Diversity Questionnaire

Hojung Jun

Senior associate, Baker McKenzie, Singapore

1. What is your name and current job, role or title?

My name is Hojung Jun and I am a senior associate in the Finance & Projects Group at Baker McKenzie Singapore, seconded from Baker McKenzie Tokyo since October 2022. I worked in Japan for nine years and in Korea for four years, specialising in construction, project development and acquisition in the energy, infrastructure and mining sectors.

2. When starting out in your career, did you have any role models?

Not really. I started my construction career as in-house counsel in 2010 at a major construction company in Korea, which is an affiliate of one of the world’s largest steelmakers and was very much male-dominated at that time. I had a supervisor who was leading the international legal group and who remains a good mentor and friend, but I didn’t really see her as my role model. I probably learnt the most about being a lawyer in this industry from the external counsel for the major deal I was working on at that time. As a second/third-year lawyer, I was given the opportunity to lead a AU$ 5–6bn deal in Australia where the external counsel was a former engineer turned construction lawyer. He taught me how to read the complicated Australian Standard forms of construction contracts and thousands of pages of scope of works and technical specifications, as well as the essentials of construction law. Thinking back now, I learned a lot from external counsel (not only him but others, too).

3. What advice did you receive which helped you progress in your career?

‘Take any and all opportunities – you can always learn something, especially when you are a young lawyer.’ I still keep this advice in mind and try to learn from anyone and anywhere.
As I get older and more senior, it has been more difficult to be as bold as I was before, but I think all lawyers (probably all human beings) should be open to learning and continuously progressing.

4. Do you think that diversity is improving in your particular professional area?

When I started off in the construction industry in 2010, the majority of project managers and lawyers I encountered in negotiations and at the construction/operation sites were white males. But now I see more female professionals and professionals with diverse ethnic/cultural backgrounds. However, I still rarely seem to see senior female lawyers (particularly of colour) or construction managers in Japan and Korea. I am often still one of very few women, if not the only one, at a negotiation table or client meeting.

5. What positive steps have you seen organisations take to progress diversity and inclusion?

Mainly speaking of Japan, recently I’ve seen more women on executive boards, particularly those who grew within the organisation and newly appointed foreigners (ie, non-Japanese women) as outside directors specifically chosen for the purposes of diversity and inclusion. Many organisations have implemented policies and encouraged a culture to support working parents. Also, in terms of race/ethnicity and LGBTQ, many have implemented policies taking account of ethnic backgrounds and sexual orientation. This has helped to raise awareness and understanding of these issues and ensure they’re more openly discussed compared to the early 2010s.

6. What aspects do you think are still ripe for improvement in organisations?

Despite the improvements mentioned above, there are still few senior female lawyers, executives and board members, especially in Japan and Korea. For women to be promoted to that level, candidates usually have to prove themselves a lot more than their male peers. Sometimes, their personality will be criticised or judged regardless of their performance and capabilities (eg, too strong/aggressive), whereas the same traits would have been perceived as positive in a male candidate (eg, seen as taking the lead/initiative, making things done/happen). This issue may require changes in the workplace culture, but drastic change also requires top-down policies and managerial commitment to gender equality.

7. What are the indicators of when a reasonable diversity balance is reached?

Personally, I do not think this is only about having a certain number or percentage of women in senior/executive level positions. Of course, numbers and percentages are important to objectively measure the diversity balance, but in my view, diversity balance means fostering an environment where different opinions are heard and people in an organisation respect differences (ie, others with different backgrounds).

