construction & engineering law 2016 · another general requirement is the attestation of...

The International Comparative Legal Guide to:

A practical cross-border insight into construction and engineering law

Published by Global Legal Group, with contributions from:

Advokatbyrån Hellgren Linander ABAdvokatfirmaet Thommessen ASAllen & Gledhill LLPAshurstBloomfield Law PracticeCMS Reich-Rohrwig HainzCOMAD, S.C.DeaconsDuane Morris LLPFALM – Sociedade de Advogados, RLGaladari Advocates & Legal ConsultantsGuangdong Guanghe Law FirmHaxhia & Hajdari Attorneys at LawKesikli Law FirmKyriakides Georgopoulos Law FirmLahsen & Cia. Abogados

Mäkitalo Rantanen & Co Ltd, Attorneys-at-LawMathesonMattos Filho, Veiga Filho, Marrey Jr eQuiroga AdvogadosMelnitsky & Zakharov, Attorneys-at-LawMiller Thomson LLPMoravčević Vojnović i Partneriin cooperation with SchoenherrNagashima Ohno & TsunematsuNorton Rose Fulbright South Africa Inc.Osterling AbogadosSimmons & Simmons LLPStassen LLP Rechtsanwälte und NotareSysouev Bondar Khrapoutski law officeWintertons Legal Practitioners

3rd Edition

Construction & Engineering Law 2016

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Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

The International Comparative Legal Guide to: Construction & Engineering Law 2016

General Chapters:

Country Question and Answer Chapters:

