Australia is one of the few places in the world experiencing something of a building boom and if you’re a UK firm keen to get involved, you might like to go to Queensland, where things are pleasantly familiar.
Queensland probably makes you think of golden beaches and the marvels of the Great Barrier Reef but although tourism is a key industry, the current resources and infrastructure boom really drives the State’s economy.
The June 2010 budget promised A$17.1bn (£10bn) for infrastructure over 2010-11 and there are several major projects happening. These include high value PPPs such as the A$1bn plus Gold Coast Rapid Transit project and the Cross River Rail project to build a north-south rail line in Brisbane including a new river crossing and inner city train stations.
Queensland’s abundant natural resources are also creating construction work, particularly in the coal and the emerging coal seam gas to LNG industries. These projects demand associated infrastructure such as processing facilities, water treatment plants, power stations and pipelines. With a busy construction market it’s worth looking at the legal and regulatory framework governing major projects in Queensland.
As you would expect, contracts are expressed to be governed by Queensland law and parties submit to the jurisdiction of Queensland courts. Queensland legislation is often the same as, or similar to, that of other Australian states. Case law is persuasive, and in some cases binding, amongst the States. And, as my former colleagues in London would remind me, Australian law originally derived from English common law. So there are also similarities with the law of England and Wales. This familiarity is a relief for foreign contractors. There is no need for English or New York choice of law clauses which abound in more exotic locations.
The two main Acts governing Queensland construction contracts are the Queensland Building Services Authority Act 1991 (Qld) (“QBSA Act”) and the Building and Construction Industry Payments Act 2004 (Qld) (“BCIP Act”). They contain provisions similar to Part 2 of the UK’s Housing Grants, Construction and Regeneration Act 1996. For example: pay when paid clauses are invalid; contractors are entitled to progress payments; and the right to adjudicate is established. Some implied provisions can be contracted out of. For example, security may exceed 5% of contract price only if the parties specifically agree and initial the relevant clause.
The QBSA Act regulates “building work” and contractors must be licensed. “Building work” is broadly defined. However, the regulations list a number of exclusions including roads, harbours, railways and construction work in mining. The courts have given these exclusions a liberal interpretation. So a threshold question for each project is whether all or part of it is caught by legislation. Licensing can be a tricky issue, particularly if a consortium includes unlicensed or foreign contractors. But projects can be structured to deal with licensing issues. The BCIP Act establishes the right to adjudicate – a process familiar to the UK industry. However, there are some differences. For example, in Queensland, parties cannot choose their adjudicator. This is decided by an authorised nominating authority.
There are other options in terms of dispute resolution. Arbitration has become less popular but remains useful if the parties want more control over the action or require the proceedings to be held in private. It is governed by the Commercial Arbitration Act 1990 (Qld). But the most widely used form of dispute resolution remains court proceedings (though contracts often require meetings between senior representatives, and sometimes compulsory mediation, before commencing litigation). Construction disputes will be heard in either the Magistrates Court, District Court or Supreme Court of Queensland (depending on the value of the claim). The Supreme Court is the highest court and includes the trial division and the Court of Appeal. Special leave is required to appeal to the High Court of Australia. Thankfully, appeals to the Privy Council ended in 1986!
Queensland has a very good judicial system – the envy of many other jurisdictions around the world. There is no need for arbitration, based on ICC or LCIA rules, with an overseas seat of arbitration.
An important issue to decide, at the outset of a project, is the form of contract. Although there are more standard forms to choose from in the UK (eg JCT, NEC, MF1/Rev4, IChemE, ICE, FIDIC) we are well served in Queensland by the Australian Standards suite of contracts. They cover construct, design and construct, supply of equipment (with and without installation), minor works, construction management, consultant appointments etc. International forms (such as FIDIC) are also sometimes used. Bespoke contracts are common - particularly for high value or complex EPC and EPCM contracts. There is no standard form PPP contract (unlike the UK’s SOPC4 or NHS3). But uniform contracts are evolving containing provisions pieced together from Australian PPP deals.
The contract that is chosen will be drafted to allocate project specific risks and to deal with Queensland legislation. The employer will usually start the ball rolling with an employer friendly contract. The contractor will want to balance this by capping its liability (with limited carve outs) and exclude consequential loss. Nothing new there.
It is hoped Queensland’s boom will continue and the fact its laws and contracts are not unfamiliar to foreign contractors, sponsors and financiers makes it an even more appealing market.
Peter Dzakula is a senior associate in the Brisbane office of Corrs Chambers Westgarth