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CIArb News

Megaprojects – National Prestige or Bottomless Well?

5 October 2017 Branch News
Amanda Lee, PRO, CIArb London Branch

On 3 October 2017, the London Branch and the Society of Construction Law held a joint seminar at the National Liberal Club.

Mega ProjectsL to R: Joanne Prior, Marion Smith QC, Paul Rose, Fiona Parkin QC and Sophie Nappert

The seminar was chaired by Marion Smith QC (39 Essex Chambers) and the learned panel comprised Fiona Parkin QC (Atkin Chambers), Sophie Nappert (independent arbitrator), and Joanne Prior (Blackrock PM). 

Marion Smith QC began the session by introducing the speakers and the topic, noting that the panel would discuss a number of issues arising from so-called ‘megaprojects’, offering the perspectives of counsel, arbitrator and expert respectively. 

Fiona Parkin QC, offering the perspective of counsel, addressed the termination of megaprojects by telling the cautionary tale of OHL v. the Government of Gibraltar, outlining the reasons why a high profile airport project went wrong, lessons to be learned and how the government was able to salvage its position. Following a competitive tender the successful contractor was unable to meet the agreed timetable and recognised that it was in difficulties, predicting losses internally and seeking to argue that the lack of progress was due to unforeseen ground conditions and health and safety risks posed by such conditions. Attempts to resolve the position through collaboration were unsuccessful – OHL’s offer to compete involved delay and additional cost – and the government resorted to legal mechanisms in an attempt to remove the non-performing contractor. Following a protracted period of court battles OHL returned as completion contractor under a new completion contract.  

Providing an arbitrator’s perspective, Sophie Nappert focused on the extent to which arbitrators tasked with resolving long, complex and expensive megaproject disputes are assisted by tools at their disposal. Observing that construction projects of this nature involve not only commercial issues but politics and diplomacy, in particular when state entities are involved, she opined that procedural management tools such as bifurcation and the restriction of disclosure should be approached prudently. Although it is helpful to have the capacity to use such procedural tools, in practice cases where their use is an obvious choice are few and far between. She went on address the key role played by experts in technical megaproject dispute: polarisation of expert evidence puts the tribunal in difficulties, parties and their experts should aim to streamline the issues.   

Concluding the session, Joanne Prior spoke on the issue of quantum from the perspective of an expert. She began by identifying factors that make megaprojects different, including the number of stakeholders involved, typical costs of over $1 billion and the pressure that results from publicity. She then turned to the impact on cost, identifying typical difficulties such as changes in stakeholders that may result in a change in the scope of the project and the timing of changes. Key considerations impacting on cost included the volume of variations, prolongation and disruption. She concluded by offering some insights on specific claim difficulties arising from megaprojects.  

Following a lively question and answer session Paul Rose (London Branch Vice Chair) offered a note of thanks on behalf of the London Branch