8. What do diversity and inclusion mean to you and why are they important?

Diversity and inclusion are important to me because of my background. I am a Korean national who qualified in New York and have worked and lived in various cities such as New York, Washington DC, Chicago, Champaign (Illinois), Seoul and Tokyo, to name a few. Growing up, I never thought I would be treated differently just because I am a woman and Asian or that I could not achieve as much as any man. However, having lived and worked in many places in the world as a foreigner, I have realised that women and Asians are expected to be mild, good listeners, reserved and are under-represented. Also, there are numerous expectations/stereotypes related to gender, race, nationality in society, which I do not agree with. I have been very active with a group called ‘Women in Law Japan’ (WILJ) and the Inclusion and Diversity Committee within Baker McKenzie Tokyo, where I chair sub-committees for working parents and race and ethnicity. Diversity and inclusion can mean many different things in different environments and for different people. I believe true diversity and inclusion is respecting each individual without trying to categorise or generalise any aspect of that individual.

9. What impact has the Covid-19 pandemic had on diversity in your professional area?

Due to restrictions on international travel, there is a significant lack of talent and diversity in general. Also, it is difficult to negotiate and resolve contracts, disputes and issues, which would have been agreed or resolved easily if we could meet the counterparts in person. For female professionals, the pandemic resulted in more housework and childcare duties, which sometimes resulted in female professionals leaving their firms.

FIDIC Contracts in Canada

Sharon C Vogel

Partner, Singleton Urquhart Reynolds Vogel, Toronto

1. What is your jurisdiction?

Canada. Constitutionally, Canada is a federation, comprised of ten provinces, three territories and the federal government. Each province or territory has its own statutes and common law (with the exception of the province of Quebec, which is a civil law jurisdiction). As a result provinces may have differing and/or conflicting interpretations of common law or statutory concepts. However, to the extent that the Supreme Court of Canada rules on a given issue, that ruling is binding on all provinces and territories.

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

The FIDIC forms of contract are not widely or commonly used for Canadian construction projects. Instead, the standard forms most widely used across Canada include the Canadian Construction Documents Committee (CCDC) suite of contracts and the Canadian Construction Association (CCA) suite of contracts.

In addition, in relation to public-private partnerships (P3) in Canada, public agencies typically rely on their own template as a basis for creating project agreements for P3 projects.

3. Do FIDIC produce their forms of contract in the language of your jurisdiction? If no, what language do you use?

Yes. In Ontario, English is the official language and the most common business language. In Canada, both English and French are official languages; English is the most common business language in Canada, although French is predominant in the province of Quebec. The FIDIC forms of contract are available in both languages.

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

No, there are no amendments needed in order for the FIDIC Conditions of Contract to be operative in Canada. However, provincial and territorial construction lien legislation may modify the common law of construction contracts; for example, in provinces such as Ontario, Manitoba, and Saskatchewan, a construction contract is deemed to be amended in accordance with the relevant statute. Therefore, it is prudent to consider the relevant construction lien legislation, if any, in order to consider how the FIDIC Conditions of Contract may be modified by such legislation.

There are also various relevant statutory and/or regulatory requirements parties must comply with regarding, without limitation, occupational health and safety, building codes, and environmental protection. This is also consistent with the FIDIC suite of contracts – for example, the FIDIC Red Book provides that a contractor must comply with all applicable health and safety laws and regulations, and obtain permits, licences, and/or approvals as required by law.

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

Because the FIDIC suite of contracts is not widely used in Canada (as noted at Question 2 above), there are no amendments that are common in Canada, either nationwide or specifically with respect to a particular province or territory. To the extent parties wish to employ the FIDIC suite of contracts on a Canadian project, they would be well advised to consult local counsel on the extent to which the FIDIC form of contract will be deemed to be amended as a result of applicable legislation (discussed in more detail at Question 4 above).

6. Does your jurisdiction treat Sub-Clause 2.5 of the 1999 suite of FIDIC contracts as a precondition to employer claims (save for those expressly mentioned in the Sub-Clause)?

Given the rarity with which the FIDIC suite of contracts is used in Canada, there is no specific authority with respect to whether, and to what extent, Sub-Clause 2.5 is a condition precedent to employer claims. As a result, there has been no judicial consideration of this provision – particularly with respect to what it means for an employer to give notice of its intention to claim ‘as soon as practicable’, nor what constitutes sufficient particulars for the purpose of such notice.

