LONDON BIRMINGHAM BRISTOL EDINBURGH GLASGOW LEEDS MANCHESTER BRUSSELS DUBAI HONG KONG SHANGHAI BEIJING.

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1 Bulletin The Bulletin has been compiled by the Hong Kong Office of Pinsent Masons and summarises recent legal developments in the fields of construction & infrastructure in the Asia Pacific region. For specific advice or further information on the topics covered, please contact Jon Howes ( or your usual Pinsent Masons contact. For copies of the articles referred to or to be included on the circulation list for future issues, please Issue 17 In this issue: Pinsent Masons News Three new partners in Asia Pacific Legislation Environment Transport and Works Bureau Technical Circulars 35/2004A, 7/2005A, 3/2007 Case Law Bernuth Lines v High Seas Shipping Round-up of recent articles Pinsent Masons Arbitration Building & Construction Mediation Disclaimer: The material and information in this Bulletin is prepared for general information only. Detailed professional advice should be sought and obtained before taking or refraining from any action based upon it. Whilst we endeavour to ensure the accuracy and completeness of the material and information herein, we accept no responsibility for loss occasioned as a result of reliance placed thereon. Editorial Team Peter Borg Nicholas Turner Lyle Andrew Brooke Holden Patricia Ho Distribution of articles not prepared by or on behalf of Pinsent Masons is subject to copyright limitations. LONDON BIRMINGHAM BRISTOL EDINBURGH GLASGOW LEEDS MANCHESTER BRUSSELS DUBAI HONG KONG SHANGHAI BEIJING Pinsent Masons Bulletin Issue 17 Page 1 of 7

2 Pinsent Masons News Three new partners in Asia Pacific With the appointment of Banking and Project Finance specialist, Simon Irvine, in January this year and the promotion of two new partners, Shourav Lahiri and Nicholas Brown, to its International Construction & Energy Group, Pinsent Masons brings the number of partners based in Asia Pacific up to 13. The promotions, which take effect from 1 May 2007, were part of a record 20 partner promotions across the Firm. Simon Irvine Simon brings a wealth of project financing experience to the firm and will complement the long-standing infrastructure projects capability of our offices in the Asia Pacific. He has been based in Asia since 1999 during which time he has advised project developers and financial institutions on a wide range of project finance transactions in a variety of energy and infrastructure sectors. Simon's arrival underscores the continued strategic expansion of Pinsent Masons' operations in the Asia Pacific region and further emphasises our ability to provide on the ground expertise on all aspects of international projects transactions. Simon can be contacted at simon.irvine@pinsentmasons.com or on Shourav Lahiri Shourav specialises in construction and environmental law and international arbitration. He has practised in Singapore, Hong Kong and London and has acted for contractors, developers, architects and governmental bodies. Shourav has acted in a number of the major infrastructure related disputes in Hong Kong since His recent international arbitration experience includes an infrastructure project in Eastern Europe and a petrochemical plant in China. Shourav's practice as a barrister in London included appearing in two significant planning inquiries in the UK - Stonehenge and London Gateway (Shellhaven). Shourav can be contacted at shourav.lahiri@pinsentmasons.com or on Nicholas Brown Nicholas specialises in projects and transactional matters and has particular experience of a wide range of international capital works projects in the fields of public works, private development PPP and BOT in the Asia-Pacific, Middle East and United Kingdom. His diverse transactional experience includes: advising a Franco-US heavy engineering contractor in connection with the provision of wet fluidized gas desulphurization technology for a power plant in Hong Kong; drafting the terminal and runway works EPC contract and ancillary tender documentation for the Delhi International Airport; advising on a multitower mixed commercial and residential complex in Dubai; acting for construction consortia in negotiations concerning joint venture arrangements, EPC contracts and interface arrangements, in connection with a series of hospital and school facilities being procured under the British PFI. Nicholas can be contacted at nicholas.brown@pinsentmasons.com or on Pinsent Masons Bulletin Issue 17 Page 2 of 7

