. No legal advice is being given in the publication. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2013, be advised that this is a developing area. Printed and distributed by Encompass Print Solutions Tel: Law Business Research Introduction Robert S Peckar Peckar & Abramson, PC 3 Brazil Júlio César Bueno Pinheiro Neto Advogados 4 Canada Bruce Reynolds, Sharon Vogel and Yvan Houle Borden Ladner Gervais LLP 16 Chile José Manuel Larraín Larraín Rencoret & Urzúa Abogados 24 China Wang Jihong, Lin Li, Jiang Jie, Miao Juan and Ma Yuhong Grandway Law Offices 31 Colombia Santiago Jaramillo-Caro Gómez-Pinzón Zuleta Abogados 38 Czech Republic Gabriel Achour and Jakub Zámyslický Achour & Hájek sro 44 Denmark Henrik Puggaard, Lene Lange and Kristian Skovgård Larsen Lett Law Firm 51 Dominican Republic Laura Troncoso Ariza and Mairení Silvestre Ramírez OMG 58 Egypt Ahmed Amin and Farah El Nahas Shalakany Law Office 64 Finland Aimo Halonen Mäkitalo Rantanen & Co Ltd 69 France Isabelle Smith Monnerville and Julien Maire du Poset Smith Violet 74 Germany Jörg Gardemann and Alexander Herbert Buse Heberer Fromm 83 Ghana David Ofosu-Dorte, Isabel Boaten and Ferdinand Adadzi AB & David 89 India Sunil Seth and Vasanth Rajasekaran Seth Dua & Associates 94 Japan Miho Niunoya Atsumi & Sakai 101 Lebanon Rana Kahwagi and Karim Khalaf Alem & Associates 106 Lithuania Jovitas Elzbergas, Valentas Mitrauskas and Donatas Lapinskas Motieka & Audzevičius 112 Luxembourg François Collot Kleyr Grasso Associés 118 Mexico Roberto Hernández-García Comad, SC 125 Netherlands Leendert C van den Berg Severijn Hulshof advocaten 130 New Zealand Garth Sinclair and Michael Gartshore Webb Henderson 135 Nigeria George Etomi, Efeomo Olotu and Ivie Ehanmo George Etomi & Partners 143 Poland Andrzej Tokaj and Przemysław Kastyak Magnusson Kancelaria Prawnicza 148 Qatar Marcus Boeglin, Veijo Heiskanen, Marc Sukkar, Matthias Scherer and Domifille Baizeau Lalive in Qatar LLC 154 Russia Vladimir Lipavsky Ost Legal 160 Saudi Arabia Hani Al Qurashi, Rami Al Qulaiti and Saeed Basuhil Hani Qurashi Law Firm in cooperation with Kilpatrick Townsend 166 Singapore Christopher Chuah and Tay Peng Cheng WongPartnership LLP 171 Sweden Andreas Magnusson, Charlotta Wälsäter and Per Vestman Foyen Advokatfirma AB 178 Switzerland Michael E Schneider, Matthias Scherer, Bernd Ehle and Sam Moss Lalive 184 Taiwan Helena H C Chen Formosan Brothers, Attorneys-at-Law 190 Turkey Ziya Akıncı and Cemile Demir Gökyayla Akıncı Law Office 196 Ukraine Timur Bondaryev, Svitlana Teush and Volodymyr Grabchak Arzinger 203 United Arab Emirates Thomas Philip Wilson, Rabih Tabbara and Scott Hutton Kilpatrick Townsend Legal Consultancy 211 United Kingdom Stacy Sinclair Fenwick Elliott LLP 217 United States Robert S Peckar and Michael S Zicherman Peckar & Abramson, PC 226

3 netherlands severijn Hulshof advocaten Netherlands Leendert C van den Berg Severijn Hulshof advocaten 1 Foreign pursuit of the local market If a foreign designer or contractor wanted to set up an operation to pursue the local market what are the key concerns they should consider before they took such a step? Foreign companies are allowed to design and construct in the Netherlands, as long as they comply with all applicable rules and regulations. Although there is no obligation to do so, in general, most foreign companies wanting to pursue the local market team up with a local company in a joint venture. A foreign company wanting to set up an office in the Netherlands should be aware of specific labour law requirements (eg, the legislation on the employment of foreign personnel), zoning law and general administrative law (if an office were to be build), lease law (if an office were to be rented), tax law and, further, would need to meet administrative requirements such as a registration with the Chamber of Commerce (under the Commercial Registers Act). It should be noted that Public Procurement law is, as is the case in all EU-member states, primarily based upon the European Directives 2004/18/CE and 2004/17/CE as well as the Government Procurement Agreement. These documents prohibit any discrimination of foreign companies that are based in member states of the European Union or companies mentioned in the Government Procurement Agreement. As a result, foreign companies may not be excluded from public procurement procedures simply for not having an office in the Netherlands. From a more factual point of view Dutch construction practice is of relevance to a company wanting to set up shop in the Netherlands. Even though international forms of contract are being used in parts of the Dutch construction industry, the way these are implemented may be influenced by the rather extensive Dutch Civil Code and Dutch construction practice. Even for companies from countries with similar cultures and roots (such as Belgium and Germany), this may lead to unexpected circumstances when organising their projects in the Netherlands. For this reason, foreign companies often use Dutch personnel in key functions or undertake joint ventures with Dutch construction companies. 3 Competition Do local laws provide any advantage to domestic contractors in competition with foreign contractors? Local laws do not discriminate between Dutch or international contractors. As indicated above, almost all public procurement law is of European Union origin and does not allow for any such discrimination. On 1 April 2013 the Public Procurement Act came into force. This law not only implements the European procurement directives but also provides a set of rules applicable to assignment with a value beneath the thresholds of the European directives. Even outside the scope of public procurement, some basic procurement principles may apply such as transparency and non-discrimination. 