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Construction in 35 jurisdictions worldwide Contributing editor: Robert S Peckar

2014 Published by Getting the Deal Through in association with: AB & David Achour & Hájek sro Akıncı Law Office Alem & Associates Arzinger Atsumi & Sakai Borden Ladner Gervais LLP Buse Heberer Fromm Comad, SC Fenwick Elliott LLP Formosan Brothers, Attorneys-at-Law Foyen Advokatfirma AB George Etomi & Partners Gómez-Pinzón Zuleta Abogados Grandway Law Offices Hani Qurashi Law Firm in cooperation with Kilpatrick Townsend Kilpatrick Townsend Legal Consultancy Kleyr Grasso Associés Lalive Lalive in Qatar LLC Larraín Rencoret & Urzúa Abogados Lett Law Firm Magnusson Kancelaria Prawnicza Mäkitalo Rantanen & Co Ltd Motieka & Audzevicˇius OMG Ost Legal Peckar & Abramson, PC Pinheiro Neto Advogados Seth Dua & Associates Severijn Hulshof advocaten Shalakany Law Office Smith Violet Webb Henderson WongPartnership LLP

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Construction 2014

Introduction Robert S Peckar Peckar & Abramson, PC

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Contributing editor Robert S Peckar Peckar & Abramson, PC

Brazil Júlio César Bueno Pinheiro Neto Advogados

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Publisher Gideon Roberton Business development managers Alan Lee George Ingledew Dan White Account manager Megan Friedman Trainee account managers Cady Atkinson Joseph Rush Dominique Destrée Emma Chowdhury

Canada Bruce Reynolds, Sharon Vogel and Yvan Houle Borden Ladner Gervais LLP

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Chile José Manuel Larraín Larraín Rencoret & Urzúa Abogados

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China Wang Jihong, Lin Li, Jiang Jie, Miao Juan and Ma Yuhong Grandway Law Offices

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Colombia Santiago Jaramillo-Caro Gómez-Pinzón Zuleta Abogados

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Czech Republic Gabriel Achour and Jakub Zámyslický Achour & Hájek sro

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Denmark Henrik Puggaard, Lene Lange and Kristian Skovgård Larsen Lett Law Firm

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Dominican Republic Laura Troncoso Ariza and Mairení Silvestre Ramírez OMG

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Media coordinator Parween Bains

Egypt Ahmed Amin and Farah El Nahas Shalakany Law Office

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Administrative coordinator Sophie Hickey

Finland Aimo Halonen Mäkitalo Rantanen & Co Ltd

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Trainee research coordinator Robin Synnot

France Isabelle Smith Monnerville and Julien Maire du Poset Smith Violet

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Marketing manager (subscriptions) Rachel Nurse

Germany Jörg Gardemann and Alexander Herbert Buse Heberer Fromm

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Ghana David Ofosu-Dorte, Isabel Boaten and Ferdinand Adadzi AB & David

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India Sunil Seth and Vasanth Rajasekaran Seth Dua & Associates

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subscriptions@ gettingthedealthrough.com

Head of editorial production Adam Myers Production coordinator Lydia Gerges

Japan Miho Niunoya Atsumi & Sakai

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Senior production editor Jonathan Cowie

Lebanon Rana Kahwagi and Karim Khalaf Alem & Associates

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Production editor Martin Forrest

Lithuania Jovitas Elzbergas, Valentas Mitrauskas and Donatas Lapinskas Motieka & Audzevicˇius

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Luxembourg François Collot Kleyr Grasso Associés

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Mexico Roberto Hernández-García Comad, SC

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Chief subeditor Jonathan Allen Senior subeditor Caroline Rawson

Netherlands Leendert C van den Berg Severijn Hulshof advocaten

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Subeditor Tim Beaver

New Zealand Garth Sinclair and Michael Gartshore Webb Henderson

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Director Callum Campbell

Nigeria George Etomi, Efeomo Olotu and Ivie Ehanmo George Etomi & Partners

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Managing director Richard Davey

Poland Andrzej Tokaj and Przemysław Kastyak Magnusson Kancelaria Prawnicza

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Construction 2014 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 © Law Business Research Ltd 2013 No photocopying: copyright licences do not apply. First published 2008 Seventh edition ISSN 1755-6953 The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer– client relationship. No legal advice is being given in the publication. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2013, be advised that this is a developing area.