1 Some Thoughts on Liquidated Damages – Tim Reid, Ashurst 1

2 Minimum Energy Efficiency Standards – Richard Dyton & Luc Cohen, Simmons & Simmons LLP 3

3 Albania Haxhia & Hajdari Attorneys at Law: Envi Hicka & Dritan Jahaj 8

4 Australia Ashurst: Joanna Jenkins & Georgia Quick 13

5 Austria CMS Reich-Rohrwig Hainz: Thomas Hamerl 22

6 Belarus Sysouev Bondar Khrapoutski law office: Ivan Martynov & Vitaly Tvardovskiy 29

7 Brazil Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados: Thiago Moreira & Eduardo Damião Gonçalves 37

8 Canada Miller Thomson LLP: William J. Kenny & Leanna Olson 46

9 Chile Lahsen & Cia. Abogados: Eduardo Lahsen Matus de la Parra & Felipe Hermosilla Torres 54

10 China Guangdong Guanghe Law Firm: Xin Tong & Guanglei Zhang 61

11 England Ashurst: Tim Reid & Michael J. Smith 67

12 Finland Mäkitalo Rantanen & Co Ltd, Attorneys-at-Law: Aimo Halonen 78

13 Germany Stassen LLP Rechtsanwälte und Notare: Anne Schoenbrunn & Florian Diestelmann 83

14 Greece Kyriakides Georgopoulos Law Firm: Elisabeth Eleftheriades & Kimon Tsakiris 90

15 Hong Kong Deacons: Kwok Kit Cheung 98

16 Ireland Matheson: Rhona Henry & Nicola Dunleavy 104

17 Japan Nagashima Ohno & Tsunematsu: Naoki Iguchi 113

18 Mexico COMAD, S.C.: Roberto Hernández García & Adrián Roberto Villagómez Alemán 119

19 Nigeria Bloomfield Law Practice: Kunle Obebe & Dayo Adu 125

20 Norway Advokatfirmaet Thommessen AS: Jacob F. Bull & Henrik Møinichen 131

21 Peru Osterling Abogados: Gustavo Miró Quesada & Gabriel Loli León 139

22 Portugal FALM – Sociedade de Advogados, RL: António André Martins & Joana Maltez 144

23 Russia Melnitsky & Zakharov, Attorneys-at-Law: Semion Melnitsky & Olga Kruglova 149

24 Serbia Moravčević Vojnović i Partneri in cooperation with Schoenherr: Slaven Moravčević & Ivana Panić 158

25 Singapore Allen & Gledhill LLP: Ho Chien Mien 165

26 South Africa Norton Rose Fulbright South Africa Inc.: Timothy Baker & Daniel McConnell 172

27 Sweden Advokatbyrån Hellgren Linander AB: Bo Linander & Mikael Lindberg 178

28 Turkey Kesikli Law Firm: Omer Kesikli & Oya Gokalp 183

29 United Arab Emirates Galadari Advocates & Legal Consultants: Thanos Karvelis & Niel Coertse 191

30 USA Duane Morris LLP: Charles B. Lewis & Jeffrey L. Hamera 198

31 Zimbabwe Wintertons Legal Practitioners: Edmore Jori & Farai Chigavazira 205

Contributing EditorTim Reid, Ashurst

Sales DirectorFlorjan Osmani

Account DirectorsOliver Smith, Rory Smith

Sales Support ManagerToni Hayward

Sub EditorNicholas Catlin

Senior EditorRachel Williams

Chief Operating OfficerDror Levy

Group Consulting EditorAlan Falach

Group PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

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ISBN 978-1-911367-04-8ISSN 2054-7560

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Chapter 6

1 Making Construction Projects

1.1 What are the standard types of construction contract in your jurisdiction? Do you have contracts which place both design and construction obligations upon contractors? If so, please describe the types of contract. Please also describe any forms of design-only contract common in your jurisdiction. Do you have any arrangement known as management contracting, with one main managing contractor and with the construction work done by a series of package contractors? (NB For ease of reference throughout the chapter, we refer to “construction contracts” as an abbreviation for construction and engineering contracts.)

Belarusian law provides for several types of construction-related contracts. The main types are:1. contracts for construction works;2. contracts for design and survey works and contract for

architect’s supervision;3. engineering services contracts, where the following sub-

types exist:a. contracts for technical supervision services, which are

largely similar to quantity surveyor services, as they are termed in other jurisdictions; and

b. other engineering services, including general site management; and

4. pooled investment real estate development (“dolevoye stroitelstvo”) contracts, where the developer raises funds from a pool of investors subject to the undertaking to provide each investor with a specific part of the property. The developer then contracts with designers, construction contractors, et al.

A specific contract form is provided by the law only for pooled investment in residential and related properties. For other types of construction-related activities no specific forms as such are prescribed; however, strong requirements exist for so-called “material conditions”, which the contracts must contain, often in specific forms, under the pain on nullity of the contract.Yes, a single contract may contain both design and construction obligations.Yes, it is possible for the Employer to sign a general construction contract and a contract for engineering services for the universal management of construction activities and thereby appoint a general contractor and an engineering company, who will be made completely responsible for the eventual delivery of the project.

However, note that certain administrative functions will, in any event, remain with the employer.

1.2 Are there either any legally essential qualities needed to create a legally binding contract (e.g. in common law jurisdictions, offer, acceptance, consideration and intention to create legal relations), or any specific requirements which need to be included in a construction contract (e.g. provision for adjudication or any need for the contract to be evidenced in writing)?

Yes, several types of pre-conditions exist. They can be widely grouped as follows:1. Requirements of form.2. Requirements of content.3. Compliance requirements for the employer and the contractor.4. Tendering requirements.Requirements of formAll construction contracts must be in writing. Contracts for construction works as well as contracts for design and survey works must be executed as “one document”, meaning that they must exist as a document signed by both parties.This means that construction contracts made by correspondence or any other exchange of documents signed by one of the parties will run afoul of this requirement. Where this occurs the contract is not invalidated, but the parties may not rely on witness testimony to prove the existence of such a contract and the content of its conditions. This does not apply to contracts for engineering services.Requirements of contentAs mentioned above, contracts must include “material conditions” as provided by the law. If this requirement is not met, the courts may not enforce a construction contract. Lately the practice of the courts has become more flexible in this respect and the courts in many cases consider whether a contract lacking material conditions is executory or executed. If the lack of specific material conditions does not per se limit the court’s ability to enforce an executed contract, in many cases the courts will consider the respective claim for enforcement on its merits.The list of material conditions in construction contracts is very wide: scope of work; starting and completion dates; pricing; payment; procedure for the certification of works; and even specific requirements for how the details of the parties are given in the contract.

Sysouev Bondar Khrapoutski law office Vitaly Tvardovskiy

Ivan MartynovBelarus

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BelarusSysouev Bondar Khrapoutski law office

1.3 In your jurisdiction please identify whether there is a concept of what is known as a “letter of intent”, in which an employer can give either a legally binding or non-legally binding indication of willingness either to enter into a contract later or to commit itself to meet certain costs to be incurred by the contractor whether or not a full contract is ever concluded.

There is no legal concept of an LoI. While such letters may be sent by employers to contractors, they do not have any legal significance.

