Worldwide: 2018 – The Year Ahead

Last Updated: 9 February 2018
Article by Clyde & Co LLP

UK

The UK Government's Department for Business, Energy and Industrial Strategy is due to complete its consultation on the 2011 amendments to the Housing Grants Regeneration and Construction Act 1996 in January 2018. It will be interesting to see to what extent industry participants recommend changes to the regime and if any of these changes will be taken on board.

At the same time, the UK Government is due to complete its consultation into retention practices in the UK. There is currently no regime that regulates retention in the UK and contractors and subcontractors have been calling for change for a number of years.

A key issue is the practice of paying retentions unjustifiably late or not at all, placing parties down the supply chain under significant pressure. As a result, 2018 could see retention practices significantly altered within the UK construction industry.

Much of the industry press anticipates that 2018 will be a tough year for construction. While current activity remains high, it has been reported that there are clear signs this is beginning to slow down. Private housebuilding is one area which is predicted to slow significantly, as a result of damaged consumer confidence. However, the November 2017 budget may have allayed some fears, with the Government committing GBP 44 billion to housebuilding in order to meet its target of 300,000 homes per year.

AUSTRALIA

The construction market in Australia will continue the current trend of operating at two speeds in 2018. On the East Coast, large infrastructure projects will continue to drive the market, particularly with growth in road and rail projects, and a second airport in Sydney. Disputes on the East Coast are also steadily increasing and it is likely that 2018 will start to see many large infrastructure projects heading for high value litigation.

On the other hand, the states of Western Australia and Queensland are likely to continue to experience a decline in mining related construction. In particular, the LNG sector will be affected as most major LNG projects draw to a close. With that, we will see the spike in oil and gas construction disputes continue to rise over the upcoming year and beyond.

It is likely that Australian contractors will continue to benefit from the globalisation of the construction market and an increase in infrastructure investment by its closest neighbours including Indonesia. Likewise, international contractors will continue to play a major role in the Australian construction industry, and reap the benefits of the high infrastructure spend on the East Coast.

In terms of legal developments, it is likely that the High Court will deliver its judgment on the right to quash security of payment determinations in early 2018, and this will set the tone for the efficacy of that legislation for the remainder of the year.

In addition, many of the amendments to the National Construction Code regarding the use of flammable cladding will take effect in 2018, with the result that many newly built apartment buildings will require rectification.

MIDDLE EAST

VAT in the UAE and Saudi Arabia will be implemented on 1 January 2018. Both countries have created tax laws based on international standard. Following the Gulf Cooperation Council (GCC) discussions on the implementation

of the VAT to all six members (at different dates), a GCC framework agreement was subsequently ratified by all countries. The UAE will implement more comprehensive VAT law compared to that referred to the GCC framework agreement, while Saudi Arabia will have much thinner law provisions, continuing in line with what the GCC had to offer in their guidelines. The scale of infrastructure projects in both jurisdictions and associated cost and revenue, is fundamentally at risk with poorly understood or managed VAT obligations. The full extent of the VAT regulations is still being understood and we may see disputes later in 2018, as contractors review contracts entered into before implementation day.

At the end of 2017, the International Federation of Consulting Engineers (FIDIC) published the second editions of its Red, Yellow and Silver Books.

In a contractual landscape that has traditionally been dominated by the older FIDIC 87 Red Book, the new "Red Book" will be of particular interest to those operating in the Gulf region. We look forward to seeing how some key aspects, such as the expanded role and powers for the Engineer, the new time limits which, if not met, will trigger deeming provisions, will impact on current contracts.

US

Two trends that were prevalent in 2017 will continue and likely grow: state- run initiatives and private investment initiatives. In terms of state-run initiatives, it is expected that more and more states will adopt a recently published model P3 law that was put out by the nonprofit Bipartisan Policy Center. These legislative efforts will be combined with state-funding to push key projects seen as critical. As for private investment initiatives, the market is expected to grow and diversify regardless of legislative support. For example, Blackstone Group, a major investment company, recently said that it will move forward with a USD 40 billion fund to invest in U.S. infrastructure regardless of whether President Trump's "USD 1 trillion infrastructure promise" ever happens.