3 Legislation, Rules & Regulations Environment Transport and Works Bureau Technical Circular (Works) 35/2004A: Prequalification of Tenderers for Public Works Contracts This circular sets out procedures whereby the identities of prequalified tenderers may be revealed where public interest so requires. There may be cases where disclosure of the identities of the successful applicants is necessary if it is considered that such disclosures are in the interest of the public. Furthermore, identity of prequalified tenderers may be revealed when the prequalified tenderer are invited to attend the pre-tender meetings where the prequalified tenderers will be present. It is therefore necessary to draw the attention of the applicants for prequalification to this requirement so that they can decide whether or not to participate in the prequalification exercise. This circular came into effect on 21 March Environment Transport and Works Bureau Technical Circular (Works) 7/2005A: Procurement of Construction Related Insurance This circular promulgated a revised standard Contractor s All Risk (CAR) policy. Clause of the standard CAR policy at Appendix B to ETWB TCW 7/2005 is deleted. Appendix B is to be replaced by the revised sample CAR policy attached at Appendix A to this circular. This circular takes effect on all public works construction contracts with CAR insurance requirement with date of invitation to tender on or after 14 March Environment Transport and Works Bureau Technical Circular (Works) 3/2007: Contractors Performance Index System This circular promulgated the updated Contractors Performance Index System. The Contractors Performance Index System was established in 2000 to provide a ready indication of contractors performance standard for reference by the project office and relevant tender board in tender evaluation. The evaluation of contractors performance is based on the reports written on the contractors performance in Government works contracts in accordance with the Contractor Management Handbook (CMH). The contractors performance reports are normally due on the last day of February, May, August and November. The 3-month periods in between these due dates are hereinafter referred to as the reporting periods. Commencing from the reports due on 28 February 2007, the reporting of contractors performance adopts a 5- grade instead of the previous 3-grade marking scheme. Updating of the Contractors Performance Index System is hence necessary to revise the method of evaluation of contractors performance accordingly. This circular came into effect on 21 March Pinsent Masons Bulletin Issue 17 Page 3 of 7

4 Case Law Bernuth Lines Ltd v High Seas Shipping Ltd (The "Eastern Navigator") This English decision considered whether service of an arbitration notice by was valid. The court held that the provisions of the English Civil Procedure Rules are not an appropriate benchmark to judge whether or not service by is effective in the context of an arbitration, and in doing so, held that valid service had been effected. Background The applicant Bernuth Lines Ltd ("Bernuth") was the charterer of a vessel Eastern Navigator. The respondent - High Seas Shipping ("High Seas") is the owner of Eastern Navigator. Clause 45 of the charter-party contained a London Arbitration clause. A dispute arose under the charter in relation to whether the master unreasonably refused to follow charterers' orders. On 5 May 2005, High Sea's solicitors sent an to info@bernuth.com, inviting Bernuth to settle the claim. This was a generic one and never appeared on any previous communication from Bernuth or their agents. It was, however, an address for Bernuth which appeared (a) in the Lloyd's Maritime Directory 2005, and (b) on Bernuth's website. Thereafter, a series of communications in relation to the arbitration proceedings were sent to this address by High Sea's solicitors, the arbitrator and the London Maritime Arbitration Association (LMAA). No replies were ever received to these communications. Eventually, on 29 July 2005, the arbitrator issued his final award, which was sent to the address and for first time since 5 May 2005, by post. It was this letter which triggered the application made by Bernuth to set aside the arbitration proceedings on the basis that they were not validly brought to their attention, thereby resulting in a serious irregularity affecting the proceedings. Bernuth contended that the s had been received and ignored as 'spam' by staff at the cargo booking department because the staff were under the impression that any genuine and serious legal correspondence would be sent to more appropriate channels. Bernuth argued that effective service had not taken place by as such mode of service had not been recognised as effective under the English Civil Procedure Rules (CPR). The CPR provides that service would only be good if the recipient expressed written indication of willingness to accept service by and provided the relevant address. It is only when an address appears on a statement of case or a response to a claim that the address can, of itself, be taken as a sufficient written indication. Held The court held that the provisions of the CPR should not be an appropriate benchmark to judge whether or not service by is effective in the context of an arbitration. Section 76(3) of the English Arbitration Act 1996 provides that any means of service will suffice provided that it is a recognised means of communication effective to deliver the document to the party to whom it is sent at his address for the purpose of that means of communication. Accordingly, the court confirmed that communication by should be treated in the same way to those sent by fax or post. The , however, must be despatched to what is, in fact, the address of the intended recipient and must not be rejected by the system. The of 5 May 2005 was sent to an address that was held out to the world as the, and so far as the evidence shows, the only of address of Bernuth. It is considered as effective service even if the clerical officer looked at the and decided that it could be ignored. Similarly, as seen in The Pendrecht [1980] 2 Lloyd's Rep 56, it was decided that a telex is effectively served, irrespective of whether it happened within business hours and whether or not the office is closed. It was not necessary that it should come to the attention of a particular individual of the company at the time it was served. Similarly in Section 76(4) of the Limitation Act 1980, in context of arbitration proceedings, service would be effective if it was addressed and delivered to the relevant address. There was no requirement that service has to be on, or brought to the attention of, any particular personnel. As a result, it was considered that service of the 5 May notice by would not be regarded as ineffective service, merely because a particular employee did not think that a serious legal matter would be sent to that address. That and the series of communications that followed on, are straightforward in their terms and moreover, called for Bernuth's serious attention. For instance, it was sent with High Importance and referred to a vessel which Bernuth had in fact chartered by the Pinsent Masons Bulletin Issue 17 Page 4 of 7

