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 18 In this issue: Pinsent Masons News Vincent Connor joins HK Enhanced Macau law capability Legislation Environment Transport and Works Bureau Technical Circular 4/2007 Case Law Multiplex Constructions v Honeywell Control Systems Round-up of recent articles Pinsent Masons Arbitration Building & Construction Mediation Middle East Projects 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 Leo Cheng Alison Lam 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 18 Page 1 of 7

2 Pinsent Masons News Vincent Connor, former Head of Pinsent Masons' Scottish office, joins Asia Pacific practice Our firm's enviable skills and reputation in Asia Pacific have been further bolstered by the move to Hong Kong of Vincent Connor, described as a "Leading Individual" in the UK legal market by Chambers' Guide to the Legal Profession, and a highly regarded expert in construction dispute resolution. Vincent has been with the firm for over nine years, and together with our Senior Resident Partner in Asia Pacific John Bishop (who was then the firm's Senior Partner) devised the original plan for our successful Scottish business which has grown from a 4-person construction practice in 1998 to a 100- person business in 2007 covering construction, corporate, projects, project finance, employment, health & safety and IT & IP. Vincent will be working closely with John and colleagues across our offices in Beijing, Shanghai & Hong Kong to develop our growth plans and to deliver over the coming years our ambition to widen further our offering to the markets in Asia Pacific. In addition, Vincent will contribute to clients of our top-rated construction team his experience as a strategic adviser in relation to large and complex construction & engineering problems and as an advocate on behalf of clients in different types of dispute resolution. Vincent is speaking at our Mid-Summer Night's Seminar at HKFC on Tuesday 26 June from 1700, and is looking forward very much to meeting many of our clients and other friends of Pinsent Masons, there. Vincent is based in Hong Kong and can be contacted on or at vincent.connor@pinsentmasons.com. Enhanced Macau law capability As of 1 June 2007 Julia Brockman, who has been Pinsent Masons' Macau law consultant for just over a year, will work in association with a newly formed Macau law firm DSL Lawyers Julia s new relationship with DSL Lawyers ensures that she can assist Pinsent Masons in providing a wider scope of services from Macau with expertise in more diverse fields of law, such as Property, Banking & Insurance, Corporate and Intellectual Property. Julia will be also able to offer corporate services for foreign investors intending to have a business presence in Macau, from the incorporation, registration and domiciliation of companies to the relevant statutory filings and assisting on applications for work permits. Pinsent Masons and Julia have worked closely together over the past year to advise on all matters relating to construction industry practice in Macau from setting up a company and/or registering as a contractor in Macau, to drafting or reviewing contracts and sub-contracts and joint venture agreements, to on-going project advice and dispute resolution. Julia s new office is located at the World Trade Centre, just next door to the Mandarin Oriental and close to the ferry terminal. For assistance with Macau law matters please contact: Jonathan Howes Julia Brockman 50th Floor, Central Plaza 13/F World Trade Centre 18 Harbour Road, Hong Kong Av. da Amizade, Macau DDI: DDI: E: jon.howes@pinsentmasons.com E: Julia.brockman@pinsentmasons.com Pinsent Masons Bulletin Issue 18 Page 2 of 7

3 Legislation, Rules & Regulations Environmental Transport and Works Bureau Technical Circular (Works) 4/2007: Consultants' Performance Information System and Management of Consultants' Performance This circular replaces ETWB TCW No. 19/2004 and promulgates the updated Consultants' Performance Information System and procedures pertaining to management of Consultants' Performance i.e. procedures and practice regarding the reporting of consultants' performance, consideration of consultants' past performance in consultant selection exercises, actions against non-performing consultants and other related matters. The Consultants' Performance Information System (CNPIS) was promulgated for managing information on consultants' performance in consultancy agreements under the purview of the Architectural and Associated Consultants Selection Board and the Engineering and Associated Consultants Selection Board. The system is designed to allow relevant organisations and Government departments to record and retrieve inline information on consultants' performance. This circular took immediate effect. Case Law Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited This English decision considered the extent to which time could be set "at large" under the terms of a sub-contract for the construction of the New Wembley Stadium. In holding that the Australian case of Gaymark Investments v Walter Construction did not represent the law of England and that contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose, the court held that the time under the terms of the sub-contract had not been set "at large". Background Multiplex was the main contractor constructing the New Wembley Stadium and Honeywell was one of the subcontractors, responsible for the design, supply and installation of