Printed and distributed by Encompass Print Solutions Tel: 0844 2480 112

Law Business Research

Qatar Marcus Boeglin, Veijo Heiskanen, Marc Sukkar, Matthias Scherer and Domifille Baizeau 154

Lalive in Qatar LLC Russia Vladimir Lipavsky Ost Legal

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Saudi Arabia Hani Al Qurashi, Rami Al Qulaiti and Saeed Basuhil Hani Qurashi Law Firm in cooperation with Kilpatrick Townsend

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Singapore Christopher Chuah and Tay Peng Cheng WongPartnership LLP

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Sweden Andreas Magnusson, Charlotta Wälsäter and Per Vestman Foyen Advokatfirma AB

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Switzerland Michael E Schneider, Matthias Scherer, Bernd Ehle and Sam Moss Lalive

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Taiwan Helena H C Chen Formosan Brothers, Attorneys-at-Law

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Turkey Ziya Akıncı and Cemile Demir Gökyayla Akıncı Law Office

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Ukraine Timur Bondaryev, Svitlana Teush and Volodymyr Grabchak Arzinger

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United Arab Emirates Thomas Philip Wilson, Rabih Tabbara and Scott Hutton 211

Kilpatrick Townsend Legal Consultancy United Kingdom Stacy Sinclair Fenwick Elliott LLP

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United States Robert S Peckar and Michael S Zicherman Peckar & Abramson, PC

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Singapore Christopher Chuah and Tay Peng Cheng WongPartnership LLP

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Foreign pursuit of the local market If a foreign designer or contractor wanted to set up an operation to pursue the local market what are the key concerns they should consider before they took such a step?

Establishing a business in Singapore is easy, and its legal system is extremely efficient and reliable. Employment and intellectual property laws in particular are business-friendly. Business vehicle

First, the foreign contractor will have to decide which business vehicle to adopt in Singapore. There are three business vehicles for foreigners, namely a Singapore-registered subsidiary, a branch or a representative office. Each of these business vehicles entails different consequences on liability, accounting procedures, tax implications and consolidation issues. There are no exchange control restrictions and no restrictions on repatriation of profits and capital. Business climate within the construction industry

The awarding of projects in Singapore is typically done by way of a competitive tender where each participating contractor will submit its tender offer to the employer. The employer will then evaluate the tenders submitted and will usually award the construction of the project to the contractor that is financially sound and has submitted an acceptable tender price, and that has a good track record in the construction industry. Alternatively, the employer may directly contract with the preferred contractor without going through a tender process. Central provident funds (CPF) contributions

Unlike many countries, there are no compulsory contributions to any pension scheme or social security insurance scheme in Singapore. Instead, Singapore has the CPF scheme, which is a form of longterm savings scheme. The employer is required to make compulsory contributions to the CPF account of an employee who is a Singapore citizen or permanent resident. For such an employee, the employer must deduct and pay to the CPF Board a specified percentage of the employee’s salary (employee’s contribution) for deposit into the employee’s CPF account. In addition, the employer must also contribute a specified percentage of the employee’s salary (employer’s contribution) to the employee’s CPF account. Foreign manpower

Singapore has very stringent regulations and policies for the employment of foreign manpower. See question 15.

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Licensing procedures Must foreign designers and contractors be licensed locally to work and, if so, what are the consequences for working without a licence?

Under the Building Control Act (chapter 29), no person shall advertise, hold him or herself out or conduct him or herself in any way or by any means as a person who is authorised to carry on the business of a general builder or a specialist builder in Singapore, or carry on the business of general building works or specialist building works, unless he or she is in possession of a general builder’s licence and a specialist builder’s licence, respectively. A person who contravenes this shall be guilty of an offence and be liable on conviction to: • a fine not exceeding S$20,000 or to imprisonment for a term not exceeding 12 months or both; • a further fine not exceeding S$500 for each day or part thereof the person fails, without reasonable excuse, to comply with such requirements; and • in the case of a continuing offence after conviction, to a further fine not exceeding S$1,000 for every day or part thereof during which the offence continues after conviction. The licensing requirements, however, do not apply to the following building works: • building works for a temporary building or the occupation of any such building; • retrofitting of exterior features referred to in part III of the Building Control Act; • building works that are exempted under section 30 of the Building Control Act, or are in relation to a building that is so exempted; and • building works that are prescribed in the building regulations to be insignificant building works. In addition, all foreign companies carrying on business must register with the Accounting and Corporate Regulatory Authority of Singapore. Failure to do so will render every officer of the company who is in default, and every agent of the company who knowingly and wilfully authorises or permits the default, to be guilty of an offence and be liable on conviction to a fine not exceeding S$1,000, and also to a default penalty. For foreign designers such as architects or engineers, the Architects Act (chapter 12) and the Professional Engineers Act (chapter 253) require persons who wish to practise as an architect or engineer in Singapore to comply with the registration requirements. The Architects Act prohibits a person from drawing or preparing any architectural plan, drawing, tracing, design, specification or other document intended to govern the construction, enlargement or alteration of any building or part thereof in Singapore unless the person is: • a registered architect who has in force a practising certificate; or • under the direction or supervision of a registered architect who has in force a practising certificate.