However, Canadian jurisdictions have developed a robust body of case law in respect of the common law of notice. Generally speaking, Canadian law construes notice provisions narrowly and strictly, insofar as a court is unlikely to overlook a claimant’s failure to give notice within the time prescribed in the construction contract, and unlikely to overlook a failure to give notice in accordance with the form prescribed by the contract. Canadian courts are also generally skeptical of the argument that compliance with the strict language of notice provisions can be waived by the parties’ conduct.

Where the wording of the notice provision is ambiguous with respect to the requirements for the timing and/or form of the notice, in rare cases the courts have found that constructive notice was given (eg, in the form of meeting minutes). However, such cases are highly uncommon, given that construction contracts in Canada are usually clear with respect to the timing and substance of a valid notice.

7. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money (not including Variations)?

As noted above, given the rarity with which the FIDIC suite of contracts is used in Canada, there has been no authority or judicial consideration specifically with respect to whether, and to what extent, Sub-Clause 20.1 is a condition precedent to claims for additional time and/or money.

Notably, the Canadian common law of notice applies with equal force to contractor claims as it does to employer claims. As a result, the commentary under Question 6 above also applies here.

8. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money arising from Variations?

As explained in response to Question 7, there has been no authority or judicial consideration in Canada with respect to whether, and to what extent, Sub-Clause 20.1 is a condition precedent to contractor claims for additional time and/or money. This is equally true as it relates to contractor claims arising from variations.

9. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

Dispute review boards and/or dispute adjudication boards are becoming increasingly common as an interim dispute resolution mechanism on certain larger construction projects in Canada (eg, infrastructure projects), although they are not yet used as a matter of course. It is more common for a Canadian construction contract to provide for an intermediate stage of dispute resolution before the independent certifier or consultant, in relation to which the contract will typically provide that their decisions are interim. However, particularly in Ontario on P3 projects, dispute review boards and/or dispute adjudication boards are starting to be used and it is possible they will become a standard feature of Canadian construction contracts over the coming years.

In any event, given that dispute review board decisions are not binding, there are no mechanisms by which to enforce such decisions. However, they are often used as a reasoned basis upon which the parties conduct settlement negotiations and avoid the need to pursue binding dispute resolution.

By contrast, given that dispute adjudication board decisions are interim binding, a construction contract that provides for such a board will commonly allow parties recourse to the courts for injunctive relief (ie, in the form of a court order mandating compliance with the dispute adjudication board’s decision until the next stage of dispute resolution is concluded).

10. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

Arbitration may be used as the final stage of dispute resolution for construction projects across Canada, although this depends on the wording of the construction contract. For example, on large projects, the contract may provide that arbitration is the final stage of dispute resolution, or it may provide the parties to the contract with the ability to choose between arbitration or litigation as the final stage of dispute resolution.

It is rarer in Canada for a construction contract to expressly provide that arbitration is an intermediate stage followed by litigation. However, it bears noting that some domestic arbitration legislation in Canada provides for limited appeal rights from arbitration as default. For example, in Ontario, the Arbitration Act 1991 provides that unless a contract states otherwise, the parties to the contract may appeal an arbitral award on a question of law provided they obtain leave of the court. In that regard, parties must be careful in drafting a construction contract to consider the possibility of appeals from arbitration. By contrast, this ability to appeal does not exist in international arbitration legislation in Canada, given that such legislation is invariably based on the UNCITRAL Model Law.

Insofar as arbitration is used on construction projects in Canada, it is typically ad hoc rather than institutional. It is also uncommon for a construction contract to stipulate the procedural law that will apply to an arbitration. More commonly, the parties will discuss and agree to the applicable procedural law as part of a procedural order after they have initiated the arbitration. In that regard, construction arbitrations in Canada frequently rely upon institutional rules (such as the UNCITRAL Arbitration Rules or the ADR Institute of Canada’s Arbitration Rules), supplemented by the IBA Rules on the Taking of Evidence in International Arbitration, all of which is typically subject to the discretion of the arbitral tribunal to vary the procedural rules as appropriate.