1.4 Are there any statutory or standard types of insurance which it would be commonplace or compulsory to have in place when carrying out construction work? For example, is there employer’s liability insurance for contractors in respect of death and personal injury, or is there a requirement for the contractor to have contractors’ all-risk insurance?

There is only one such requirement. A construction contractor, upon completion of construction of residential and various types of social or community properties, is required to provide the employer with a security for the performance of the contractor’s obligations of rectification of defects. One such possible type of security is insurance of the contractor’s liability. Otherwise, the law does not have any insurance requirements. However, contractors may voluntarily insure constructions risks. The policies used by most insurance companies are largely based on Munich Re rules. The average insurance premium ranges from 0.12% to 0.36% of the value insured. Other voluntarily used insurance types in the industry include insurance of liability for damage caused by defective work and services and general civil liability insurance.The law does provide for mandatory insurance for industrial accidents and work-related medical conditions for employees. Companies which operate equipment and facilities which are classed as presenting an industrial hazard are required to insure risks related to the operation of such.

1.5 Are there any statutory requirements in relation to construction contracts in terms of: (a) general requirements; (b) labour (i.e. the legal status of those working on site as employees or as self-employed sub-contractors); (c) tax (payment of income tax of employees); or (d) health and safety?

For most projects the employer is required to first commission a “pre-investment study”, which is directed at the evaluation of the architectural, engineering and financial feasibility of the project and the assessment of its environmental impact. A decision to proceed with the project must be taken with regard to the study.Another general requirement is the attestation of companies involved in construction activities. This includes the employer, designers, all contractors and providers of engineering services. Attestation involves verification of compliance with multiple requirements, including the qualification of employees, health and safety as well as quality management policies, certification of works and services, financial standing, availability of necessary equipment, staff, etc. Employers may be exempted from attestation if they retain an engineering company for “comprehensive management” of the construction project.Prior to the start of any construction project, the employer must take out construction and design permits in respect of that project.

Compliance requirements for the employer and the contractorThe law sets certain pre-conditions which the employer and the contractor must satisfy prior to entering into a construction contract. For the employer, these pre-conditions include, among others: possession of construction and design permits; specific evidence of rights to the land; design documentation where the contract does not provide that this should be developed by the contractor; and compliance with licensing requirements when these exist for the employer, et al.For the contractor, these pre-conditions are as follows: compliance with licensing (attestation) requirements for the contractor and its personnel; and possession of machinery and other equipment necessary to complete the project.Where these pre-conditions are not observed, the contract may be invalidated as a contract made in violation of the law upon a claim from a party with locus standi.Tendering requirementsMany construction contracts and related contracts over a certain threshold are subject to mandatory tendering. The table below sets out the requirements:

Contract type Threshold for tenderingContract for construction works between a non-government owner and contractor

Over 100,000 basic values*

Government or municipal contracts for construction works and contracts whose funding has been guaranteed by government or municipal authorities

Over 6,000 basic values

Other contracts made by owners for projects where tendering of construction is mandatoryDesign and mandatory feasibility studies Must be tendered regardless of value

Engineering contracts 3,000 basic valuesProcurement of equipment, materials, inter alia 3,000 basic values

Construction contracts for specific disciplines 3,000 basic values

* Basic values are nominated in Belarusian roubles and are subject to review and approval by the Council of Ministers. They serve to tie certain regulatory values to the rate of inflation. At the time of writing, one basic value is BYR 210,000, which is roughly equal to USD 10.50. Procurements for selection of sub-contractors must be held only if that was mentioned in the main contract or the decision was made by the main contractor.Notably, projects financed exclusively by foreign investors are exempt from mandatory tendering. Failure to tender a project where this is mandatory may have two negative outcomes: a court may invalidate the contract as one made in violation of the law; and the employer may be required to pay a substantial administrative fine to the authorities.It should be mentioned that recently the Ministry of Architecture & Construction has circulated a draft Presidential Decree which, if enacted, would exempt private companies from mandatory construction tendering. However, it is not yet certain if and when this Decree will be enacted.


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1.8 Is it possible and/or usual for contractors to have retention of title rights in relation to goods and supplies used in the works? Is it permissible for contractors to claim that until they have been paid they retain title and the right to remove goods and materials supplied from the site?

Yes, the Civil Code and the Rules for the Conclusion and Performance of Construction Contracts specifically provide for such a right.

2 Supervising Construction Contracts

2.1 Is it common for construction contracts to be supervised on behalf of the employer by a third party? Does any such third party (e.g. an engineer or architect) have a duty to act impartially between contractor and employer? Is that duty absolute or is it only one which exists in certain situations? If so, please identify when the architect/engineer must act impartially.

