Advice on disputes under the IChemE Red Book

Facts

Client: EPC contractor

Region: UK

Industry: Process plant engineering

Issues:

Acting on behalf of an EPC contractor and its parent company on a project for the provision of a process plant under a modified IChemE Red Book contract.

The initial instructions concerned advising mid-build on negotiating amendments to the contract to facilitate take-over, which had repercussions on funding the project and its performance in producing biofuel.

We were then called to advise whether the contractor had complied with relevant UK and EU law concerning the odorous emissions from the plant that became evident soon after takeover. This involved extensive legal and expert arguments in relation to technical issues leading to negotiations over whether overall performance guarantee requirements had been met.

We also advised the client and its parent company, (who had provided a parent company guarantee and funding), on the security documentation following threats to call a demand bond issued under the contract. Ultimately we successfully resisted the call following widely reported High Court injunctive proceedings in the TCC.

A full and final compromise was reached with the owner.

Solutions

In a very short space of time Fenwick Elliott had to assimilate the detail of a large and complex £200 million contract with five amending contracts sitting on top of it, to ascertain the client's obligations, defaults, rights and remedies in the context of demands for change and completion being made by the owner.

We prepared and marshalled well-developed arguments and position papers with the help of American experts to defend our client’s technical position in correspondence and submissions.

We also prepared and commenced three adjudication referrals and concurrent arbitral notices to put the client on attack footing in tandem with the injunctions to leverage pressure on the owner.

We also sought to pre-empt a call on the demand bond by obtaining an ex-parte and later a full injunction in the High Court on the back of that first injunction and proven prima facie owner breaches, which ultimately enabled the client to settle this case without having to pursue its arbitration references further.

Benefits

The ultimate benefit of our actions for our client was the avoidance of protracted international arbitration proceedings through the use of quick short-form High Court procedures to get the client before the judge in charge of the Technology and Construction Court, including obtaining access to the judge over a weekend in the ensuing emergency when a bond was wrongly called.

We enabled the client to strike a settlement with the owner in circumstances where potentially the parent company of the contractor and our main client would have suffered very serious financial repercussions had things gone the other way.