With respect to the applicable seat, the arbitration is almost invariably seated in the jurisdiction in which the project is situated. It is very uncommon in Canada for a construction arbitration to be seated elsewhere.

11. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

No. Perhaps because of how rarely the FIDIC forms of contract are used in Canada, there have been only a handful of reported court decisions in which the FIDIC forms were even referenced. Of those decisions, none have interpreted the FIDIC contracts in any depth.

12. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

If parties are considering the use of the FIDIC suite of contracts on a project in Canada, they should be mindful of applicable lien legislation and the extent to which it modifies construction contracts and/or creates additional prompt payment obligations and statutory adjudication regimes.

In Ontario, for example, the applicable lien legislation provides that all construction contracts are deemed to be amended to conform with the terms of the lien legislation. As a result, certain terms of a FIDIC contract may be modified notwithstanding the parties’ intentions. This proposition is particularly important as it relates to prompt payment and statutory adjudication.

As it relates to payment, the FIDIC Red Book provides for a payment process whereby a contractor provides an application for payment to the project engineer, who must issue an Interim Payment Certificate (IPC) to the employer within 28 days. The IPC will identify the amount which the engineer considers due and owing to the contractor. Thereafter, the employer must pay the contractor the amount certified in the IPC within the period stated in the contract. If the contract is silent, the employer must pay within 56 days. Furthermore, the Red Book is silent in relation to the timeline for payment of subcontractors, sub-subcontractors, etc.

By contrast, under Ontario’s lien legislation, an employer must pay a contractor within 28 days following receipt of a proper invoice. Thereafter, a contractor who has received full payment of a proper invoice must pay each subcontractor who supplied services or materials included in the invoice within seven calendar days. The subcontractor is then required to pay its sub-subcontractor(s) within seven calendar days, and this regime continues down the construction pyramid.

As a result, users of the FIDIC suite must be mindful of whether the applicable lien legislation imposes a comparatively quicker payment regime.

Also in Ontario, parties have the right to refer payment-related disputes to adjudication, regardless of whether the same matter is the subject of a court action or an arbitration. By contrast, the FIDIC Red Book states that a Dispute Avoidance/Adjudication Board is to resolve disputes that arise between the parties. Accordingly, if a construction project is carried out in Ontario under a FIDIC contract such as the Red Book, the lien legislation’s adjudication provisions will be implied into the contract, creating a potential conflict with the Red Book’s dispute adjudication provisions. Accordingly, parties using the FIDIC suite would be well-advised to consider including special provisions within their contract to address those aspects of the lien legislation.

FIDIC under German Law

Dr Götz-Sebastian Hök

Partner, Stieglmeier & Kollegen, Berlin

In this questionnaire, references to FIDIC clauses are references to clauses in the 1999 Red Book, unless otherwise specified.

1. What is your jurisdiction?

Germany/German law.

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

The German federal government uses FIDIC forms occasionally for governmental projects abroad; the offshore and marine sector occasionally use FIDIC forms within the German territory including the Exclusive Economic Zone (EEZ).

In Germany, ‘Vergabe- und Vertragsordnung für Bauleistungen’ (VOB/B) are used almost exclusively. The VOB/B are a German standard set of rules for use in the construction industry. They cover the award (procurement) of construction contracts (Part A), establish general conditions of contract relating to the execution of construction work (Part B) including 18 clauses, and prescribe good building practice in the construction sector (Part C).

3. Do FIDIC produce their forms of contract in the language of your jurisdiction? If no, what language do you use?

No, FIDIC does not produce the forms in German. However, a German translation is available from the German Member Association of FIDIC, Verband Beratender Ingenieure (VBI). In the past, FIDIC forms have been used either in English and/or in German translation.