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singapore A person who contravenes this shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$5,000 and, in the case of a second or subsequent conviction, to a fine not exceeding S$10,000 or imprisonment for a term not exceeding six months, or both. The Professional Engineers Act prohibits a person from engaging in any of the prescribed branches of professional engineering work in Singapore or drawing or preparing any plan, sketch, drawing, design, specification or other document relating to any of the prescribed branches of professional engineering work in Singapore unless the person: • is a registered professional engineer who has in force a practising certificate authorising him or her to engage in that branch of professional engineering work; • is under the direction or supervision of a registered professional engineer who has in force a practising certificate authorising the professional engineer to engage in that branch of professional engineering work; or • is authorised by the Professional Engineers Board to work in collaboration (but without a right to any independent practice) with a registered professional engineer who has in force a practising certificate authorising the registered professional engineer to engage in that branch of professional engineering work. The ‘prescribed branches of professional engineering work’ means civil engineering, electrical engineering, mechanical engineering, and such other branches of engineering as may be prescribed. A person who contravenes this shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$5,000 and, in the case of a second or subsequent offence, to a fine not exceeding S$10,000 or imprisonment for a term not exceeding six months or both. 3 Competition Do local laws provide any advantage to domestic contractors in competition with foreign contractors?

No, local laws generally do not discriminate between domestic and foreign contractors. 4 Bribery If a contractor has illegally obtained the award of a contract, for example by bribery, will the contract be enforceable? Are bribe-givers and bribe-takers prosecuted and, if so, what are the penalties they face? Are facilitation payments allowable under local law?

The contract is unenforceable as a result of illegality if it is expressly or by implication forbidden by common law or legislation. In particular, the contractor may be liable under the Prevention of Corruption Act (chapter 241) (PCA) for committing bribery and be subject to a fine not exceeding S$100,000 or imprisonment not exceeding a term of seven years, or both. In addition, the contractor may be debarred from bidding for public sector projects in the future. Facilitation payments that amount to bribery are not allowable under local law, and would contravene the general prohibitions against bribery set out in the PCA and the Penal Code (chapter 224). Under the PCA, any person who shall by him or herself or by or in conjunction with any other person corruptly solicit or receive, or agree to receive for him or herself, or for any other person or corruptly give, promise or offer to any person whether for the benefit of that person or of another person, any gratification as an inducement to or reward for, or otherwise on account of any person doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed or any member, officer or servant of a public body doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which such a public body is concerned shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$100,000 or imprisonment for a term not exceeding five years or both.

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WongPartnership LLP Where the matter or transaction in relation to which the offence was committed was a contract or a proposal for a contract with the government or any public body or a subcontract to execute any work comprised in such a contract, a person convicted of the offence shall be liable on conviction to a fine not exceeding S$100,000 or imprisonment for a term not exceeding seven years or both. 5

Political contributions Is the making of political contributions part of doing business? If so, are there laws that restrict the ability of contractors or design professionals to work for public agencies because of their financial support for political candidates or parties?

The making of political contributions is not a necessary precondition to the attainment of business success in Singapore. There are no laws in Singapore that restrict the ability of contractors or design professionals to work for public agencies because of their financial support for political candidates or parties. 6

Other international legal considerations Are there any other important legal issues that may present obstacles to a foreign contractor attempting to do business in your jurisdiction?

While legal issues are not likely to present obstacles to a foreign contractor, it is prudent for a foreign contractor to understand the local conditions and legal climate before undertaking work in Singapore. 7

Construction contracts What standard-contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution?

Locally, the standard-contract form used for public sector projects is known as the Public Sector Standard Conditions of Contract. For private sector projects procured on a design-and-build basis, the Real Estate Developers’ Association of Singapore design and build form is commonly used. For the construction of private sector projects using the traditional method of procurement, the Singapore Institute of Architects Conditions of Contract is also frequently used. In addition, standard-contract forms that are widely used internationally, such as the FIDIC conditions of contract, have also been used, albeit with suitable modifications. While the standard-form contracts referred to above are drafted in the English language, and it is common for construction and design contracts to be in the English language, there is no restriction on the use of other languages. There are also no restrictions on the choice of law and the venue for dispute resolution, although there are also mandatory laws in Singapore applicable to projects in Singapore that cannot be circumvented through the choice of another governing law. 8

Payment methods How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments?

