Internationalisation is affecting legal support for large infrastructure projects
It will come as no surprise to anybody reading this magazine that activity in construction and engineering over the last decade has become increasingly, and is now predominantly, international. This has been coupled with a more striking move from the general contracting and building market to see investment redirected to major engineering projects.
At the top end of the European contracting market - the top 20 European contractors with turnover between €5bn (£4.3bn) and €30bn (£25bn) - tough domestic markets have provoked aggressive restructuring to survive. These contractors have become increasingly dependent upon large international projects in technically complex fields such as power, oil and gas bridge construction, and tunnelling. While this market is competitive, and certainly a more risky place to do business, it remains a vibrant and interesting sector in which to work.
The internationalisation of the construction market, coupled with the greater complexity of contracts, has resulted in a need for more flexible, sophisticated, and wider-ranging legal support to deal with the contribution of equity to projects for example, or dealing with operational risks during the construction cycle.
International projects often involve complex contractual procedures to regulate the interfaces, and hence risks, between the project participants. If contractors are going to maximise the commercial opportunities offered by these projects they need to be well advised by specialist, experienced lawyers, and ideally those who already have a track record. For a number of reasons lawyers in the UK are particularly well positioned to fulfil this need.
The processes used in managing a project and the methods of assembling claims also throw up particular issues. This is illustrated by the way in which disputes are resolved. Local courts can be slow and are perceived to be unreliable. The parties instead mostly choose contractual mechanisms such as arbitration and Dispute Adjudication Boards, whose panels are often filled with engineers, lawyers and other industry professionals drawn from a common law background. This means these international projects exist in a parallel dispute resolution system, which effectively “floats” above the local law courts yet has little to do with them.
Contractors expect the legal teams they are used to working with to be prepared to do what they do, and move around the globe, following their own teams
English lawyers are key players in this international market irrespective of the country of origin of the project participants, and irrespective of the underlying law. This is, in part, because the contracts are almost always written in English and follow English or American formats. It is also because we know the way construction projects and their risks are managed. A deep understanding of a client’s internal processes and industry drivers is of major importance when advising on projects that often take years to deliver.
Construction law as a discipline was carved out in the early eighties by a small number of English niche construction law practices. These invariably only had a UK presence, and didn’t need wider capability because they could happily work exclusively in a domestic, contractor market. Those niche practices have now pretty much disappeared. Today, the UK-based firms that have a global footprint are in the best place to advise international clients.
International contractors have a practice of seconding their best managers to the projects which are perceived to be most challenging at any particular time in the construction cycle as the company requires. Whilst an efficient way of allocating the contractor’s expertise to hot spots that need it, this shows that a contractor cannot easily justify maintaining the best teams in any single country location.
To keep up, lawyers have to be able to mirror that practice. Contractors increasingly expect the legal team they are used to working with, and who therefore understand their approach, to be prepared to do what they do, and move around the globe, following their own teams.
Earlier this year my team of specialist construction lawyers switched from niche firm Maxwell Winward to Holman Fenwick Willan (HFW) precisely because of the international footprint we now require in the light of this market evolution. HFW is an international law firm advising businesses engaged in international commerce, in particular the infrastructure projects that support it, which has 14 international offices across 11 countries.
In an increasingly globalised environment, it is vital to have lawyers that can offer a flexible international approach to working on large, complex, multi-party construction projects.
Max Wieliczko heads the specialist construction team at Holman Fenwick Willan