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

Basically, mandatory German construction contract law and dispositive default rules will apply additionally (as implied by law). Construction contracts fall under section 631 et seq of the German Civil Code with a special chapter on construction contracts in accordance with section 650(a) et seq of the Civil Code. Special amendments are necessary predominantly for special projects, for instance offshore projects (eg, regarding insurance requirements). The legal framework addresses basic aspects of the reciprocal duties under such types of contract and aspects of related risk allocation.

Any type of standard form of contract governed by German law is exposed to a certain legal uncertainty or risk due to the courts’ authority to review standard forms against the leitmotivs of the German laws (see section 305 et seq of the German Civil Code). Permanent case law presupposes that standard terms meet the leitmotiv(s) of the German law. Courts have held that, inter alia, the following provisions contradict the leitmotiv(s):

• exclusion of entitlement to the adjustment of unit rates in the event of increased quantities;¹

• exclusion of entitlement to the adjustment of the contract price in the event of ‘frustration’;²

• indefinite retention monies equal to five per cent;³

• performance security securing ten per cent of the contract amount⁴ likely to contradict Sub-Clause 4.2 of the FIDIC conditions;

• accumulated ten per cent retention monies and performance security⁵ likely to contradict Sub-Clauses 4.2 and 14.9;

• duty to obtain an on-demand guarantee instead of a bond⁶ likely to contradict Sub-Clause 4.2;

• duty to provide a security securing defects liability;⁷

• duty to provide the site with gas, water and electricity likely to contradict Sub-Clause 4.19;

• exception from liability for gross negligence and/or deliberate acts.⁸

Bespoke contract wording that contradicts the leitmotiv(s) may be allowed.

Special attention should be paid to section 650(e)–(f) of the Civil Code which provides for mandatory legal instruments aimed at securing the contractor’s payment.

Regarding particular amendments that might be appropriate or necessary under German law, reference is made to Dr Götz-Sebastian Hök and Dr Henry Stieglmeier, ‘Applying FIDIC Contracts in Germany’.⁹

Apart from occasional statements to the contrary¹⁰ there is no mention anywhere of massive or even significant incompatibilities between FIDIC and German law.¹¹

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

The number of FIDIC-based contracts under German law in the past was relatively limited. German practice did not develop common standards or practices regarding changes to FIDIC forms:

• For practical reasons some model forms as suggested by FIDIC will not be used (eg, the model performance security form, due to German peculiarities).

• Insurance requirements may require adjustments (eg, a problem with indemnity practice regarding special types of damage).

• Clarifications regarding the meaning of taking-over and Clause 11 of the FIDIC conditions may be welcome in order to avoid misunderstandings.

Bespoke FIDIC-based contracts with frequently heavy amendments (purported to be necessary in accordance with German law) prevail. However, in most cases the amendments are not strictly necessary; rather, inexperienced users are ill at ease with FIDIC concepts and English legal terms.¹²

6. Does your jurisdiction treat Sub-Clause 2.5 of the 1999 suite of FIDIC contracts as a precondition to Employer claims (save for those expressly mentioned in the sub-clause)?

Without guidance from other jurisdictions on the possible meaning of Sub-Clause 2.5, it would be unlikely that German courts would understand Sub-Clause 2.5 as a condition precedent to employers’ claims. However, it might be arguable that Sub-Clause 2.5 contradicts the basic right to withhold performance in the event of defective work. The synallagmatic nature of a contract for works implies the application of the maxim ‘exceptio non adimpleti contractus’.¹³

7. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money (not including Variations)?

Without guidance from other jurisdictions on the possible meaning of Sub-Clause 20.1, it would be unlikely that German courts would understand Sub-Clause 20.1 as a condition precedent to contractors’ claims. It is much more likely that German authorities would understand or classify Sub-Clause 20.1 as a short limitation or prescription period. If so, they may be concerned about the comparatively short notice period and sanctions for non-compliance.