Payment methods vary depending on the contractual provisions. Typically, payment may be made by cheque or electronic transfer. Payment by cash or cashier’s order is less common where large amounts are involved. There is no standard frequency for payments as payment terms are dependent on contractual provisions, for example, provisions for single or one-off payments or payments based on certain milestones or dates. The Building and Construction Industry Security of Payment Act (chapter 30B) (SOP Act) sets out a specific regime for the payment of contractors, in relation to contracts that fall within its ambit.

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For such contracts, subject to the provisions of the SOP Act, the contractor or supplier is entitled to serve a payment claim at such time as provided for in the contract, and if the contract makes no such provision, by the last day of the month following the month in which the contract is made. For construction contracts, the respondent named in the payment claim should then serve a payment response within the stipulated time frame under the SOP Act. For construction contracts, subject to the SOP Act, the due date for payment is the due date provided for in the contract, subject to a maximum of 35 days after submission of the contractor’s tax invoice or the due date for the payment response. If the due date for payment is not provided for in the contract, subject to the SOP Act, the due date is a stricter 14 days after submission of the contractor’s tax invoice or the due date for the payment response. For pure supply contracts, the due date for payment is the due date provided for in the contract, subject to a maximum of 60 days after the payment claim (eg, the invoice) is served. If the due date for payment is not provided for in the contract, the due date is 30 days after the payment claim is served. 9

Contractual matrix of international projects What is the typical contractual matrix for a major project in your jurisdiction in terms of the contractual relationships among the various construction project participants?

In most major projects in Singapore, the employer contracts directly with a contractor for building works and a supervising officer, who is usually an architect or a professional engineer, who will administer the building contract. Some parts of the construction works may be subcontracted to other contractors but this is done only with the approval of the employer. Nominated subcontractors are sometimes appointed by the employer to carry out specialised building works. It is also not uncommon for the employer to contract with a consortium made up of contractors as well as consultants. 10 PPP and PFI Is there a formal statutory and regulatory framework for PPP and PFI contracts?

There is no formal statutory and regulatory framework for PPP and PFI contracts in Singapore. 11 Joint ventures Are all members of consortia jointly liable for the entire project or may they allocate liability and responsibility among them?

This depends on first, the contractual arrangement between members of the consortium and second, the terms of the contract between the consortium and the employer. If a joint venture entity is incorporated, liability for the project would generally lie with the incorporated joint venture entity, although an employer may seek to obtain security of performance from the members of the joint venture. Otherwise, employers will generally wish to make the consortium members jointly and severally liable for performance of the works required for the project. Local laws do not restrict or regulate the allocation of liability and responsibility between members of a consortium. However, for certain types of works, only holders of specific licences may be able to undertake such works. 12 Tort claims and indemnity Do local laws permit a contracting party to be indemnified against all acts, errors and omissions arising from the work of the other party, even when the first party is negligent?

In addition, since such indemnity clauses effectively exclude or limit liability, they are usually strictly construed by the Singapore courts. Under the UCTA, liability for death or personal injury resulting from negligence cannot be excluded or restricted by reference to any contract term or notice given. 13 Liability to third parties Where a contractor constructs a building that will be sold or leased to a third party, does the contractor bear any potential responsibility to the third party? May the third party pursue a claim against the contractor despite the lack of contractual privity?

In contracts between employers and contractors, contractors expressly or impliedly warrant that works will be done in a good, workmanlike manner. The Contracts (Rights of Third Parties) Act (chapter 53B) allows a third party to sue the contractor directly if the contract expressly provides the third party the right to sue the contractor directly, or the contract purports to confer a benefit on the third party and it does not appear from the contract on its proper construction that the parties did not intend the term to be enforceable by the third party. In addition, the contractor may also be liable in tort to the third party if the court finds that there was sufficient proximity between the contractor and the third party, which gives rise to a duty of care on the part of the contractor. Even then, the contractor’s liability is only limited to the losses or damage that were reasonably foreseeable. However, the court would be slow to impose such a duty of care on the contractor if this would lead to indeterminate liability for an indeterminate time to an indeterminate class: see RSP Architects, Planners & Engineers v Ocean Front Pte Ltd [1995] 3 SLR(R) 653 (Court of Appeal, Singapore), RSP Architects, Planners & Engineers v MCST Plan No. 1075 [1999] 2 SLR(R) 449 (Court of Appeal, Singapore) and Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 (Court of Appeal, Singapore). 14 Insurance To what extent do available insurance products afford a contractor coverage for: damage to the property of third parties; injury to workers or third parties; delay damages; and damages due to environmental hazards. Does the local law limit contractors’ liability for damages?

