Construction and projects

In a nutshell

Construction 

Construction law can broadly be divided into non-contentious and contentious issues. The first involves lawyers helping clients at the procurement stage, pulling together all the contractual relationships prior to building work; the second sees them resolving disputes when things go wrong. In the past, the relatively high monetary stakes involved, and the industry trend for recovering building costs through the courts, made construction a litigation-happy practice. Since the 1990s most new contracts have contained mandatory procedures to be adopted in case of dispute. Adjudication of disputes has become the industry norm and these tend to follow a swift 28-day timetable. Others are resolved through mediation or arbitration; however, some disputes are so complex that the parties do still choose to slug it out in court.

Projects 

Specialist construction lawyers work hand in hand with finance and corporate lawyers to enable projects to come to fruition. A few City firms and the largest US practices dominate the biggest international projects, but there’s work countrywide. In the UK the Private Finance Initiative (PFI) – an aspect of Public Private Partnerships (PPP) – has been an important source of work. A key policy of the old government, it introduced private funding and management into areas that were previously public sector domains. Some law firms consistently represent the project companies, usually through a ‘special purpose vehicle’ (SPV) established to build, own and operate the end result of the project. Often the project company is a joint venture between various ‘sponsor’ companies. An SPV could also be partially owned by a government body or banks. Other firms consistently represent the organisations that commission projects. Then there are the firms that act purely on the finance side for banks, guarantors, export credit agencies, governments and international funding agencies.

What lawyers do

Construction: procurements 

• Negotiate and draft contracts for programmes of building works. Any such programme involves a multitude of parties including landowners, main contractors, subcontractors, engineers and architects.
• Work in conjunction with property lawyers if the client has invested in land as well as undertaking a building project. Together, the lawyers seek and obtain all the necessary planning consents as well as local authority certifications.
• Where the developer does not own the land, liaise with the landowner’s solicitors over matters such as stage payments, architects’ certificates and other measures of performance.
• Make site visits during development

Construction: disputes 

• Assess the client’s position and gather all related paperwork and evidence.
• Extract the important detail from huge volumes of technical documentation. 
• Follow the resolution methods set out in the contracts between the parties.
• Where a settlement is impossible, issue, prepare for and attend proceedings with the client, usually instructing a barrister to advocate.

Projects 

• Too varied to list. The field has specialists in the areas of funding, construction, real estate, planning, energy, telecoms and all aspects of the public sector, including health, education and housing.

The realities of the job

• Drafting requires attention to detail and careful thought.
• It’s essential to keep up to date with industry standards and know contract law and tort inside out.
• People skills are fundamental. Contractors and subcontractors are generally earthy and direct; structural engineers live in a world of complicated technical reports; corporate types and in-house lawyers require smoother handling. You’ll deal with them all.
• The construction world is often perceived as a male-dominated environment, but while some clients might see a visit to a lap-dancing club as par for the business entertainment course, there are many successful female construction lawyers, architects and engineers who avoid such activities.
• Most lawyers prefer either contentious or non-contentious work, and some firms like their construction lawyers to handle both, so pick your firm carefully.
• A background in construction or engineering is a major bonus because you’ll already have industry contacts and will be able to combine legal know-how with practical advice.
• Projects require lawyers who enjoy the challenge of creating a complex scheme and figuring out all its possibilities and pitfalls. Projects can run for years, involving multidisciplinary legal work spanning finance, regulatory permissions, construction, employment law and much more.

Current issues

• The difficult market conditions caused by the recession have made it hard for companies to obtain financing for projects. However, after two years of decline, 2010 saw a 38% rise on the previous year in the value of global project finance work. The jump is partly due to frozen projects being started up again, but there is optimism that the sector is recovering.
• There was a slight upturn in construction disputes during 2009/10, though not to the extent that some people had predicted. Ultimately, many claimants were unsure as to whether defendants would be able to pay the sums claimed, given the increase in contractors going bust all around the country. Mediation, arbitration and adjudication are definitely preferred.
• As the Brown government came to an end, it rubber-stamped quite a lot of public initiatives, such as Building Schools for the Future (BSF) and NHS LIFT projects. Shortly after the election of the coalition government, BSF came under the axe. The Olympics and Crossrail remain fairly significant for those contractors and lawyers lucky enough to have involvement.
• House building came to a standstill during the recession, but there is optimism in some quarters. The hope is that having battened down the hatches in the downturn, developers will now have money to spare, perhaps for strategic land purchases of both green and brown-field sites in readiness for a revival in the building market.
• Social housing development became a hot area for firms to try and break into, but this sector is fearful for the period ahead because of cuts in government spending.
• In Europe, energy security is a key concern for governments as recent political developments have emphasised the problematic nature of relying on a small number of countries (or just one) for domestic energy requirements. An obvious example of the interest in energy security is the development of LNG storage and pipeline projects.
• Renewable energy continues to be a key area of investment and it satisfies both government commitments to energy security and carbon emission targets. These projects tend to have continued unabated despite the economic downturn due to their long-term nature.
• Nuclear technology is a key focus as, due to its relatively low carbon emissions, it too is able to satisfy reduction targets. The renewed interest can also be traced to a view that renewable energy sources may not be sufficient – in the short term at least – to meet energy needs. This coincides with a reduction of interest and investment in traditional power generation, such as coal-powered stations. There is, however, investment in technology to make these old power stations more carbon-efficient where possible.
• The Middle East, with its oil reserves, continues to be a key area for investment. Europe – particularly Western Europe – appears to be more active in renewable energy, although this is driven more by government targets. Other emerging markets rich in natural resources are also experiencing strong investment, essentially due to the value of their commodities.

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