4 Bribery If a contractor has illegally obtained the award of a contract, for example by bribery, will the contract be enforceable? Are bribe-givers and bribe-takers prosecuted and, if so, what are the penalties they face? Are facilitation payments allowable under local law? Bribery is prohibited by law and is an act for which one may be prosecuted. Agreements that were concluded through deceitful acts may be annulled but are not automatically void. Sometimes, employers insert clauses to that extent in their tender documentation or in their forms of agreement. Further, the Dutch Competition Act prohibits all pacts and actions that would limit fair and equal competition, allowing the Dutch Authority for Consumers and Markets (ACM) (recently created out of several governance institutes) to fine both companies as well as their management. In public procurement, bribery (including when it was committed in the recent past) may lead to exclusion from all procurement procedures. Finally, it is common practice in public procurement that the higher management of the bidders need to sign a personal statement declaring that the bid concerned was not in any way established through competition limiting actions. If such a statement proves to be false, this may have a direct effect on the management itself. 2 Licensing procedures Must foreign designers and contractors be licensed locally to work and, if so, what are the consequences for working without a licence? The title architect is protected by law. Only qualified and registered architects may use that title. Under the EU Council Directive of 10 June 1985 (OJ 1985, L223/15), however, qualified architects from other member states of the EU are entitled to use their title in the Netherlands and to operate accordingly. Contractors will need to observe all relevant labour and safety regulations but, in general, do not need to be licensed locally. 5 Political contributions Is the making of political contributions part of doing business? If so, are there laws that restrict the ability of contractors or design professionals to work for public agencies because of their financial support for political candidates or parties? Political contributions are not a common practice. The construction sector has its own professional organisation that lobbies regularly for the construction industry in general. The same goes for architects and engineers who have their own professional organisations. 130 Getting the Deal Through Construction 2014

4 Severijn Hulshof advocaten netherlands 6 Other international legal considerations Are there any other important legal issues that may present obstacles to a foreign contractor attempting to do business in your jurisdiction? Not specifically. Many foreign construction companies do business in the Netherlands. Tax regimes are usually benign and legislation is for the bigger part based upon European law. In the Dutch legal system, the principles of equitable behaviour and good faith are predominant. As such, parties (national or international) are usually protected from unreasonable or unsuspected outcomes of contractual provisions. At a cultural level, this may, however, present a challenge to companies that are used to a more precise and legalistic approach. 7 Construction contracts What standard-contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution? First, it should be noted that Dutch statutory law is rather extensive and detailed, while at the same time allowing contracting parties to largely make their own arrangements. As a result, a contract only needs to contain the specific arrangements the contracting parties wish to make or the alterations they wish to make as per the statutory rules. Over the last years, DBFM and BOT or BOOT contracts (in their original Anglo-Saxon form or in an adapted Dutch form) have become more and more common for larger (infrastructural) projects. In 2000, a Dutch standard form for Design and Construct contracts was developed (UAV-GC), which was revised in 2005 and is used regularly for integrated projects. The UAV-GC aim to provide a form of contract that allows both a more traditional repartition of responsibilities and risks, as well as a more innovative repartition in which the contractor is responsible for both design and construction. For more traditional contracts (where the design is provided by the employer), general conditions, called the Uniforme Administratieve Voorwaarden (UAV), are most commonly used. These conditions have recently (in 2012) been revised but do not differ much from the last edition, which dated from This form of contract was reviewed (and slightly altered) in 2005 and is now more commonly used for larger projects. 8 Payment methods How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments? Construction contracts usually contain a payment schedule that follows the development of the works. As a result, payments usually keep up with the progress made by the contractor, which limits its exposure for non-payment. Payments are usually made electronically. Invoicing is becoming more and more digitalised. Cash is not commonly used. 9 Contractual matrix of international projects What is the typical contractual matrix for a major project in your jurisdiction in terms of the contractual relationships among the various construction project participants? Roughly, two models may be identified, the traditional and the integrated model. In the first, the employer contracts the architect, engineer and contractor directly and, as such, is responsible for the general coordination (contracting) of the works. In the latter, the employer generally contracts just one party, which is then responsible for both the design, engineering and the execution of the works. Construction managers are not commonly used for construction projects. 