The Work Injury Compensation Act (chapter 354) makes it compulsory for all contractors to take up compensation insurance for their workers. This ensures that injured workers or dependents of deceased workers can be adequately compensated. It should be highlighted that failure to procure such insurance is an offence under the Act and is punishable with a fine of up to S$10,000 or a jail term of up to one year, or both. Apart from the insurance to be procured for the purposes of the Work Injury Compensation Act, any other insurance to be procured is purely a matter of commercial negotiations and contract between the contractor and insurer. Typically, contractors would procure insurance to cover the works as well as any injury to third parties and the Contractor’s All Risk Policy is maintained for this purpose. There is little restriction on the type or amount of insurance that a contractor may obtain to cover the risks. It depends on whether the contractor is able to obtain the necessary cover, and the amount of premium that the contractor is prepared to pay. There is no statutory limitation of liability for damages applicable to contractors. Generally, damages will be compensatory in nature.

Yes, if contractual provisions are clear. Further, if the contract is subject to the Unfair Contract Terms Act (chapter 396) (UCTA), then such provisions must also satisfy the requirement of reasonableness. www.gettingthedealthrough.com



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singapore 15 Labour requirements Are there any laws requiring a minimum amount of local labour to be employed on a particular construction project?

As at 14 March 2013, for the construction sector, the ‘dependency ceiling’ that limits the proportion of foreign workers in the total workforce of any employer is one local worker for every seven foreign workers (ie, 87.5 per cent). The Ministry of Manpower’s Guidelines on the Calculation of Quota and Levy Bill can be found on its website: www.mom.gov.sg. Specifically, in relation to the construction sector, the Ministry of Manpower has stipulated the countries from which companies may recruit workers: Bangladesh, China, Hong Kong, India, Macao, Malaysia, Myanmar, the Philippines, South Korea, Sri Lanka, Taiwan and Thailand. 16 Local labour law If a contractor directly hires local labour (at any level) for a project, are there any legal obligations towards the employees that cannot be terminated upon completion of the employment?

This depends very much on the terms of the employment. Upon the completion of employment, employers generally owe no further legal obligations towards employees. This is however, subject to the employers having fully discharged the contractual obligations owed to the employee prior to completion (for example, payment of salary and contributions towards the CPF). If such obligations have not been fully discharged, the employees will continue to have the right to require that the said obligations be discharged. 17 Close of operations If a foreign contractor that has been legally operating decides to close its operations, what are the legal obstacles to closing up and leaving?

There are no legal obstacles for a foreign contractor to cease its operations in Singapore, if it no longer carries on business in Singapore. If it ceases to have a place of business or to carry on business in Singapore, it must lodge notice of that fact with the registrar within seven days of cessation. As from the day on which the notice is so lodged, its obligation to lodge any document (not being a document that ought to have been lodged before that day) with the registrar shall cease, and the registrar shall, upon the expiration of 12 months after the lodging of the notice, remove the name of that foreign company from the register. However, if a foreign contractor has not completed the performance of any contract, the contract may have provisions deeming such closure of business as a breach of contract or prohibiting him or her from doing so. A company may also choose to voluntarily wind up its affairs if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of such voluntary winding up. In such case, the company will have to appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications and documents as may be required under the Companies Act (chapter 50). 18 Payment rights How may a contractor secure the right to payment of its costs and fees from an owner? May the contractor place liens on the property?

For contracts subject to the SOP Act, a contractor may exercise its statutory right of payment under the SOP Act. Under the SOP Act, the contractor is entitled to serve a payment claim on the party responsible for payment (the respondent). The payment claim must: • be served within the stipulated period; • be in writing and served on the respondent; • identify the contract to which the claim relates; • contain details of the claimed amount; and

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WongPartnership LLP • s tate the claimed amount supported with relevant documentation and calculations. The respondent must issue a payment response within the time stipulated in the contract, subject to a maximum of 21 days after the payment claim is served. In the absence of such contractual provision, the payment response due date shall be seven days after a payment claim is served. Thereafter, a contractor is entitled to invoke an adjudication process under the SOP Act to determine the contractor’s right to payment. However, the adjudication determination is only accorded temporary finality and any of the parties can submit the dispute to the appropriate dispute resolution forum provided for in their contract or the court, as the case may be. For immoveable property, the contractor may not place liens on the property without an order of the court made pursuant to a writ of seizure and sale attaching the interest of the judgment debtor in the property described. For moveable property, the SOP Act provides that a contractor can exercise a lien over unfixed and unpaid goods supplied by the contractor to the respondent under the contract if the respondent fails to pay the whole or any part of the adjudicated amount. The lien granted by the SOP Act does not give the contractor a preference over a lien or charge existing before the date that the adjudicated amount became due pursuant to the SOP Act. In addition, if there is an enforceable retention of title clause in the agreement between the contractor and the owner, in favour of the contractor, the contractor may be able to withhold the passing of title of property supplied to the owner until such time as the contractor is fully paid. Except as described above, there is no general concept of a ‘contractor’s lien’ or ‘mechanic’s lien’ prevailing in some other countries. 19 Contracting with government entities Can a government agency assert sovereign immunity as a defence to a contractor’s claim for payment?