various electronic systems for communication and control of the building. The subcontract made between Multiplex and Honeywell ("Sub- Contract") required Honeywell to complete the work within 60 weeks from 5 April At the time when Honeywell entered into the Sub-Contract, substantial delays to the project had already occurred. Delays to the construction of the stadium and the installation of the electronic systems continued to occur after Honeywell had commenced work. During 2005, Multiplex issued three revised programmes to Honeywell. However, the project was not completed by the latest proposed completion date of 31 March Honeywell then commenced adjudication regarding the issue of whether time had been set "at large". In this adjudication, it was held that time had been put at large under the Sub-Contract because (a) the three programmes had been issued under clause 4.2; and (b) clause 11 of the Sub-Contract Conditions did not contain any mechanism for extending time in respect of delay caused by a direction under clause 4.2. Multiplex was aggrieved by the decision of adjudication and it commenced proceedings for a declaration that time was not "at large" under the Sub-Contract. Multiplex argued that on the true construction of the Sub- Contract, clause 11 provided a mechanism for extending the period for completion of the sub-contract works in respect of any delay caused by an instruction under the contract, therefore an instruction given under the contract would not render time "at large". Pinsent Masons Bulletin Issue 18 Page 3 of 7

4 Honeywell put forward three main arguments in response: the adjudicator was correct that any direction under clause 4.2 which affected the completion date, put time "at large" ("Construction Point"); Multiplex had by its conduct made the extension of time machinery inoperable ("Operational Point"); and even if (contrary to its case) the machinery under Clause 11 could still be operated, Honeywell's noncompliance with the condition precedent in clause had put time "at large". This argument was based upon the decision of the Australian Supreme Court of the Northern Territory of Australia in Gaymark Investments v Walter Construction Group ("Gaymark Point"). Held The Court dismissed all three arguments put forward by Honeywell and in doing so concluded that time had not been set at large under the Sub-Contract. The Court also found that Multiplex was obliged to award Honeywell an appropriate extension of time. Construction Point Having upheld the principle that should delays occur due to the fault or partial fault of the Employer, time will, in the absence of any extension of time provision, become "at large" and the Contractor should not be subjected to liquidated damages for delay principle applies as between main contractor and sub-contractor, the Court established the following principles:- actions by the employer which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause delay beyond the contractual completion date; acts of prevention by an employer do not set time "at large" if the contract provides for extension of time in respect of those events; in so far as an extension of time clause is ambiguous, it should be construed in favour of the contractor to allow for appropriate extensions of time. Applying these principles to the extension of time clause in the Sub-Contract, the Court found that clause did identify a number of relevant events in respect of which Multiplex could award an extension of time to Honeywell. Although these did not expressly refer to directions issued under clause 4.2, the Court held that if Multiplex issued a direction under clause 4.2 which constituted a variation then such a direction would constitute an act of prevention under the Sub-Contract and if Honeywell could demonstrate that any extension of time would be appropriate in order to counteract Multiplex's issuance of the revised programmes, extension of time could be awarded. Operational Point Honeywell argued that Multiplex, by its conduct, had made the extension of time machinery inoperable and therefore time had been put "at large". Honeywell's basic argument was that Multiplex's failure to provide comprehensive programming information made it impossible for Honeywell to comply with the notification requirements of clause 11, with the consequence that time must be "at large". On an analysis of the surrounding clauses, the Court held that the obligation set out in clause as a condition precedent did not comprise or include any absolute obligation to serve notices or supporting information. The only obligation imposed upon Honeywell was an obligation to act as best it could as soon as it reasonably could. While the Court accepted Honeywell's evidence that Multiplex had indeed caused a significant amount of delay due to its acts and omissions which did constitute relevant events under clause and would entitle Honeywell to an extension of time under clause 11, it held that this did not demonstrate that the extension of time machinery had broken down and Honeywell was entitled to receive an appropriate extension of time through the operation of those provisions. Gaymark Point Gaymark is a case where an employer who claimed liquidated damages against a contractor for a delay in constructing a hotel. The contract in question imposed conditions in respect of giving notice of delay. The contractor was delayed in completing the work, including a delay of 77 days for causes of which the employer was