10 PPP and PFI Is there a formal statutory and regulatory framework for PPP and PFI contracts? No. PPP and PFI projects may be influenced by all sorts of public legislation, which is, however, not specifically aimed at such projects. 11 Joint ventures Are all members of consortia jointly liable for the entire project or may they allocate liability and responsibility among them? Parties in a joint venture or consortium are usually (depending on the legal entity that is chosen) jointly and severally liable. This is usually a requirement of employers in their procurement documents or forms of agreement. Parties may, however, agree upon a different repartition of liabilities. 12 Tort claims and indemnity Do local laws permit a contracting party to be indemnified against all acts, errors and omissions arising from the work of the other party, even when the first party is negligent? Intent or gross negligence may not be contractually excluded. Other than that, contracting parties may limit their liability to a great extent and may also agree that one party will indemnify the other party for damages resulting from the works performed. Such a contractual indemnification provision does not in any way limit the indemnified party s liability towards third parties. 13 Liability to third parties Where a contractor constructs a building that will be sold or leased to a third party, does the contractor bear any potential responsibility to the third party? May the third party pursue a claim against the contractor despite the lack of contractual privity? If the contractor commits an act in tort that leads to damages for third parties, this may lead to liability towards those third parties, may they be owners, tenants or other third parties. 14 Insurance To what extent do available insurance products afford a contractor coverage for: damage to the property of third parties; injury to workers or third parties; delay damages; and damages due to environmental hazards. Does the local law limit contractors liability for damages? It is highly common that companies maintain an insurance that covers their liability for torts towards third parties (AVB policy). Further, it is common practice that a Construction All Risks (CAR) insurance is maintained for each construction project. Such an insurance policy provides a specific coverage for construction projects, designed to cover the liability of all parties involved in the project, as well as material damage to the works. Most larger contractors maintain a general CAR insurance in which specific projects can be insured though a simple notification. Liability is, in general, limited by law. 15 Labour requirements Are there any laws requiring a minimum amount of local labour to be employed on a particular construction project? Such requirements are not set by law. However, it is not uncommon that public procurement agencies stipulate that to some extent local labour should be used. Such demands may constitute an infringement of European procurement law

5 netherlands severijn Hulshof advocaten 16 Local labour law If a contractor directly hires local labour (at any level) for a project, are there any legal obligations towards the employees that cannot be terminated upon completion of the employment? Generally, labour laws are rather protective towards workers. Temporary contracts are not allowed on a continuous basis. Workers that are employed for a certain amount of time may, by law, at some point be entitled to a contract for an indefinite term. As such, the finishing of a particular project is not very relevant in itself to the employment situation of the personnel in execution of that same project. 17 Close of operations If a foreign contractor that has been legally operating decides to close its operations, what are the legal obstacles to closing up and leaving? Closing operations would not be any different for foreign companies than they would be for Dutch companies. If a Dutch legal entity was established, such an entity would need to be dissolved. Any remaining obligations would have to be settled, but this would be no different for a Dutch company closing down. 18 Payment rights How may a contractor secure the right to payment of its costs and fees from an owner? May the contractor place liens on the property? As indicated above, a payment schedule is common in a construction contract. Such a payment schedule may even result in prepayment for work still to be performed. If and when an employer does not live up to its obligations to pay the contractor, Dutch statutory law provides the latter with a number of possibilities to secure payment. If an employer refuses to pay up on the due date without good cause, the contractor may summon the employer to pay within a certain time limit. Then, if payment is still not made, the contractor is entitled to either postpone or to terminate the execution of the work (and to annul the agreement). In such circumstances the contractor is further entitled, under certain conditions, to exercise the right of retention, which allows it to deny the employer access to and the use of the works. In order to secure payment, a contractor may also proceed to obtain the permission of the court to freeze assets of the employer. A freeze on assets will only be granted by the court if it is followed, within a certain time, by civil or arbitral proceedings. In addition to these statutory provisions, most common forms of contract provide additional mechanisms to secure payment, such as an elevated interest rate and the right to require adequate security for the payments (such as a bank guarantee). Given the mitigation of risk following on from the payment schedule and given all described possibilities to secure payment, liens or other forms of security are uncommon. 