No. In addition, the SOP Act specifically binds the government. 20 Statutory payment protection Where major projects have been interrupted or cancelled, do the local laws provide any protection for unpaid contractors who have performed work?

The contractor’s right to recover payments is largely dictated by the contractual provisions agreed between the contractor and the employer. In addition, the SOP Act assists the unpaid contractor who has done work or supplied goods or services to obtain expedited resolution of payment disputes through a process of adjudication, subject to the contractor having complied with the applicable procedural requirements. However, section 36(4) of the SOP Act provides that the provisions of the Act do not limit or affect the operation of any other law in relation to any right, title, interest, privilege or liability of a person arising under or by virtue of a contract or an agreement and, accordingly, insolvency laws continue to be applicable in connection therewith. 21 Force majeure and acts of God Under local law are contractors excused from performing contractual obligations owing to events beyond their control?

In general, parties may contractually provide for non-performance upon the occurrence of certain events so that such non-performance does not amount to a breach. Such clauses are termed as ‘force majeure’ clauses and allow parties to be innocent of liability for non-performance following the occurrence of the specified force majeure event.

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There is no general rule as to what constitutes an event of force majeure and it depends on what parties have provided for in their contract and the circumstances in each case. If there is no force majeure clause in the contract, the contractor may still be excused from performing its contractual obligations by invoking the common law doctrine of frustration. However, it should be noted that the doctrine of frustration operates only in very exceptional circumstances and results in the discharge of the contract, provided the supervening event is one that fundamentally or radically alters the contract such that it is no longer the same as that which was originally entered into. 22 Courts and tribunals Are there any specialised tribunals that are dedicated to resolving construction disputes?

Specially appointed adjudicators are empowered to resolve payment disputes under the SOP Act. There have also been specialist judges appointed to preside over construction-related disputes in the subordinate courts, all of whom are experienced and well-respected members of the legal profession and academia. 23 Dispute review boards Are dispute review boards (DRBs) used? Are their decisions treated as mandatory, advisory, final or interim?

Dispute review boards (DRBs) and dispute adjudication boards (DABs) have not been used often in Singapore. There is a distinction between the effect given to decisions of a DRB and a DAB. In the Court of Appeal case of CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] SGCA 33, the Court of Appeal cited the academic view that a decision of a DRB is only a non-binding recommendation, while the decision of a DAB has an interim binding effect. As there are no treaties or legislation based on which a DAB decision may be enforced, any avenue of enforcement of a DAB decision is dependent on the terms of the contract between the parties. Depending on the terms of the contract, the decisions of both Boards are usually subject to subsequent resolution at arbitration or litigation. 24 Mediation Has the practice of voluntary participation in professionally organised mediation gained acceptance and, if so, how prevalent is the practice and where are the mediators coming from? If not, why not?

Mediation has been widely used in Singapore. Standard form construction contracts generally provide that parties refer their disputes to mediation first before resorting to arbitration or litigation. More than 2,000 matters have been mediated by the Singapore Mediation Centre, whose mediators include professionals from the local construction industry, as well as legal practitioners and consultants. Of the matters mediated, about 75 per cent have been settled. 25 Confidentiality in mediation Are statements made in mediation confidential?

Typically, at common law, statements made on a ‘without prejudice’ basis during negotiations towards settlement of a dispute are inadmissible in subsequent court proceedings relating to the same subject matter. As such, the without prejudice privilege is usually applicable in most mediations. However, this is not an absolute privilege. At present, it would appear that the without prejudice privilege only applies to the parties in mediation and not the mediator or the process. This poses a potential problem where there is a dispute between parties and mediator. In order to avoid these potential problems, most agreements to mediate contain a confidentiality clause that provides that the parties and the mediator are not to disclose to persons outside the mediation any information or document used in the mediation. www.gettingthedealthrough.com



26 Arbitration of private disputes What is the prevailing attitude towards arbitration of construction disputes? Is it preferred over litigation in the local courts?