Yes, it is common for the employer to appoint an engineering company to supervise the construction process and/or as a site supervisor (technical supervisor). As was mentioned above (see question 1.6), in most cases an engineering company is appointed for “comprehensive management” of the construction project when the employer does not have the attestation for the construction activity.There are no direct legal provisions which require the technical supervisor to act impartially. However, in the event of an unjustified suspension, the parties to the construction contract are entitled to claim any resulting damages and losses to them from the engineering company and the specific person who gave the instructions to suspend the works.

2.2 Are employers entitled to provide in the contract that they will pay the contractor when they, the employer, have themselves been paid; i.e. can the employer include in the contract what is known as a “pay when paid” clause?

“Pay when paid” clauses are not recognised by Belarusian law.

2.3 Are the parties permitted to agree in advance a fixed sum (known as liquidated damages) which will be paid by the contractor to the employer in the event of particular breaches, e.g. liquidated damages for late completion? If such arrangements are permitted, are there any restrictions on what can be agreed? E.g. does the sum to be paid have to be a genuine pre-estimate of loss, or can the contractor be bound to pay a sum which is wholly unrelated to the amount of financial loss suffered?

Yes, this is possible. The parties to the contract can foresee any penalties in a fixed amount, which must be paid in case of a default or defective performance of an obligation, in particular in the case of a delay in performance. The party entitled to such penalties is not required to prove the damages caused, so such penalties can be unrelated to the amount of losses.However, courts may reduce the amount of damages, which they consider as overestimated.

Health and safety as well as other labour-related requirements (duration of a working day, length of rest periods, life and health insurance, protective equipment and measures and wages) are all regulated in accordance with existing labour laws and construction regulations. The contractor is vicariously liable for its employees.Contractors, as with all other companies, are required to withhold from the employees’ wages and pay the following:■ income tax at 13% of the wages paid and most fringe benefits

provided to employees; and■ a social security contribution of 1% of the wages paid and

most fringe benefits provided to employees.Beyond that, contractors, again as with all companies, are required to pay (without withholding) an employers’ social security contribution, which is in most cases equal to 34% of the total payroll and total fringe benefits provided to employees.One must also keep in mind that technical regulation and administrative regulation in the Belarusian construction industry is quite exhaustive, contained in a plethora of standards and regulatory instruments.

1.6 Is the employer legally permitted to retain part of the purchase price for the works as a retention to be released either in whole or in part when: (a) the works are substantially complete; and/or (b) any agreed defects liability is complete?

This practice recently began to take hold, and contractors are accepting retention conditions for projects they find attractive. The legal treatment of such conditions by the courts is inconsistent. In most cases the courts did recognise retention provisions as valid, but this practice is not yet settled.The law directly provides for a similar measure, but the retention money in this case is held in a separate bank account of the contractor. Under this rule, the contractor in a project for construction of residential and various types of social or community properties must provide the employer with one of the following:■ a reserve of 1.5% of the cost of the works actually performed

for the duration of the warranty period in a separate bank account. Regular transfers from this account are not permitted and the funds may only be used in the manner provided for in the law;

■ a bank guarantee; or■ insurance for his liability for default or defective performance

of his duties in the course of the warranty period.The funds reserved in the separate account may be used by the contractor only to finance the works needed for the rectification of defective work. The law also provides a schedule for the release of the reserved funds and the treatment of the funds in the event of the contractor’s insolvency.

1.7 Is it permissible/common for there to be performance bonds (provided by banks and others) to guarantee performance, and/or company guarantees provided to guarantee the performance of subsidiary companies? Are there any restrictions on the nature of such bonds and guarantees?

Performance bonds provided in the form of bank and/or company guarantees are permissible, but rarely used except in particularly massive projects. This is because few contractors can afford such securities, mostly due to the high cost of funds. The law directly provides for bank guarantees for some types of projects (see the answer to question 1.6 above). No particular restrictions on the nature of bonds and guarantees exist.



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to envisage in the context of Belarusian law. If the contractor experiences delay due to delays by the client (e.g. late delivery of materials by the client) the contractor may be entitled to an extension of time.

3.6 Is there a limit in time beyond which the parties to a construction contract may no longer bring claims against each other? How long is that period and from what date does time start to run?