responsible. In an earlier arbitration, it was held that the contractor's application for an extension of time was barred because of its failure strictly to comply with the notification requirements for the extension of time clause. However the arbitrator also held that the 77 days' delay constituted acts of prevention by the employer with the result that there was no date for practical completion. In light of this it was held that the contractor was then obliged to complete the work within a reasonable time with the consequence being that the employer was prevented from recovering liquidated damages for delay. This decision was upheld by the Australian Supreme Court. The Court considered that Gaymark did not represent the law of England and that contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose. The Court held that if Gaymark was followed, then a contractor would be able to disregard any provision making proper notice a condition precedent and set time at large at its own option. The Court also managed to distinguish Gaymark from this particular case. In Gaymark, non-compliance with the notice clause had exposed the contractor to an automatic liability for liquidated damages. However in this case, non-compliance with clause 11 did not have such automatic consequences. Under clause 12 of the Sub- Contract, Multiplex could only recover liquidated damages in respect of loss or damage "caused by the failure of the Sub-Contractor". As the failure (i.e. the delays) was in fact caused by Multiplex, it would not be able to recover liquidated damages in any event. The Court therefore held that Honeywell was in a position to give notice but simply failed to do so and this did not set time "at large". Pinsent Masons Bulletin Issue 18 Page 4 of 7

5 Round-up of recent articles and news Pinsent Masons BOT Projects analysing the risks Construction Times 14 June 2007 Simon Irvine, of Pinsent Masons' Hong Kong office, continued the series of articles on BOT projects, by looking in detail at some of the principal risks to be considered by the project participants, including market risk, credit risk, legal risk, change in law risk, construction risk, operating risk, financing risk, technology risk and political risk. Arbitration Serious irregularity fraud in the proceedings This article reviews the English decision Elektrim SA v Vivendi Universal SA where Aikens J rejected an allegation that the successful party to an arbitration had withheld a material document in breach of a disclosure order by the arbitrators. The provision under section 68(2)(g) of the Arbitration Act 1996, which provides that an award may be set aside on the ground of serious irregularity, if it has been obtained by fraud or in a manner contrary to public policy, has not been used widely and the decided cases indicate that it has a narrow ambit. Did arbitration fail India or did India fail arbitration? Sarah E. Hilmer asks whether the development of the Indian arbitral system from a readily available dispute resolution option to a complex rule-driven system has rendered it a more burdensome process than litigation, or whether the lack of guidance and interpretation of the Arbitration and Conciliation Act 1996 and the Code of Civil Procedure 1908 has prevented a more effective use of the arbitral process. She suggests ways in which the current process can be improved. "Manifest disregard of law" as a ground for refusing enforcement of award in Asia? Peter Chow examines the Philippine Court of Appeal ruling in Transfield Philippines Inc v Luzon Hydro Corp on whether the enforcement of an International Chamber of Commerce tribunal final award could be refused on public policy grounds, in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, where it was asserted that the tribunal's failure to apply solely Philippine law to the dispute was a "manifest disregard of the law". International commercial arbitration in the PRC: further steps in the right direction Asia Pacific Arbitration Review 2007 James L Loftis and Mark Beeley examine the effect of the PRC's Supreme Court's Judicial Interpretation of 8 September 2006 in bringing greater legal certainty to PRC seated arbitrations and narrowing the scope for technical challenges to arbitral awards rendered in the PRC. The challenging provisions are discussed by the authors as well as other issues i.e. enforcement, choice of arbitral institutions and ways to protect investors' interests. International energy dispute resolution in the Asia-Pacific region Asia Pacific Arbitration Review 2007 James L Loftis and Mark Beeley discuss the use of IDR (International Dispute Resolution) in the expanding Asian energy market by looking into its trends, troubles and techniques. They analyse the growth of IDR usage in both the globe and Asia, and look at obstacles of various categories which hinder Asian parties from capturing the full benefits of the IDR system. They provide their observations on some specific practices in Asian IDR agreements. Predictions are also made that the emphasis on mediation and conciliation that characterises Asian IDR practice will ultimately influence the western norms inherited in the current IDR system. Pinsent Masons Bulletin Issue 18 Page 5 of 7