19 Contracting with government entities Can a government agency assert sovereign immunity as a defence to a contractor s claim for payment? No. In some very specific cases, the means described above to secure payment may be limited because of the nature of the government agency. However, government agencies are still regarded as very stable and creditworthy parties, so, in general, this does not pose a problem. 20 Statutory payment protection Where major projects have been interrupted or cancelled, do the local laws provide any protection for unpaid contractors who have performed work? may, within a reasonable delay, choose to continue the work. Most common forms of contract, such as the UAV and UAV GC mentioned above, contain provisions that allow the employer to speed up this process (eg, limiting the delay in which the trustee or liquidator must choose to continue the works to eight days) and to require the furnishing of such adequate security for the continuation of the works as the employer demands. Further, in urgent cases, these provisions usually grant the employer the right to take such measures at the contractor s expense as the employer may deem appropriate for the benefit of the works. Besides these very common forms of contract, employers and contractors quite often use their own general conditions in which the annulment of the contract results from the mere application for insolvency or bankruptcy. Specific protection for unpaid contractors is not foreseen. However, contractors may, in some cases, exercise the rights described above to secure their payments anyway. 21 Force majeure and acts of God Under local law are contractors excused from performing contractual obligations owing to events beyond their control? If the contractor fails to live up to the contract, this only leads to a breach of the contract if it is at fault and to blame for the shortcoming. If this is not the case, the shortcoming does not lead to liability. Further, if such circumstances arise that the continuation of the contract cannot reasonably be requested, a contracting party may request a change of the contract in a court of law or in arbitration. This right is provided by law and cannot be forsaken. However, this rule only applies to conditions that have not been foreseen by the contracting parties. The contracting parties may, in their contract, nominate any number of circumstances and may agree upon a specific repartition of risk once these circumstances present themselves. If such arrangements are made, those specific circumstances that were foreseen by both parties can no longer lead to an alteration of the contract through the courts of law based upon this statutory provision. For example, if the contracting parties agree that the risk (and consequences) of the entire surface of the Netherlands being flooded is allocated to only one party, this provision is binding for both parties and is perfectly valid. For risks or circumstances that were not foreseen by the contracting parties, a rule of reason applies. Contracts not only have those consequences that derive directly from their wording but also those consequences deriving from the law, custom and the requirements of reason and equity. Contractual rules do not apply if under given circumstances they would lead to an inequitable result (article 248, book 6 Civil Code). 22 Courts and tribunals Are there any specialised tribunals that are dedicated to resolving construction disputes? No. The different arbitration institutes are discussed below. The ordinary courts are not specialised in construction matters, which often proves to be a problem. Judges will need to rely on expert witnesses and court experts most of the time as they lack the specific knowledge needed for construction-related disputes. 23 Dispute review boards Are dispute review boards (DRBs) used? Are their decisions treated as mandatory, advisory, final or interim? Not commonly. At present, there is much discussion on the usefulness of DRBs but they are only used in some very large projects. By law, the insolvency or bankruptcy of either of the contracting parties does not render the contract void nor does it lead to automatic termination of the contract. In such cases the trustee or liquidator 132 Getting the Deal Through Construction 2014

6 Severijn Hulshof advocaten netherlands 24 Mediation Has the practice of voluntary participation in professionally organised mediation gained acceptance and, if so, how prevalent is the practice and where are the mediators coming from? If not, why not? Mediation is still not very common in construction disputes but is gaining ground. One reason for its relative unpopularity may be the existence of other mechanisms that function well enough (such as arbitration). 