Date: 16 April 2010

Adapting FIDIC Standard Forms for Local Conditions and Regulations

TCDPAP Annual Conference - '‘New Approaches and

Solutions for Consultancy Business Innovation’

MENACHEM HASOFERPartner

+852 2843 2384menachem.hasofer@mayerbrownjsm.com

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Mayer Brown is a global legal services organisation comprising legal practices

that are separate entities ("Mayer Brown Practices"). The Mayer Brown

Practices are: Mayer Brown LLP, a limited liability partnership established in

the United States; Mayer Brown International LLP, a limited liability partnership

incorporated in England and Wales; and JSM, a Hong Kong partnership, and

its associated entities in Asia. The Mayer Brown Practices are known as Mayer

Brown JSM in Asia.

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• Increasing size and complexity of projects in this region

• Increasing involvement of international contractors and overseas project financiers / sponsors

• Greater need for parties to carefully tailor FIDIC forms to match local conditions and regulations

• Importance of carefully following the contractual processes throughout the project

Introduction

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Co - ordination

“Back to Back” obligations

Financier / Project Sponsor

Government

Authorities

Technical

Services Team

Locally

Licensed

Consultant

OwnerProject

Manager

Engineer / Lead Consultant

Sub-consultants

Main Contractor

Sub-contractors

Compliance

Sta

ndar

ds /

Pol

icie

s

App

rova

ls

Design and Construction of an

Major Engineering Project

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• Socialist-oriented market economy

• Central, Municipal and Provincial Government

• Rapid economic progress

• Constantly evolving system of laws, decrees and regulations affecting engineering projects

• FIDIC forms used for projects with 'foreign' elements

Experience Sharing : Similarities between People's Republic

of China (PRC) and Socialist Republic of Vietnam

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• Law on Construction No. 16/2003/QH11 dated 26 November 2003 (as amended by No. 38/2009/QH12 dated 19 June 2009) ("Law on Construction")

• Decree No. 12/2009/ND-CP on management of investment projects for construction works dated 12 February 2009 (amended by Decree No. 83/2009/ND-CP dated 15 October 2009) ("Decree 12")

• Circular No. 06/2007/TT-BXD of 25 July 2007 providing guidance on contracts in construction activities ("Circular 06")

• Decision No. 131/2007/QD-TTg dated 9 August 2007 issuing regulations on hiring foreign consultants in construction activities in Vietnam ("Decision 131")

• Circular No. 40/2009/TT-BXD dated 9 December 2009 on applying foreign construction standards to construction activities in Vietnam ("Circular 40")

Case Study: Principal Laws and Decrees

/ Circulars / Decisions Affecting

Engineering & Construction Projects in Vietnam

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Case Study: Principal Regulatory

Requirements for Projects in Vietnam • Mandatory articles in construction contracts, including:

– warranties and insurance

– environmental protection, labour safety, fire protection

– notification and correction of errors

– force majeure circumstances

– contract must be governed by the Laws of Vietnam

– language: Vietnamese and English permitted

• Evaluation and approval of engineering design

• Construction Permit

• Approval for application of foreign construction standards

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• General Conditions - amendments to be limited as far as possible

• Appendix to Tender must be prepared with care

• Starting point is FIDIC's Guidance Notes for the Preparation of the Particular Conditions of Contract

• Customised (bespoke) amendments : specialist drafting skills required to avoid inconsistencies

Adapting FIDIC Standard Forms

for Local Conditions and Regulations

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• Tendering procedures• Business licensing for foreign contractors / consultants• Evaluation and approval of engineering design by locally

qualified consultants• Sub-Contracts / Nominated Sub-Contracts• Role and independence of “the Engineer”• Possible requirement for approval of Employer’s Project

Manager for key matters

Adapting FIDIC Standard Forms :

Topics for Consideration

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Adapting FIDIC Standard Forms :

Topics for Consideration (...continued)

• Site Possession / Site Clearance• Sectional Completion / Phased Completion • Worker’s compensation and works insurances• Professional indemnity insurance for design works• Performance Security / Retention / Advance payment• Consequences of suspension / termination• Payment currency - exchange restrictions

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Adapting FIDIC Standard Forms :

Topics for Consideration (...continued)

• Strictness of regime for notices of claim / extension of time / variations : consider local 'claims culture'

• Dispute Adjudication Board (DAB) or Dispute Review Board (DRB) : Finding an appropriate Adjudicator

• Reference to Mediation / Arbitration - need to comply with local Arbitration laws

• Privity of contract : claims by sub-contractors and employees against Employer

• Statutory time limit for defective work claims: application to extended warranty periods?

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Adapting FIDIC Standard Forms :

Conclusions

• International project participants must become familiar with local laws and practices

• Locally qualified and experienced engineers and other consultants are key members of the project team

• Particular Conditions and Appendix of appropriate FIDIC form must be suitable to local conditions / regulations

• Customised amendments : imprecise drafting could lead to significant problems - specialist advice recommended

• Contractual processes provide protection only if carefully followed throughout the project

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Q & A

Thank you

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Disclaimer

• These materials are provided by JSM and reflect information as of 16 April 2010.

• The contents are intended to provide a general guide to the subject matter only and should not be treated as a substitute for specific advice concerning individual situation.

• You may not copy or modify the materials or use them for any commercial purpose without our express prior written permission.