A standard prescription period of three years is applicable. This starts to run from the date when the party entitled to claim has learned or should have learned of the events giving cause to a claim (violation of the respective party’s rights). Where the law and/or the contract provides for a warranty term and the employer has made a claim for a rectification of defects within this term, the prescription period starts to run from the date of this claim.

3.7 Who normally bears the risk of unforeseen ground conditions?

The general rule is (applicable not only to unforeseen ground conditions), that if the contractor discovers that additional work not provided for in the design documentation (this would normally include design solutions based on geodetic and geological data) is necessary, he must immediately give notice to the employer. If the employer does not respond with instructions within 10 days (the contract may provide for a different time), the contractor must suspend work and will be entitled to a claim for costs because of the delay. The employer will not be liable for costs if he proves that the additional work was not necessary.If the contractor does not follow the above procedure, he will not be entitled to a claim for costs unless he proves that immediate actions were necessary to prevent the demise of or damage to the project.Otherwise, prior to the employer taking over, the contractor bears the risks of damage to or demise of the project, unless this was caused by materials and components provided by the employer, or where this resulted from incorrect instructions by the employer and the contractor gave the employer notice of the respective risks.

3.8 Who usually bears the risk of a change in law affecting the completion of the works?

Generally, where changes in the law make it impossible to complete the project as designed, this risk is borne by the employer, except where the contract provides for both design and construction. This is subject to the frustration and force majeure and “material change of circumstances” doctrines as described below.Where changes in law make it impossible to complete the project altogether, the risk is borne by the employer and the contractor must be compensated for the work performed.Where changes in law make it substantially more expensive to complete the project as designed, different situations are possible:1. Where the contract is cost-plus or a unit price contract, the

risks are borne by the employer.2. Where the contract is fixed-price, only certain risks are borne

by the employer:a. changes in tax law; andb. changes in certain regulatory indices and values, which

the contractor used to calculate its price.

3 Common Issues on Construction Contracts

3.1 Is the employer entitled to vary the works to be done under the contract? Is there any limit on that right?

According to the Civil Code, the employer has the right to demand amendments to the design and estimate documentation when such amendments will not entail additional costs for the contractor. At the same time, in accordance with Article 420 of the Civil Code, the contractor is entitled to demand a review of the estimates in case the cost of actual work exceeds the values provided in the estimates by 10% or more, due to reasons outside of the contractor’s control.Any other variations may only be agreed by the parties as a written addendum to the original contract.

3.2 Can work be omitted from the contract? If it is omitted, can the employer do it himself or get a third party to do it?

Yes, where the contract directly provides for this. Where the contract does not so provide, an omission can only happen by way of a written addendum to the contract.Work omitted in accordance with the contract may be done by the employer personally or he can retain another contractor to perform it.

3.3 Are there terms which will/can be implied into a construction contract?

Relevant provisions of the Civil Code and mandatory requirements of the Rules for the Conclusion and Performance of Construction Contracts, as well as certain other statutes and regulatory instruments, are always implied in a construction contract. Unless the parties agree otherwise, dispositive terms contained in the above regulations are also implied.

3.4 If the contractor is delayed by two events, one the fault of the contractor and one the fault or risk of his employer, is the contractor entitled to: (a) an extension of time; or (b) the costs occasioned by that concurrent delay?

The courts would consider such situations on a case-by-case basis. They would consider such factors as: the nature of each event; whether the two events are interconnected (did one cause the other or prevent the other from ending?); whether the contractor gave notice to the employer of the obstacles to due performance; and whether each party took sufficient efforts to mitigate the situation.

3.5 If the contractor has allowed in his programme a period of time (known as the float) to allow for his own delays but the employer uses up that period by, for example, a variation, is the contractor subsequently entitled to an extension of time if he is then delayed after this float is used up?

Belarusian law does not expressly provide for the concept of a programme and, as explained above, only variations which do not entail an additional cost for the contractor may be unilaterally initiated by the employer. Therefore, this situation is difficult



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Belarusian law also provides for a “material change of circumstances” (“MCC”), describing it as follows: “a change of circumstances is material, if it is such that had the parties been able to reasonably foresee it, they would not have entered into a contract or would have entered into it on significantly different conditions”.Where the parties are unable to renegotiate the contract in light of the MCC, any one of them may apply to the court with a claim to have the contract terminated or changed. Termination is allowed by the court if:■ at the time of entering into the contract the parties had relied

on the assumption that the MCC in question would not occur;■ the MCC arose due to reasons which the interested party

could not overcome by acting reasonably and in good faith; ■ performance of the contract in accordance with its conditions

would substantially deprive the interested party of the benefits it could otherwise reasonably anticipate as a result of performance not under MCC; and

■ the MCC is not the interested party’s risk.In exceptional situations the courts may change the contract rather than terminating it.However, the MCC rule is rarely applied by Belarusian courts and the application of that rule is decided on a case-by-case basis.