25 Confidentiality in mediation Are statements made in mediation confidential? Commonly, mediation agreements arrange for the confidentiality of the statements. It is, however, up to the mediating parties to agree upon such confidentiality as there is no legal basis for it. 26 Arbitration of private disputes What is the prevailing attitude towards arbitration of construction disputes? Is it preferred over litigation in the local courts? The Court of Arbitration for the Netherlands Building Industry is highly specialised in construction matters. The same goes for several other arbitral institutions in the field of construction. Arbitration is still the main way to end disputes as it allows a more technical approach, and arbitrations usually have a larger understanding of the construction practice than the ordinary courts. Update and trends Due to the global financial crisis, the number of housing projects is, at present, at its very lowest and recovery of the market is only foreseen as from Infrastructure projects continue relatively strongly, helped by the investment by the state of the Netherlands in larger projects to keep the economy moving. Over the next few years, a redevelopment of the surplus of office space is expected, given the large amount of available office space. On a contractual level, integrated forms of contract are gaining popularity as well as construction concepts that combine the actual construction with maintenance and management. In the next couple of years it is highly likely that procurement law will change (again) due to the update of the EU directives on public procurement. 29 Arbitral award Is there any basis upon which an arbitral award issued by a foreign or international tribunal may be rejected by your local courts? The Netherlands is party to the 1958 Convention of New York. Execution of a foreign arbitral award is possible after a specific court procedure in which the court may enforce the arbitral award. Awards will generally be enforced unless the opposing party demonstrates that the award is in some way invalid or was established though violations of procedures or of the arbitration agreement. Enforcement may also be refused if the award violates public policy. 27 Governing law and arbitration providers If a foreign contractor wanted to pursue work and insisted by contract upon international arbitration as the dispute resolution mechanism, which of the customary international arbitration providers is preferred and why? It can be stated that the ICC is the best known institute, but the LCIA and other institutes are gaining ground. Generally, a preference for Dutch law is expressed by Dutch contracting parties but the laws of England and Wales or Swiss law are not uncommon in international contracts if Dutch companies are involved. There is no specific preference or resistance to any venue for hearings as long as the venue itself does not influence the impartiality of the tribunal. 28 Dispute resolution with government entities May government agencies participate in private arbitration and be bound by the arbitrators award? 30 Limitation periods Are there any statutory limitation periods within which lawsuits must be commenced for construction work or design services and are there any statutory preconditions for commencing or maintaining such proceedings? Firstly, it should be noted that all common forms of contract for construction purposes contain limitation periods that generally oblige the employer to start a lawsuit in order to avoid a loss of rights. Generally, these limitation periods are of two or five years. Further, the legal provisions for contracting provide a two-year prescription term, starting from when the employer complains about a defect. It should also be noted that the employer is under the obligation to notify the contractor straight away if it notices a defect. If it fails to do so, this, in itself, may lead to a loss of the right to pursue compensation. Yes they may and they do. Major disputes in, for example, the infrastructure sector are commonly settled through arbitration. Leendert C van den Berg [email protected] Postbus Tel: CH The Hague Fax: Netherlands

7 netherlands severijn Hulshof advocaten 31 International environmental law Is your jurisdiction party to the Stockholm Declaration of 1972? What are the local laws that provide for preservation of the environment and wildlife while advancing infrastructure and building projects? Environmental law is very extensive in the Netherlands and mostly based upon EU law. There are local laws protecting endangered species, regulating surface water quality, flora and fauna law, general hindrance, etc. 32 Local environmental responsibility What duties and liability do local laws impose on developers and contractors for the creation of environmental hazards or violation of local environmental laws and regulations? Developers and contractors are bound to apply for all necessary permits, resulting from the legislation mentioned above. The issuance of a permit does not in any way diminish the liability of the contractor or developer for the works performed. Parties may be liable to third parties for any environmental hazard resulting from the works and the way they are performed. 34 Tax treaties Has your jurisdiction entered into double taxation treaties pursuant to which a contractor is prevented from being taxed in various jurisdictions? At present, over 80 bilateral tax treaties that avoid double taxation exist. The number of treaties is still rising and the Netherlands is known for a generally friendly tax regime where foreign companies are concerned. 35 Currency controls Are there currency controls that make it difficult or impossible to change operating funds or profits from one currency to another? No. 36 Removal of profits and investment Are there any controls or laws that restrict removal of profits and investments from your jurisdiction? No. 33 International treaties Is your jurisdiction a signatory to any investment agreements for the protection of investments of a foreign entity in construction and infrastructure projects? If so, how does your model agreement define investment? The Netherlands is a party to many general investment treaties, which, however, are not specifically aimed at construction. 134 Getting the Deal Through Construction 2014

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