According to section 6, paragraph 1 of the VOB/B, the notice of a disruptive event must be given ‘forthwith’. The rationale for this requirement is to put the event on record. The notice is dispensable in cases where the client was obviously aware of the event and its impeding effect.¹⁴ However, claim deadlines with foreclosing effects are unusual; prescription rules are deemed to provide sufficient and appropriate protection. The VOB/B do not contain any special cut-off period for claims. Basically, claims can be pursued in the final statement or invoice.¹⁵

8. Does your jurisdiction treat Sub-Clause 20.1 of the 1999 suite of FIDIC contracts as a condition precedent to Contractor claims for additional time and/or money arising from Variations?

There is no case law available on this question.

Regarding variations, recent statutory law must be taken into account. German law suggests that the judge has the power to reform the contract price. Constraints as imposed by FIDIC in accordance with Sub-Clause 8.4(a) may require special attention in accordance with general principles of law.¹⁶ Due to conceptual differences between common law and German law it is rather unlikely that claims for EOT will be discussed. Instead, excusable delay may result in discharge from liability for penalties. Regarding the financial effects of a variation, it is necessary to treat the unchanged part and the changed part of the works separately. The unchanged part of the works will be evaluated against the existing rates. Concerning varied parts of the works, recent legal developments¹⁷ have prompted a discussion on the prevailing principle (actual costs versus extrapolation of new rates from existing rates). In any case, comprehensible evidence for an extension of the overall time for a completion claim cannot be rejected as inconclusive because individual parts of the delay analysis are unclear or incorrect. Despite the lack of clarity or incorrectness in individual parts, it remains a suitable basis for estimating an extension of the construction time, if necessary, with the help of an expert. Each individual delay must be examined separately and is subject to an independent assessment.¹⁸ A discussion on time bars as a condition precedent of contractor’s claims will not usually take place.¹⁹

9. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

DABs are rarely used. Some years ago, there was an intense discussion on the use of DABs without any consequences on past and actual legal practice. In Germany, DABs are likely to be perceived as expert determination boards with similarities to expert determination in accordance with section 317 et seq of the Civil Code. If so, German courts are likely to classify the remedy as one arising out of substantive law and may allow the review of a DAB decision upon the submission of evidence of a manifest error in law or fact (based on section 319 of the Civil Code). This is extremely unlikely to happen, but legally possible.

DAB decisions may be enforceable by means of a special court procedure intended to limit evidence to documentary evidence.²⁰ However, in my personal view,²¹ the DAB decision under FIDIC does not constitute a document in the proper sense of section 592 of the German Civil Procedure Code.²² At best, the DAB award proves its existence,²³ but not the existence of the pursued claim, especially since it does not exclude the objection of gross incorrectness. The duty to comply with a DAB award which emerges from the contract wording in Sub-Clause 20.4 should not be confused with the duty as crystallised in the DAB award. Summary proceedings do not exist in German law. Hence, in Germany, the correct approach would be to obtain an interim award in arbitration.

10. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

Sometimes, but not as a common practice. German practice frequently relies on the German Institution of Arbitration (DIS) arbitration rules. Most frequently the seat will be in Germany, at least regarding domestic arbitration. Regarding contracts with foreign parties, ICC arbitration is the preferred choice, but also Swiss Chambers’ Arbitration Institution (SCAI) and others are used.

11. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary

No, there are no notable German court decisions interpreting FIDIC contracts. However, Germano-roman case law regarding FIDIC forms of contract exists from the Federal Swiss Supreme Court regarding the enforceability of Sub-Clauses 20.2 et seq. It held that direct access to arbitration may be allowed if the appointment of a DAB takes too much time.²⁴ This decision may have some authority before German courts.

12. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

It is specific to the German jurisdiction that courts have the authority to declare standard business terms to be ineffective.