These trends have created a foundation upon which the P3-market has grown significantly in 2017, and the market is predicting that P3 dealfow will only increase in 2018. In fact, there are already around a dozen projects currently in procurement, including a USD 9 billion traffic relief plan in Maryland, a USD 5 billion airport modernization at LAX in California, and USD 1 billion airport projects in New York and Kansas City.

Infrastructure is also seen as President Trump's legislative priority in 2018. His plan, which is due to surface in January or February of 2018, is expected to be far more detailed than anything that has been released so far, but still not yet "the legislation itself". Regardless, the plan should resolve some uncertainty in the direction of infrastructure development in the US – including whether the Trump administration believes that P3s are a solution or part of the problem. The infrastructure plan is also expected make use of matching funds from state and local authorities, similar to existing Department of Transportation grant programs such as TIGER, which awards funding on a competitive basis.

SOUTH AFRICA

Conditions in the South African construction sector remain under pressure. The outlook for the industry, over the next four to five years, is said to be moderate. There is currently broad policy uncertainty, especially surrounding the implementation of the Mining Charter and the continuation of the Renewable Energy Programme.

While there has been a total absence of infrastructure spend in the course of 2017, it is anticipated that infrastructure investment in the transport and logistics, and energy and low cost housing sectors is expected to create growth over the next four to five years. The Gautrain 2 Project and the Lesotho Highlands Water Project – Phase 2 – are both very substantial developments, although they currently remain on the horizon, awaiting Treasury approval of the feasibility studies.

A Charter, understood to introduce "Radical Economic Transformation" in the construction industry, is in the process of being finalised. The Charter is aimed at transforming the industry, via the protection of sub-contractors from the abuses they face from major contractors, such as late payment or even non-payment. Discussions are to take place between the Department of Public Works and the South African Chamber of Commerce and Industry, with a view to the establishment of a transformation coordinating committee for the purposes of developing a policy document (the Charter) to tackle developmental challenges in the industry.

The Integrated National Resource Plan for 2010 – 2030 provides for coal, gas and renewables, and for 9 600 Mwh of nuclear energy, as part of the country's energy mix, by 2030.

There has been much discussion and debate in 2016/2017 about whether South Africa should deploy more renewable energy, or whether there should be more nu clear energy and coal procurement. Notwithstanding that there is much concern about the cost of pursuing its nuclear target, estimated at R 1 trillion, the Government is clearly in favour of nuclear procurement, and is forging ahead with the process. Numerous legal challenges are anticipated.

The impasse in the signing of the power purchase agreements between independent power producers for Bid Windows 3.5 and 4, and Eskom, has been partially resolved with the signing of a number of these agreements by Eskom. It is hoped that South Africa's Renewable Energy Power Producer Procurement Programme, which has been a substantial success, will continue unabated.

Finally, the promulgation of the International Arbitration Bill 2017 into law is imminent. The Bill will provide for the incorporation of the Model Law on International Commercial Arbitration, as adopted by the United Nations Commission on International Trade Law, into South African Law. This is anxiously awaited, as it is anticipated that it will bring increased opportunities to the country, and the region, and that South Africa will be seen as a preferred arbitral seat in both the southern African and greater African regions.

HONG KONG

The Arbitration and Mediation Legislation (Third Party Funding) (Amending) Ordinance ("the new law") was enacted in June 2017 and effectively laid out the foundation for third party funding ("TPF") of arbitration and mediation in Hong Kong. The new law is expected to take effect in the near future, once the regulatory framework is in place.

The exact mechanism of TPF in Hong Kong and its impact on the volume of the arbitral proceedings remain to be seen. Nonetheless, the development should be worthy of note in Hong Kong, including those not directly considering TPF of their proceedings.

This is particularly so because they may be facing a third party funded opponent in arbitration. For example, it is possible that the arbitrator's award may order the losing party to pay the costs of the winning party (which was funded by TPF) including the costs of obtaining the TPF. Although costs are normally at the discretion of the tribunal and the court, parties should be aware of the possible cost consequences as we proceed to the era of TPF.

Given the Belt & Road Initiative, there will be an increase in big PPP projects in the Belt & Road countries. As a result, we expect that there will be issues of financing, dispute resolution clauses and choice of arbitration seat.

With Hong Kong being poised as a legal service provider for Belt and Road infrastructure investment and projects, Clyde & Co will be well-positioned to provide legal support for the Belt and Road projects with our advisory and dispute resolution services.