Arbitration has gained prominence over litigation in the area of construction disputes. Arbitration clauses can be found in most standard form construction contracts, and as a result of this, construction disputes are more likely to be arbitrated instead of litigated in the local courts. The number of arbitration cases (for all industries) heard at the Singapore International Arbitration Centre (SIAC) has increased more than three-fold in 2010 when compared with 2000. As at 31 December 2012, the SIAC had received 235 new cases, a 25 per cent increase in new filings on 2011. For new cases filed in 2012, the total sum in dispute amounted to S$3.61 billion. 27 Governing law and arbitration providers If a foreign contractor wanted to pursue work and insisted by contract upon international arbitration as the dispute resolution mechanism, which of the customary international arbitration providers is preferred and why?

The SIAC is the customary provider for international arbitration in Singapore and it has handled more than 1,600 cases to date. The SIAC also administers the cases under its own rules of arbitration, the latest of which came into effect on 1 April 2013. The SIAC is usually the preferred choice as the provider for international arbitration because of its reputation as a strong arbitration institution with excellent support facilities and services. It is also less costly than other major arbitration institutions. Most construction contracts in Singapore provide the law of Singapore as the governing law of the contract. Arbitrations can also take place under the rules of other prominent providers such as the International Chamber of Commerce’s International Court of Arbitration, the London Court of International Arbitration and the American Arbitration Association. Each of these institutions has formulated its own arbitration rules. 28 Dispute resolution with government entities May government agencies participate in private arbitration and be bound by the arbitrators’ award?

Local law does not prevent government agencies from consenting to participation in private arbitrations and from being bound by the arbitrators’ award. 29 Arbitral award Is there any basis upon which an arbitral award issued by a foreign or international tribunal may be rejected by your local courts?

The court may set aside a foreign arbitral award if it is satisfied that: • a party to the arbitration agreement was under some incapacity when the agreement was entered into; • the arbitration agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the laws of Singapore; • the party making the application was not given proper notice of the appointment of the arbitrator or the arbitration proceedings or was otherwise unable to present his or her case; • the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, except that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award that contains decisions on matters not submitted to arbitration may be set aside;

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singapore • t he composition of the arbitral tribunal or the arbitral procedure is not in accordance with the parties’ agreement; • the award has not yet become binding on the parties to the arbitral award or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made; • the making of the award was induced or affected by fraud or corruption; • a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced; • the subject matter of the dispute is not capable of settlement by arbitration under the law of Singapore; or • the award is contrary to public policy. Apart from the above circumstances, foreign arbitral awards are usually enforceable in Singapore. 30 Limitation periods Are there any statutory limitation periods within which lawsuits must be commenced for construction work or design services and are there any statutory preconditions for commencing or maintaining such proceedings?

Under section 6 of the Limitation Act (chapter 163), actions founded on contract or tort shall not be brought after the expiration of six years from the date on which the cause of action accrued. In addition, for latent defects, under section 24A of the Limitation Act, an action is required to be brought within three years from the earliest date on which the plaintiff, or any person in whom the cause of action was vested before him or her, first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. This is subject to an overriding time limit of 15 years for the commencement of such an action. Except for what is specified in the Limitation Act on the accrual of the cause of action, there are no statutory preconditions for commencing or maintaining such proceedings. 31 International environmental law Is your jurisdiction party to the Stockholm Declaration of 1972? What are the local laws that provide for preservation of the environment and wildlife while advancing infrastructure and building projects?

While Singapore is not a signatory to the Stockholm Declaration of 1972, there are many environmental laws and regulations that are applicable during the construction of a project, including codes of practice and guidelines that are issued by relevant authorities, which should be adhered to as a matter of good practice. The key legislation and codes of practice that may be applicable include the following: Air pollution

• Environmental Protection and Management Act; • Environmental Protection and Management (Prohibition on the Use of Open Fires) Order; • Environmental Protection and Management (Air Impurities) Regulations; • Environmental Protection and Management (Vehicular Emissions) Regulations; • Environmental Protection and Management (Ozone Depleting Substances) Regulations; • Kyoto Protocol to the United Nation Framework Convention on Climate Change; • Smoking (Prohibition in Certain Places) Act; • Smoking (Prohibition in Certain Places) Notification; • Guidelines for Good Indoor Air Quality in Offices Premises; and • Code of Practice on Pollution Control – Air Pollution Control.

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WongPartnership LLP Water pollution

• • • • • • • •

Sewerage and Drainage Act; Sewerage and Drainage (Sanitary Works) Regulations; Sewerage and Drainage (Trade Effluent) Regulations; Sewerage and Drainage (Exemption – Approval for Discharge of Trade Effluent) Notification 2013; Environmental Protection and Management Act; Environmental Protection and Management (Trade Effluent) Regulations; Code of Practice on Pollution Control – Water Pollution Control; and Code of Practice on Sewerage and Sanitary Works.