Pursuant to section 301(1) of the German Civil Code, section 305(2)–(3), 308 and 309 do not apply to standard business terms which are used in contracts with an entrepreneur, a legal person under public law, or a special fund under public law. Section 307(1)–(2) nevertheless apply to these cases to the extent that this leads to the ineffectiveness of the contract provisions set out in sections 308–309; reasonable account must be taken of the practices and customs that apply in business dealings. In the case of contracts with an entrepreneur, a legal person under public law, or a special fund under public law, section 307(1) as above (2) does not apply to contracts in which the entire Award Rules for Building Works, Part B²⁵ in the version applicable at the time of conclusion of the contract are included without deviation as to their content, relating to an examination of the content of individual provisions.

It is likely that courts would apply section 310(1) of the Civil Code mutatis mutandis to other types of standard forms of contracts for works, meaning that major changes to the standard form of contract which are likely to denature the balanced spirit of risk allocation may trigger the application of section 307(1)–(2).

In German practice, DAB clauses are usually deleted; in public works contracts, ADR provisions are possible²⁶ but not appreciated and not widely used.

German law permits penalties that do not go along with a limitation of liability. At least it will be possible to claim more than what was agreed subject to the evidence of greater cost incurred. In cross border business it is important to understand that penalty clauses have a different legal nature than liquidated damages. Unfortunately, German courts are likely to confuse English liquidated damages clauses and penalty clauses by wrongly interpreting liquidated damages as penalty clauses.

Notes

1 Federal Supreme Court Neue Juristische Wochenschrift Rechtsprechungs-Report 2016, 29; NJW 1993, 2738.

2 Federal Supreme Court Neue Juristische Wochenschrift 2017, 2762.

3 Federal Supreme Court Neue Juristische Wochenschrift 2003, 2605

4 Federal Supreme Court Neue Juristische Wochenschrift 2011, 2195.

5 Court of Appeal Celle Neue Juristische Wochenschrift Rechtsprechungs-Report 2020, 79.

6 Federal Supreme Court Neue Juristische Wochenschrift 2002, 2388.

7 Federal Supreme Court Neue Juristische Wochenschrift Rechtsprechungs-Report 2014, 814.

8 See Federal Supreme Court Neue Juristische Wochenschrift 2002, 749.

9 See Dr Götz-Sebastian Hök and Dr Henry Stieglmeier, ‘Applying FIDIC Contracts in Germany’, in Donald Charrett (ed) FIDIC Contracts in Europe: A Practical Guide to Application (Informa Law from Routledge, 2023) 290–303, at Ch 10.5.2, and for more details in German Wiesner, Inhaltskontrolle internationaler FIDIC-Bauverträge nach deutschem Recht, 2009.

10 See Kus, Markus and Steding, ‘FIDIC’s New ‘Silver Book’ under the German Standard Form Contracts Act, (2009) ICLR, 533.

11 See n 9 above.

12 Ibid, at Ch 10.6.

13 See Federal Supreme Court Neue Juristische Wochenschrift 2005, 919.

14 Section 6, No 5 VOB/B.

15 Court of Appeal OLG Dresden, Judgment dated 31 August 2011 – 1 U 1682/10.

16 See section 305 et seq of the Civil Code.

17 Ibid, s 650(c).

18 Federal Supreme Court, decision dated 24 February 2005, ref VII ZR 225/03.

19 Federal Supreme Court, (2005) Immobilien- und Baurecht (Zeitschrift) 359.

20 See, eg, Lembcke, Immobilien- und Baurecht (Zeitschrift) 2008, 1198 (online): Rechtsnatur des Adjudication-Verfahrens – Auflösend bedingtes Schiedsgutachten.

21 For more details see Hök (2008) Immobilien- und Baurecht (Zeitschrift) 308.

22 See Federal Supreme Court NJW-RR 1988, 506 regarding an expert determination that was manifestly wrong.

23 Greger/Stubbe, Schiedsgutachten – Außergerichtliche Streitbeilegung durch Drittentscheidungen, Munich 2007, 204.

24 Decision dated 1 October 2014, ref: 4A_124/2014.

25 Vergabe- und Vertragsordnung für Bauleistungen Teil B – VOB/B.

26 See s 18 VOB/B.