SINGAPORE

Public sector construction demand is projected to grow to between SGD 26 billion and SGD 35 billion for 2018 and 2019 respectively, up from about SGD 20 to SGD 24 billion in 2017, according to figures quoted by the Building and Construction Authority in Singapore.

Separately, new tender criteria will be kicking in by the start of 2018, whereby the quality component of a tender will be given greater weighting of around 40% to 60%, up from the usual 30%. This is designed to ensure greater emphasis on quality rather than price.

The government is also bringing forward SGD 700 million in public- sector projects over the next two years, including the upgrading of public amenities such as community clubs and sports facilities.

TANZANIA

In January 2018, Tanzania introduced "local content" regulations for its mining sector. This follows similar "local content" laws and regulations for the petroleum and telecom sectors in 2017 and 2016 respectively. With the Government determined to increase local participation in all areas of the economy, other sectors could see the addition of "local content" laws and regulations. The year 2018 will also see key milestones achieved for the Turkish-financed standard gauge railway, the East African Crude Oil Pipeline which is being developed in conjunction with the Ugandan government, and other infrastructure development projects.

FRANCE

Following a report issued late December 2017 by the "Cour des Comptes" (a French administrative Court in charge with conducting financial and legislative audits of most public institutions), there has been growing concern on the financial feasibility of the much anticipated "Grand Paris Express", a project which includes the construction of 68 new metro stations with over 200 km of automatic metro lines. In its report, the Cour des Comptes has indeed outlined that the initial investment of EUR 25 billion related to the performance of this megaproject had dramatically increased to EUR 38.5 billion due to lack of anticipation and poor governance. As a result, the Cour des Comptes recommended that the project be revised and amended, which led some to conclude that this project would not be developed as planned. The French government had initially committed to decide upon this matter mid-January 2018, however this deadline has been adjourned to mid-February of the same year. The Government has reassured the various stakeholders that the project would definitively be performed in full, but its planning might be revisited.

The French Government intends to [shortly] propose a bill ("ELAN" bill"), the aim of which will be to tackle the growing numbers of poorly housed. To that effect, the bill will be structured around three axes:

  1. Build better and cheaper (simplification of standards and planning procedures; simplification of procedures for converting offices into dwellings; dematerialization of building permit applications for municipalities whose population is above a threshold set by decree; fight against abusive recourse; reform of the social housing – "HLM" – sector).
  2. Respond to everyone's needs and promote social diversity (creation of a mobility lease, more flexible, from 1 to 10 months, to facilitate geographic and professional mobility, particularly for young people; greater transparency in the allocation of social housing and greater mobility in the social housing; a better coordination of the procedures of prevention of the evictions with that of over- indebtedness).
  3. Improve the living environment (increased penalties for sleep merchants; new tools to renovate the degraded city centres of medium-sized towns; creation of a digital lease; streamlined procedures for the deployment of very high speed [internet] in all territories).

CANADA

The appeal of the decision Deguise c. Montminy, released on June 12, 2014 by the Superior Court of Quebec, must be rendered in 2018. The first instance decision provided a comprehensive analysis of the applicable legal principles that guide compensatory awards for victims of building degradation due to the presence of Pyrrhotite in the concrete. The resulting judgment resolved 70 distinct civil actions involving over 800 plaintiffs seeking approximately CAD 200 million in compensation for the replacement of their foundations. Because of the big impact that the 2014 decision had on construction in Quebec, the appeal is crucial for the industry.

The Supreme Court of Canada's judgment regarding the legal duty to bring the existence of a labour and material payment bond to the attention of potential claimants must also be rendered in 2018. It will have a major impact on the construction industry in Canada, with the Court noting that this case deals with an important issue that no Canadian Court has previously resolved.

The Code of Civil Procedures of Quebec came into force on 1 January 2016. The Code established new principles that aimed to ensure the accessibility, quality, promptness and proportionality of civil justice. The legislation created a duty to consider private prevention and resolution processes before referring dispute to courts. Two years later, the number of settlement conferences in the construction field is increasing quickly, and this corresponds with a reduction of construction litigation cases rendered before the courts. These new obligations have had a big impact on the construction industry, and are a great opportunity to change the way it works. We expect the trend of the last two years to continue into 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions