Construction Law International homepage  »  June 2020

 

The Application of Contracts in Developing Offshore Oil and Gas Projects Philip Loots and Donald Charrett Informa Law from Routledge (2019) ISBN: 978-0-367-13552-2 362 pages Reviewed by Jaclyn Masters

 

Those practising in the field of construction and engineering will undoubtedly be familiar with both Philip Loots and Donald Charrett. Together and individually, Loots and Charrett have published extensively and have a broad practice within these fields. The Application of Contracts in Developing Offshore Oil and Gas Projects follows in the steps of their existing works in its thorough coverage of the development of offshore oil and gas projects internationally. The text is both academically rigorous and grounded in key industry and legal frameworks. Like their earlier

co-authored text, Practical Guide to Engineering and Construction Contracts, this newly released text has a very practical industry focus and is aimed at lawyers and construction professionals alike. This is an advanced text and will be most beneficial to those with a working knowledge of the industry, specifically the intricacies of offshore oil and gas projects.

The Application of Contracts in Developing Offshore Oil and Gas Projects is a practical guide with an emphasis on offshore oil and gas project development and the heightened risk profile these projects have when compared with onshore construction. The text reads like a practical glossary and comprehensive overview of some key risk and project issues at the various stages of an offshore oil and gas project. Structurally, the text examines projects from inception to decommissioning, with a practical focus at all stages. It is also worth noting that the advice in this text is supplemented by appendices. For example, to support the focus in Chapters 3 and 4 on feasibility studies, Appendix B includes a sample framework.

The earlier chapters focus on ensuring that readers understand important definitions and thematic concepts as well as appreciate the key risks that typically arise on offshore oil and gas construction projects. There are helpful and targeted international examples and case studies, and the commercial and legal ramifications of project decisions are explored. For example, in Chapter 2, the authors use a United Kingdom case study on fraudulent misrepresentation of key project personnel. It serves as a timely reminder of the importance of representations made during a project tender phase about the personnel who will be involved in the project.

Subsequent chapters explore more specific areas spanning the life cycle of an offshore oil and gas construction project. For example, Chapter 5 focuses on contract strategy and addresses the common misconception that an engineering, procurement and construction (EPC) contract is of necessity a lump sum contract. It distinguishes between EPC and engineering, procurement and construction management, both in terms of issues like privity of contract, buildability, and the dispute resolution implications, with some focussed diagrams to demonstrate these issues.

Chapter 7 looks at the all-important choice of contract for oil and gas projects. As well as outlining a case for the use of standard forms, the authors illustrate some key ones used across the world in the industry. By the same token, they warn against the use of precedents based on the theory that no two offshore construction projects are the same. While this may be the case, what these projects do share is the most common single cause of project failure: inappropriate project organisation, including having the wrong people in key positions, with roles and responsibilities that are neither well defined nor understood. Chapter 15 explores this carefully and its inclusion in the text is appropriate given the reiteration of the need for the key personnel to be well matched to the specific project, first articulated in earlier chapters.

Chapter 16, focusing on international contracting, is a chapter I think many working in this field will be particularly interested in given the tendency for oil and gas projects to have an international reach in some form because of scale and cost considerations. Much of the chapter helpfully consists of checklists regarding general considerations to be resolved, contract documentation, company issues, and other vital areas. A detailed case study of the Petrobras-36 project supports this.

Unsurprisingly for those working in offshore oil and gas construction, variations are described as being at the heart of most offshore disputes. Chapter 18 contains practical project management advice, for example, on the importance of documentary evidence and maintaining accurate records, data and contemporaneous communications. Intrinsically, this also reads as sage dispute avoidance and risk management advice.

Chapter 20, another topic likely to be anticipated by many working in this area, looks at the challenges in achieving successful megaprojects. This chapter focuses on just two of the issues that can be addressed to improve project outcomes: scoping and risk allocation. This reflects the focus given to these issues throughout the book, and in relation to projects of all sizes within the offshore construction oil and gas category.

While many of the chapters cover content that one would expect to find in a text of this nature, several stood out as unique, either structurally or in content. As an example, Chapter 12 looks at construction in a practical setting. It uses an unspecified medium-to-large project as a working case study, in addition to the many international reported judgments discussed in the chapter.

Similarly, many chapters use a checklist approach, perhaps best demonstrated in Chapter 13, which walks through commissioning and start-up. The use of this list format will be particularly helpful to experienced professionals looking for a more nuanced and thematic engagement with project issues.

Chapter 14, which includes a sample insurance clause alongside the discussion of risk allocation and insurance, is another example of content that was particularly helpful.

In terms of unique content, Chapter 19 explores the interesting concept of economic duress in the context of construction contracts on large oil and gas projects, from an
Anglo-Australian perspective. The authors outline the elements of the claim, with extensive case references. They also explore the practical application of the law. The final chapter closes with decommissioning, a natural end for a book on offshore oil and gas projects given the end of (productive) life. The processes involved are discussed by reference to the UK continental shelf.

Overall, this is a comprehensive and practical text, and the advanced focus will make it a valuable resource for legal and construction professionals working on offshore oil and gas construction projects internationally.

 

Jaclyn Masters is a licensed attorney in Texas and a legal practitioner in Victoria, Australia.

 

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The International Application of FIDIC Contracts: A Practical Guide (2019) Edited by Donald Charrett Routledge  ISBN: 9780367142971 442 pages Reviewed by Bill Barton

 

‘A Practical Guide’ is an understatement. Covering 18 countries, each almost a book in its own right, and with 442 pages, this is not bedtime reading.

It is said that this book is not intended to be a formal text on the use of FIDIC, but such is the comprehensive nature of the guidance and explanations within the opening chapters that it will undoubtedly be regarded as one of the definitive guides to what FIDIC is and how to use it.

Apart from some useful summaries as to the differences between the rainbow forms, there is a detailed consideration of the Golden Principles, upon which FIDIC is drafted. This helpfully sets the scene for all the subsequent chapters and should be read by all those who seek to draft or amend FIDIC in order to recognise and understand the importance of how and why it is drafted, with the division of risk and responsibility.

It is important when examining the underlying use of FIDIC under different jurisdictions that the user recognises the allocation of specific risks, duties and obligations and how these have evolved over a long period of time.

While this book is about jurisdiction differences and is not specifically aimed at lawyers, it carefully provides enough explanation and guidance to the reader to ensure that fundamental aspects such as the allocation of risk are clearly set out and defined.

Any user of FIDIC will benefit from a careful reading of the chapter on the preparation of Particular Conditions. It gives clear explanation and guidance as to the meaning of the standard provisions and concise assistance on what should and should not be changed, depending on the contents of the General Conditions and governing law.

If there is a criticism of this section of the book, it is that it undoubtedly goes into more than superficial detail and in conjunction with the detailed tables and prodigious footnotes, there is a significant amount to take in, digest and absorb. This book is probably not suitable for a first-time user of FIDIC unless read and accompanied with a full unamended form of the required FIDIC contract and the time to read it.

The book is written in plain English and with a minimum of legal jargon, but these early chapters still pull no punches and there is no oversimplifying. However, for individuals and parties with either some experience of, or long-term exposure and use of FIDIC, there are some great tables that identify modifications which might be made, and then sections dealing with which are most likely to appear, as between governing laws, applicable laws and employer’s performance.

As a consequence of this methodical and patient analysis of a standard FIDIC contract, its layout, context, intent and purpose, these early chapters provide sensible assistance in its use and how to complete and apply the contract. Thereafter, you are ready to dive into any one of the 18 country-specific chapters.

As is made clear, these are all, bar one signed up to the New York Convention.

Each country’s section follows the same format and deals with a set of specific questions and issues. They cover the country’s basic legal environment, the applicable law and guidance as to the changes required to adapt FIDIC and the special conditions required to account for jurisdictional differences on common construction law issues such as gross negligence, loss of profit, termination, dispute resolution and variations. Thus, there is a strong cross-jurisdictional content.

Each section is authored by a solicitor or of counsel with extensive construction experience in the delivery of projects and dispute resolution using FIDIC. Most of the authors are also arbitrators, adjudicators and even judges, so are able to understand and apply the principles observed from a variety of very helpful aspects. One very helpful aspect of each section is an outline of which issues a court or arbitrator may construe differently to that which is outlined in the contract, whether due to local law or custom.

It is neither possible nor practical to review in detail all 18 sections, so purely from the personal perspective of the reviewer, a short comment on the Australian and Italian entries are set out below, by way of comparison.

The individual sections are perhaps not enough on their own to stand as comprehensive references as to the ways in which FIDIC will be interpreted and how it should be completed for each country. However, there is more than enough detail to ensure competent contract administrators comprehend the scale of issues they must consider, and are able to raise these with their client and, as necessary, to employ legal expertise locally to advise in greater detail.

Mention must also be given to the wonderfully coherent and useful glossary. Once again it is comprehensive and includes not only English words but words from across the world – for example, the word ‘impervision’ from Romania.

While aimed at contract administrators and/or lawyers who are more familiar with the requirements and peculiarities of FIDIC and the application of FIDIC in a range of jurisdictions, any lawyer involved in the drafting and negotiation of a FIDIC contract should read and digest this book.

If you advise across multiple jurisdictions or have clients operating in different countries, then this book can be considered to be essential.

It is available in an electronic version as well as in hard copy.

 

Australia is a common law country.	Italy is a civil law country.
Australia comprises six states and two territories.	The Italian civil code is one of the primary sources of law and is divided into six books, of which the fourth book regulates the general provisions of obligations of contracts (including construction agreements).
While judgments from other common law jurisdictions will in theory be followed, there are instances when the statutory frameworks existing within the six states has led to judgements being overruled by a relevant court.	There is general freedom to agree the law of the contract and there are no particular requirements of formality.
Unlike in the UK, statutory adjudication is confined to payment disputes.	However, there are safeguards such as double signing, which are advised in order to be compliant with Italian law.
This section has a very detailed and useful summary of the applicable legislation for each state and territory as it applies to some of the fundamental aspects of FIDIC contracts.	There are also, for example, peculiar requirements that operate in the event of insolvent termination.

Table 1: comparison between Australia and Italy

 

Bill Barton is a Director at Barton Legal Limited, Leeds.