3.13 Are parties which are not parties to the contract entitled to claim the benefit of any contract right which is made for their benefit? E.g. is the second or subsequent owner of a building able to claim against the original contracts in relation to defects in the building?

This is only possible if such benefit to a third party is specifically mentioned in the contract in respect of the particular party.The subsequent owner can claim damages only under the contract on the basis of which he acquired the property. For example, a buyer of a property under a sales contract may have a claim against the seller for defects in the property.

3.14 Can one party (P1) to a construction contract which owes money to the other (P2) set off against the sums due to P2 the sums P2 owes to P1? Are there any limits on the rights of set-off?

Yes, set-off is possible. Set-off may occur in respect of debts which are due or which are due when they are claimed or the maturity of which is not defined. Set-off is not possible in respect of debts for some activities (which are normally not related to construction activity) and when the prescription period for which has expired, if P1 or P2 specifically mentioned it. Contracts may also limit rights of set-off.

3.15 Do parties to construction contracts owe a duty of care to each other either in contract or under any other legal doctrine?

A duty of care is a common law doctrine which does not have exact counterparts in the law of the Republic of Belarus. However, according to Article 705 of the Civil Code, if for the performance of the contract any obstacles were found, the employer and the contractor should take all reasonable actions to eliminate these obstacles. Any expenses incurred by one of the parties for the purpose of elimination of the obstacles should be compensated by the other party, if this is specifically mentioned in the contract.The rules of the Civil Code on work production contracts (a more general contract category, to which construction contracts belong), also provide that the work result must be fit for its purpose defined in

3.9 Who usually owns the intellectual property in relation to the design and operation of the property?

Intellectual property rights to the design and operation of the property traditionally belong to the author of the creative work. The contractor, engineer or designer can be the author of the construction project as the case may be. Employers must require the contractors to assign to the employers the ownership and/or financial rights pertaining to the relevant intellectual property rights under the special agreement or special clauses in the construction agreement.

3.10 Is the contractor ever entitled to suspend works?

Yes, he is. There are three different situations when this may occur (all are described here in general terms, though the law sets them out in greater detail):1. The contractor discovers that due to omissions in the design

documentation certain additional costs may be incurred.2. There are factors outside of the contractor’s control which

may negatively impact the result of the work.3. The employer is not performing his duties (e.g. delivery of

materials, transfer of design documentation) on which the result of the work depends, or it is obvious that the employer will delay such performance.

In each of these cases the contractor is required to give notice to the employer and await his instructions.

3.11 On what grounds can a contract be terminated? Are there any grounds which automatically or usually entitle the innocent party to terminate the contract? Do those termination rights need to be set out expressly?

In general terms, contracts may be terminated on the following grounds:1. Material breach by one of the parties (the law describes

several situations in which material breaches can be deemed to exist).

2. Failure by one of the parties to provide performance on which the performance of the other party is based (called “reciprocal performance”).

3. Termination for “good reasons” by the employer.Contracts may provide for additional grounds. Those mentioned above do not need to be set out in a contract in order to entitle a party to termination.

3.12 Is the concept of force majeure or frustration known in your jurisdiction? What remedy does this give the injured party? Is it usual/possible to argue successfully that a contract which has become uneconomic is grounds for a claim for force majeure?

In Belarusian law, force majeure is termed “circumstances of insurmountable force”. The law does not clearly define the meaning of this term but provides that entities acting in an “entrepreneurial capacity” are exempted from liability for default if the default is caused by such circumstances. Therefore, force majeure normally provides defence to a party defaulting on the contract.However, most contracts contain a “loss of interest” clause incorporated into the force majeure section, whereby any party to the contract may terminate it, where force majeure lasts for more than a certain prescribed time period.



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of the design to the assignment of the client, the client’s needs of which the designer is aware and the compliance of the design with the applicable regulations.