5 charter party. It purported to initiate arbitration proceedings by calling for agreement as to an arbitrator. If these s never reached the relevant managerial and legal staff, it is an internal failure of the company, which is irrelevant to the validity of the service. In addition, it was Bernuth who decided to publish into the current Lloyd's Maritime Directory as their only address. The provisions of the CPR were not an appropriate benchmark by which to judge whether or not service by e- mail was effective in the context of an arbitration. It followed that service had been effective. The Hong Kong perspective While this case is not directly applicable to Hong Kong arbitrations, a note of caution is raised for clients who have generic addresses and who do not expressly exclude service of documents by in their agreements, arbitration clauses etc. Electronic means of communication are steadily gaining the same status as hard copy documents and all businesses need to put adequate systems and procedures in place to record and process them appropriately. Round-up of recent articles and news Pinsent Masons Meaning of Practical Completion in Hong Kong Building Contracts Eileen Tay considered the recent judgment of Hong Kong's Court of Final Appeal in the case of Mariner International Hotels Ltd v Atlas Ltd, as a result of which the term "practical completion" in Hong Kong building contracts is now arguably a legal term of art which means a state of affairs in which the works have been completed free from patent defects other than ones to be ignored as trifling. This is a rather more exacting standard than the standard which tends to be applied in practice in Hong Kong where a practical completion certificate is typically issued when the work reaches a state of readiness for use or occupation even though there is a long list of patent defects and outstanding works yet to be carried out which are arguably non-trifling. If the definition of practical completion adopted by the Court of Final Appeal is not the definition intended, then clear words to the contrary should be inserted into the building contract. For more details go to: c.aspx The road planning minefield by Pinsent Masons Highways January/February 2007 (Vol 76 No 1) p12-13 This article considers some of the potential planning pitfalls that lie in wait for contractors about to embark on a roads project. Arbitration CIETAC Arbitration Clauses: Tips and Pitfalls China Law & Practice Vol 21 No 1 Howard Yinghao Yang examines the new rules, interpretations and court decisions in China that give greater flexibility to the way in which arbitration clauses can be structured, particularly with regard to the choice of arbitration venue and applicable law. However, there a various repercussions of choosing to conduct arbitration at CIETAC. The author suggests how practitioners can structure arbitration clauses to ensure enforcement of awards both domestically and internationally. Pinsent Masons Bulletin Issue 17 Page 5 of 7

