Infrastructure collaboration faces legal and risk challenges

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Construction law experts have warned that alliancing and collaboration face real challenges, though there are benefits to it being done well.

While there is near-universal agreement that collaborative approaches can generate the best outcomes for infrastructure projects, there are real legal and risk challenges to making it work as well as it should.

Speaking at FIDIC’s Global Infrastructure Conference, Arbitrator and adjudicator from 39 Essex Chambers, Lindy Patterson QC, warned: “My experience in the past has been that some collaborative models have become so tied up with process that we’ve lost sight of what we set out to achieve.”

Her comments came as experts sought a way forward against a backdrop of legal responses to problems brought about by Covid-19. “We’ve seen contracts terminated and contractors not coming back to site. Is this really the best way to do things?” Patterson asked.

Kiri Parr, from Kiri Parr Consulting, stressed that if the industry was to deliver the pipeline of work resulting from Covid-19 it needed to avoid the ‘claim cycle’. “One of the emerging tools is relationship contracts,” said Parr. “It’s not new but what these models are doing is that they are trying to tackle underlying behavioural issues that arise when you bring companies together,” she said.

Of course, it is not only the contractors that are involved in understanding and responding to risk. Antony Smith of international law firm Beale & Co explained: “You need to build a long-term relationship with the right insurers. Take insurers to your officers, meet them regularly and demonstrate to them why you are low risk.”

His colleague, James Hutchinson, also highlighted areas of risk with an alternative approach to working together – mergers and acquisitions. “Size can assist with the perennial problem of professional indemnity renewal but any M&A transaction is dependent on all parties being open and honest about what they want from that transaction,” he said.

Of course, there is also a natural tension that comes from competition for the best people and, in regards to national ambitions, the best possible partner companies to undertake work. 

Jafar Khan from Mott MacDonald highlighted the experience of this in the Middle East, saying “There has been a flight of talent and there are consultants that have left the Middle East because the balance of risks and opportunities has swung to other places. How will governments there respond?” 

Gordon Kenwright, senior vice president and legal counsel at AECOM, highlighted that whether working with others or alone, post-Covid risk had to incorporate Covid too. “Passing risk down in a linear way does not lead to the best results and in a world when Covid-19 has been normalised, it won’t be treated as a ‘force majeure’ issue, so companies must make sure they can manage that risk and price it in,” he said.

Interestingly, Rob Morson from Pinsent Mason turned the attention on the legal profession itself. “As lawyers we need to think very differently about how we advise our clients about new developments,” he said. “We need to focus on training more now than ever before and that goes back to rethinking how we allocate risk. Risk isn’t a binary issue, but it is shared and we don’t talk enough about that sharing,” Morson said.

Finally, James Pratt from Arup highlighted that all of this had come around as significant legal change had to be faced up to. “We are also going to see contract clauses driven by regulatory and reporting requirements and judicial outcomes that are affecting governments and clients. Green finance in particular is going to be quite influential in driving the contractual requirements around sustainable delivery of projects,” said Pratt.

The group of experts were speaking at the FIDIC Global Infrastructure Conference legal forum, bringing global infrastructure leaders together to address some of the biggest challenges the world faces.

You can read our coverage of the news and insights that emerge here.