4 Dispute Resolution

4.1 How are disputes generally resolved?

Where disputes are concerned with rights to real estate, Belarusian state economic courts have exclusive jurisdiction. However, for other contractual matters, parties have a choice of arbitration or state economic courts.Most construction contracts have amicable resolution clauses, whereby attempts at resolution by negotiations is required prior to filing a law suit.Furthermore, the Code of Commercial Procedure requires that, prior to filing a suit, the aggrieved party must send a claim (“pretenziya”) to the other party, setting forth the merits of the claim, enclosing evidence, citing relevant legal authorities to support the claim and, where the claim is for damages or penalties, providing a calculation of the respective amount.Unless the contract provides for a shorter term, court proceedings may be commenced only upon the expiration of 30 days after the other party has received the claim. Importantly, the law suit may not go beyond the substance of the claim.

4.2 Do you have adjudication processes in your jurisdiction? If so, please describe the general procedures.

No, there is no equivalent to adjudication in Belarus.

4.3 Do your construction contracts commonly have arbitration clauses? If so, please explain how arbitration works in your jurisdiction.

Usually, construction contracts for a high total contract value contain arbitration clauses. Arbitration in Belarus is primarily regulated by the Law of the Republic of Belarus “On international commercial arbitration” (hereinafter – “ICA Act”), dated 09.07.1999, the Law of the Republic of Belarus “On arbitration courts” dated 18.07.2011 and the Civil and Economic Procedural Codes of the Republic of Belarus (hereinafter – “CPC” and “EPC”). The ICA Act is based on the UNCITRAL Model Law on international commercial arbitration 1985 in its primary form, without the changes and amendments adopted in 2006.In order to initiate arbitration, a party should submit the request for arbitration to the arbitral institution based on the arbitration clause. Further process is regulated by relevant rules of arbitration institute. The main arbitration institute in Belarus is the international arbitration court at the Belarusian chamber for commerce and industry; however, several specialised construction arbitration courts also exist.

4.4 Where the contract provides for international arbitration do your jurisdiction’s courts recognise and enforce international arbitration awards? Please advise of any obstacles to enforcement.

According to Article 245 of the EPC, foreign arbitral awards are recognised and enforced by the national courts if such recognition

the contract, or if no such purpose is defined, for purposes, for which such a work result would normally be used.Furthermore, the contractor is liable to the employer for any detriment caused to the property of the latter, which was provided to the contractor for the performance of the contract.There is also some regulation for compensation of damages which should be mentioned.Contractors and employers are liable to each other for any damage caused not just by breach of obligations, but also under the civil delict doctrine.Construction sites and equipment are considered hazardous objects. Under Belarusian law, before the employer takes over the project, the contractor is, subject to certain exceptions, considered to be in control of the site and therefore by default liable to all other persons on the site for damage incurred by them or damage caused to their property.The Civil Code also contains provisions against “abuse of rights”, i.e. exercise of rights, which is prejudicial to others. In construction contracts this will apply to almost any interaction between the parties, but it is hard to envisage how a Belarusian court would award damages based on an abuse of rights by any party to a construction contract. The court would rather refuse to enforce a right which is exercised in an abusive manner.

3.16 Where the terms of a construction contract are ambiguous are there rules which will settle how that ambiguity is interpreted?

The initial position is that contracts are interpreted in keeping with the literal meaning of words and phrases used in them. If the content of the contract cannot be thus determined, the courts must determine the “true will of the parties, taking into consideration the goal of the contract”. For this, the courts will consider “all relevant circumstances”, including preparatory documentation for the contract, negotiation material, regular practice of the parties and their subsequent behaviour.

3.17 Are there any terms in a construction contract which are unenforceable?

Whenever a construction contract purports to deprive or limit a right which is provided in the law without the wording “unless otherwise provided in a contract” or vice versa, i.e. it attempts to state otherwise an imperative provision of the law, these terms will be unenforceable. One notable example is that the law provides for a minimum threshold of penalties on both parties: on the contractor for late delivery; and on the employer for late payment. It is impossible to set lower penalties in the contract. Another notable example discussed above are “pay when paid” clauses. A third example is a transfer to an engineering company of the employer’s power to certify the works in the last instance or approve design documentation. However, this is not limited to the examples provided.

3.18 Where the construction contract involves an element of design and/or the contract is one for design only, are the designer’s obligations absolute or are there limits on the extent of his liability? In particular, does the designer have to give an absolute guarantee in respect of his work?