6 Building & Construction Experts in litigation, arbitration and adjudication Society of Construction Law paper February 2006 Dr Robert Gaitskell QC discusses two main concerns: that the expert acts like a "hired gun" and is not independent; and that the expert does not have the necessary expertise. The author considers these and other concerns in the light of Part 35 of the Civil Procedure Rules and linked Practice Direction, case law, guidance from the editors of the White Book, the Civil Justice Council Protocol for the Instruction of Experts to give Evidence in Civil Claims, the TCC Guide 2005, the joint Royal Academy of Engineering and Engineering Council UK Statement of Ethical Principles 2005 and the Code of Practice for Experts Repudiation, termination and quantum meruit Society of Construction Law paper May 2006 Julian Bailey addresses two issues. If a contractor has performed work under a construction contract which the owner repudiates, and if the contractor accepts the owner's repudiation, thereby terminating the contract, is the contractor entitled, instead of claiming damages in contract, to recover money on a quantum meruit for work performed up to the point of termination? If the answer is yes, does the contract price, or do the rates and prices specified in the contract represent a constraint on the contractor's remedial entitlement? Made to measure Building 4 May 2007 p53 Andrew Hemsley considers the different ways of analysing disruption including 'the measured mile', industry guidelines, expert opinion, time and motion, and global claims. Who are you today? Building 27 April 2007 p69 Tim Elliott reviews the Australian case Kane Construction v Sopov, which highlights the difficulties of the middleman role of the contract administrator. The search for meaning Building 25 May 2007 p66 Martino Giaquinto discusses a recent High Court case, Rhodia v Huntsman, which sheds some light on the subject of best and reasonable endeavours. The judge commented that, where the contract actually specifies certain steps to be taken as part of the exercise of reasonable endeavours, those steps have to be taken even if they could involve the sacrificing of a party's commercial interests. The meaning of 'under the contract' in a letter of intent Building Law Monthly May 2007 This is a review of the English decision Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd. The Court of Appeal held that the words 'under the terms of the contract' in a letter of intent had the effect of incorporating into the contract represented by the letter of intent the terms of the draft contract which had been under negotiation between the parties prior to the sending of the letter of intent. 'Unreasonable or vexatious' termination Building Law Monthly May 2007 This is a review of Reinwood Ltd v L Brown & Sons Ltd (2007) BLR 10. On the facts of this case, Judge Gilliland held that the contractor had neither acted vexatiously nor unreasonably in determining the contract. He set out six points to bear in mind when deciding whether a contact has been determined vexatiously or unreasonably Extension of time: a contract administrator's perspective. Bevis Mak explores the general duties imposed on contract administrators when exercising their powers to determine extensions of time under the different standard forms of contract available. Considers how the powers should be exercised in practice. Pinsent Masons Bulletin Issue 18 Page 6 of 7

7 Mediation Award of costs following refusal to mediate This article reviews Halsey v Milton Keynes General NHS Trust where the English Court of Appeal laid down guidelines identifying the circumstances in which a party, who has been successful in litigation, is to be deprived of his costs by reason of his failure to mediate the dispute. This should happen in very limited circumstances and the general rule remains that the successful party is entitled to costs. Middle East Middle East warms to carbon capture Middle East Economic Digest 4-10 May 2007 Tom Pepper comments on the Middle East's potentially major role in reducing carbon emissions by using its used oil fields as underground stores for carbon dioxide. Development without downsides Middle East Economic Digest May 2007 Colin Foreman reports on Plan Abu Dhabi 2030, which will lay down the guidelines that all real estate developments in Abu Dhabi will follow. Projects Asian race for renewables Project Finance International Issue 362 Daniel Liew, chairman of China committee of Independent Power Producers Forum, outlines that although most attention in the renewables sector has been focused on the West, Asia is set to become the home to numerous opportunities for renewable developers. The impact of Midland Expressway v Carillion Construction (No 2) on 'equivalent project relief' in PFI transactions The only game in town? Reflections on the UK experience of PFI Society of Construction Law paper February 2006 John Redmond outlines the development of PFI as a method of financing major projects in the UK. The author explains why the PFI developed, why it is favoured by the UK Government, the structure of a typical PFI project and how that structure has been modified to enable PFI to play a part in the regeneration of public services in city areas. He concludes with some concerns expressed by those who have been working with PFI in the UK. Society of Construction Law paper November 2006 Hamish Lal discusses the first case to examine the 'right to refer' and 'equivalent project relief' provisions in the context of PFI transactions. He examines both the jurisprudential significance and the practical impact for the key parties involved in PFI transactions. JUNE 2007 Pinsent Masons Bulletin Issue 18 Page 7 of 7