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16 International Contracts.

Objective: To understand the basic issues when entering into an

international construction contract.

Summary:16.1 Legal Awareness.

16.2 International Contract Forms and Provisions.

16.3 Political Risks.

16.4 Obtaining Foreign Contracts.

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16.1 Legal Awareness

• Beware: laws relating to international contracts may be based on a fundamentally different legal philosophy.

• Make sure you are aware of:– all local laws (not just contract law, for example,

environmental regulations, labor employment laws, etc..);

– available legal remedies (from arbitration through to litigation).

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16.2 International Contract Forms and Provisions

• There are many forms of contract worldwide.• An International Contractor may not be familiar with local

forms of contract in the host country:– both parties will be at a disadvantage;– a solution is to use a commonly used international form of contract;– forms that have a wide acceptance will likely be understood by both

parties, and thus lead to a quicker agreement of terms;– commonly used forms are published by FIDIC (International

Federation of Consulting Engineers Association).

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• When entering into a foreign contract, you are subject to political risks:– political uprisings;– strikes;– vandalism;– terrorism, or war, etc...

• Minimize your risk by obtaining knowledge of the risks. Check:– US Department of State;– Other contractors;– International Banks; etc..

• Minimize your risk by obtaining knowledge of the risks. Check:

16.3 Political Risks

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• Sources of information:– International periodicals:

• ENR; International Construction Week; etc..;

– National Publications:• Commerce Business Daily, etc..;

– Competitors who may need assistance on large projects;– Organizations:

• International Banks; US Embassies; US and Foreign Chambers of Commerce; etc...

16.4 Obtaining Foreign Contracts

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• Contacting the Controlling Entity:– Send a firm resume to the controlling entity, as an

indication of commitment;– send a representative of the firm to give a presentation.

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17 Legal Considerations in International Contracts.

Summary:17.1 Financing the Project.

17.2 Choices of Law and Forum.

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17.1 Financing the Contract

• Sources of foreign financing.– Private capital: banks, insurance companies, etc..– Multinational lending agencies:

• International Bank for Reconstruction and Development (IBRD) which only lends to government or government backed enterprises;

– US Agency for International Development (AID) which offers aid to finance projects in less developed countries;

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17.2 Choices of Law and Forum• Choice-of-law (or forum) clause:

– stipulates which legal system (or forum) will be used to resolve any litigation;– if enter into contract with government agency, a choice of law will not usually be

permissible;– without such a clause, the law that is applied is usually that of the place of the

project.

• Calvo clauses:– the contractor waives its right to have its government intervene on any claims it may

have against the contracting state.

• Limitation of liability clauses:– reduces contractor’s risk from claims;– must be reasonable and concurrent with standard limitations to ensure enforceability.