In the absence of any contractual provisions which impose additional duties, a designer’s liability is limited to correspondence



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of the court’s judgment on the appointment of the case for trial. In exceptional cases, taking into account the particular complexity of the case, the term of the proceedings may be extended to four months, and cases involving foreign persons outside the Republic of Belarus by up to one year.A judgment enters into force after the expiration of 15 days from the date of its adoption, unless appealed. On the basis of the judgment after its entry into force, the court issues a writ to the claimant, except in the case of immediate execution, when the writ is issued immediately after the decision. A first instance judgment can also be appealed to the appellate court within 15 days from the date of the judgment of the first instance court, and considered within 15 days.The judgment of the appellate court may be appealed to the court of cassation within one month from the date of the judgment of the appellate court, and considered within one month. The decision of the court of cassation may be subject to review via a supervision procedure in a period not exceeding one year from the date when the cassation judgment entered into force.

AcknowledgmentMr. Alexander Filipishin, a senior associate in the SBH law office Construction and Investments Practice, and Ms. Anna Shalbanova, an associate in Arbitration Practice, have both provided invaluable contributions to this chapter.

and enforcement is stipulated by legislation or by an international treaty, or on the basis of the reciprocity principle.Belarus ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards on 13 September 1960, and it came into force on 13 February 1961.According to Article 45 of the ICA Act, international arbitration awards (regardless of the country in which they were made) shall be recognised and enforced in accordance with the economic procedural legislation of the Republic of Belarus and its international treaties.The procedure of recognition and enforcement of Foreign Arbitral Awards is set forth in Chapter 28 of the EPC and Annex 4 of CPC.Under the procedural law of Belarus, grounds for refusal in recognition and enforcement of foreign arbitral awards are similar to those specified in Article 5 of the New York Convention.

4.5 Where the contract provides for court proceedings in a foreign country, will the judgment of that foreign court be upheld and enforced in your jurisdiction?

Unless regarding an international agreement whereby Belarus recognises and agrees to enforce the judgment of foreign courts, a Belarusian court will recognise and enforce a foreign judgment on the basis of reciprocity. The general position is that reciprocity is presumed by the court unless a party to a dispute shows otherwise.

4.6 Where a contract provides for court proceedings in your jurisdiction, please outline the process adopted, any rights of appeal and a general assessment of how long proceedings are likely to take to reduce: (a) a decision by the court of first jurisdiction; and (b) a decision by the final court of appeal.

Construction cases are considered by the economic court of first instance within a period of not more than two months from the date



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Sysouev Bondar Khrapoutski is a full-service law firm with offices in Belarus and Ukraine. We advise our clients in all areas of business, corporate and financial law, with an emphasis on mergers and acquisitions, inbound foreign investment, insurance, banking, arbitration and litigation, real estate and construction.

For over 20 years, since the emergence of the new Eastern European independent states, our lawyers and attorneys have been providing foreign and Belarusian companies and entrepreneurs as well as sovereign states with detailed and groundbreaking advice, working on cases and transactions which have shaped Belarusian law and business practice. We also provide transnational legal services through our strategic alliance with leading firms in the Baltic region and our office in Ukraine.

We are also well-known for our pro bono work with government bodies, charities, cultural and sports institutions.

Ivan Martynov joined Sysouev Bondar Khrapoutski law office as a partner in 2015 upon the merger of his firm Archer Legal, which specialised in construction and investment matters as well as tax, with SBH. He is an attested commercial lawyer and has been practising law since 2003. Ivan currently heads the Construction and Investments Practice at SBH.

Vitaly Tvardovskiy is an associate of the Construction and Investments Practice at Sysouev Bondar Khrapoutski law office. He has been practising law since 2014. Vitaly specialises in real estate and construction, foreign investments, contract, corporate, labour and migration law. Recently he has participated in many projects related to obtaining all the necessary permissions for construction activity in Belarus for foreign companies, involving the attraction of investments into the country amounting to more than USD 1 billion. He also provides legal support for the establishment, restructuring and liquidation of legal entities and representative offices for both residents and non-residents of the Republic of Belarus.

Vitaly TvardovskiySysouev Bondar Khrapoutski law officeKrasnoarmeiskaya 20A/1, offices 26-27Minsk 220030Belarus

Tel: +375 17 327 53 77Fax: +375 17 327 47 89Email: [email protected]: www.sbh-partners.com

Ivan MartynovSysouev Bondar Khrapoutski law office Krasnoarmeiskaya 20A/1, offices 26-27Minsk 220030Belarus

Tel: +375 17 327 53 77Fax: +375 17 327 47 89Email: [email protected]: www.sbh-partners.com

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