6 The Costs in International Arbitration and the Use of Sealed Offers Asian Dispute Review January 2007 Poupak Anjomshoaa considers a party's potential costs liability, and the feasibility of using the 'sealed offer' mechanism as a means of containing that liability, in international commercial arbitration. International arbitration: selecting the proper forum Mealey's International Arbitration Report February 2007 Cedric Chao and James Schurz compare aspects of the leading international commercial arbitration rules to assist parties in defining the best legal environment in which to arbitrate. The authors compare selected provisions of the rules of UNCITRAL, ICC, AAA, SCC, JCAA, WIPO, CIETAC, LCIA, SIAC, ICSID and JAMS. Building & Construction Mareva injunctions in Hong Kong: evolving principles and practices revisited Construction Law Journal Henry Suen and Sai On Cheung assess the current state of the law applicable in Hong Kong on the grant of Mareva injunctions. Examines the conditions for granting Mareva injunctions and looks at exceptions which may be inserted into the Mareva order to protect the defendant. Notes the guidelines issued by the Court of Appeal in Dadourian Group International Inc v Simms, which are likely to be persuasive in applications to the Hong Kong courts. Discusses the Hong Kong court decisions relevant to the application of Mareva relief to the construction sector. Includes a summary list of Mareva injunction cases from Hong Kong over the past decade. illustrates the reluctance which many judges have to conclude that an apparent agreement is too uncertain to be enforced, particularly in the case where the parties have acted on the basis of the agreement over a period of time. Watch out, Homer Simpson Building 16 February 2007 Melinda Parisotti discusses the courts' attempts to interpret the understanding of the parties when they enter a contract. They look at the interpretation that a reasonable person would have in such circumstances. The author refers to Skanska v Somerfield (November 2006) and Maggs v Marsh (2006). OFT makes 'fast track' offer in biggest ever UK cartel investigation Office of Fair Trading announced that it is looking to "fast track" its current bid rigging cartel investigation in the construction industry, by making an offer of reduced financial penalty to all those implicated companies that have not so far applied for leniency but are willing to cooperate with the OFT in certain specific ways. In particular, the OFT has said that it has written to businesses that are a suspect party in the cartel investigation but have not so far applied for leniency, and has notified these companies that it will be making them an offer of a reduced financial penalty in exchange for admissions to participation in bid rigging along with certain ancillary promises. Memorandum sufficiently certain to create binding obligations Building Law Monthly February 2007 (Vol 24 No 2) This article reviews the English decision of Bell Scaffolding (Aust) Pty Ltd v Rekon Ltd and Alba Hire & Sales Ltd, in which Mr Justice Ramsey held that the terms of a "Memorandum" agreed between the parties created binding and enforceable obligations. The decision Devil is in the contract details Construction News 22 February 2007 Guy Cottam stresses the need to carefully read conditions of contract, especially those clauses dealing with the allocation of risk. The author refers to Shepherd Homes and Encia Remediation v Green Piling (2007), which considered risk allocation in circumstances where settlement had caused cracking to a number of homes. Establishing dispute boards selecting, nominating and appointing board members Society of Construction Law paper December 2006 Nicholas Gould considers legal issues, standard form provisions, practical issues and the difficulties of identifying and appointing board members for international projects. The topics are discussed by reference to the published rules and guidance from FIDIC, ICC, AAA and ICE as well as those in World Bank procurement procedures. Pinsent Masons Bulletin Issue 17 Page 6 of 7

7 The rise and rise of time-bar clauses Management, Procurement and Law February 2007 In this paper H. Lal examines the express time-bar clauses in the FIDIC and NEC3 standard forms of contract and considers whether such clauses are enforceable under English law. The author examines the jurisprudential conflict between such clauses and the socalled English law concept of the "prevention principle". He concludes that the 'real issue' is not, in fact, the tension between the time-bar clause and the prevention principle but one between the time-bar clause and the 'freedom of contract' doctrine. This analysis is supported by a body of case law. Interpretation of terms Contract Journal 14 March 2007 Owen Fox discusses P4 Limited v Unite Integrated Solutions plc (TCC 27 October 2006) where the issue was the incorporation of terms and conditions. The author comments that regardless of what the standard terms and conditions state, you need to bring them to the attention of the other party in a way that will allow them to be incorporated into the contract. John Doyle v Laing Management - is it good English law? Is it good English practice? Construction Law Journal Jeremy Winter assesses whether the Outer House ruling in John Doyle Construction Ltd v Laing Management (Scotland) Ltd, on the ability for construction claims to be advanced on a global basis, may be regarded as good English law and good practice for the construction industry outside Scotland. Considers the practicalities of apportionment by the courts, the burden on the claimant of proving that loss or expense attributable to each head of claim cannot be separated and the need for a balancing of the parties' interests. No solid grounds for argument Contract Journal 7 March 2007 p26 Geoff Brewer provides a general overview of the way in which unforeseen ground condition claims may be resolved. There is no standard way and reference must be made to the specific terms of contract as a starting point in examining such claims. How "all risk" cover works Construction News 15 March 2007 Daniel Atkinson discusses the case of English Court of Appeal case Blackwell v Gerling Allegemeine Verischerungs AG (2007), which is a useful illustration of the operation of "all risk" policies. It introduces the concept of the effect of a combination of events being fortuitous even if each individual event is not. A Stand-up row Building 9 March 2007 p61 Ian Yule discusses a case involving Tramtrack Croydon, the company that operates the Croydon Tramlink, a light rail system procured under the PFI. The case contains important points for those drafting output specifications, especially PFI ones. If a criterion is to be a performance standard, it is essential to set out a scheme for evaluating performance together with the financial consequences of failure. Mediation Without prejudice privilege in mediation Arbitration Law Monthly April 2007 This article reviews the English Court of Appeal's decision in Aird and Aird v Prime Meridian Ltd (2006). The Court of Appeal had to decide if a document, which had been used in an unsuccessful mediation, had been prepared for the purposes of the mediation or for the purposes of the proceedings. On the facts, it was held that the latter was the case. APRIL 2007 Pinsent Masons Bulletin Issue 17 Page 7 of 7