Hazardous substances

• • • • • • • • • • • •

Poisons Act; Poisons Rules; Environmental Protection and Management Act; Environmental Protection and Management (Hazardous Substances) Regulations; Hazardous Waste (Control of Export, Import and Transit) Act; Hazardous Waste (Control of Export, Import and Transit) Regulations; Radiation Protection Act; Radiation Protection (Non-Ionising Radiation) Regulations; Radiation Protection (Ionising Radiation) Regulations; Radiation Protection (Transport of Radioactive Materials) Regulations; Radiation Protection (Transit and Transhipment) (Exemption) Regulations; and Code of Practice on Pollution Control – Hazardous Substances Control and Toxic Industrial Wastes Control.

Noise pollution

• • • • •

Miscellaneous Offences (Public Order and Nuisance) Act; Environmental Protection and Management Act; Road Traffic Act; Air Navigation Act; Environmental Protection and Management (Control of Noise At Construction Sites) Regulations; • Environmental Protection and Management (Boundary Noise Limits for Factory Premises) Regulations; and • Code of Practice on Pollution Control – Noise Pollution Control. Environmental sustainability for buildings

• B  uilding Control (Environmental Sustainability) Regulations 2008; and • Code for Environmental Sustainability for Buildings. 32 Local environmental responsibility What duties and liability do local laws impose on developers and contractors for the creation of environmental hazards or violation of local environmental laws and regulations?

Developers and contractors must comply with duties imposed by the legislation listed at question 31, insofar as they are applicable to the works. Apart from civil liability, the creation of environmental hazards or violation of local environmental laws can result in criminal liability. By way of example, under the Environmental Protection and Management Act, any person who discharges or causes or permits to be discharged any toxic or hazardous substance into any inland water so as to be likely to cause pollution of the environment is guilty of a criminal offence and will be liable on the first conviction for a fine not exceeding S$50,000, imprisonment for a term not exceeding 12 months or both.

Getting the Deal Through – Construction 2014

WongPartnership LLP

singapore

Update and trends The SOP Act continues to change the landscape for the resolution of payment disputes in construction cases. Statistics from the Building and Construction Authority showed that as at May 2013, 868 adjudication applications were filed, with the bulk of the valid applications filed by subcontractors against main contractors. The total amount that has been adjudicated was approximately S$341 million as at May 2013, with the largest adjudicated amount for a case being approximately S$30 million. Contractors (both local and foreign) should therefore familiarise themselves with their rights and obligations under the SOP Act.

33 International treaties Is your jurisdiction a signatory to any investment agreements for the protection of investments of a foreign entity in construction and infrastructure projects? If so, how does your model agreement define ‘investment’?

Singapore is a signatory to a number of investment agreements, including, for example, the Japan and Singapore for a New-Age Economic Partnership Agreement (JSEPA) and the United States– Singapore Free Trade Agreement (USSFTA). The USSFTA provides for international law standards in the case of expropriation, and investors have the right to make financial transfers freely without delay. Both USSFTA and JSEPA define ‘investment’ to mean every kind of asset owned or controlled, directly or indirectly, by an investor, including ‘rights under contracts, including turnkey, construction, management, production […] revenue-sharing contracts’.

34 Tax treaties Has your jurisdiction entered into double taxation treaties pursuant to which a contractor is prevented from being taxed in various jurisdictions?

Yes, Singapore is a signatory to more than 60 of these treaties. The type of payment (dividend, interest or royalties) must be defined before determining whether the contractor is prevented from being taxed in various jurisdictions. Although in most cases the contractor is generally exempted from being taxed in other jurisdictions that are signatories to the treaties, there are exceptions. Therefore it is important to first examine the transaction and determine what the exact type of payment is and whether it is exempted. All the avoidance of double taxation agreements concluded by Singapore since 1965 to date can be found on the Inland Revenue Authority of Singapore website, www.iras.gov.sg. 35 Currency controls Are there currency controls that make it difficult or impossible to change operating funds or profits from one currency to another?

No, there are generally no such restrictions. 36 Removal of profits and investment Are there any controls or laws that restrict removal of profits and investments from your jurisdiction?

No. However, this is still subject to tax considerations.

Christopher Chuah Tay Peng Cheng

[email protected] [email protected]

12 Marina Boulevard, Level 28 Marina Bay Financial Centre, Tower 3 Singapore 018982

Tel: +65 6416 8000 Fax: +65 6532 5711 / 5722 www.wongpartnership.com

www.gettingthedealthrough.com



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