1 16 International Contracts. Objective: To understand the basic issues when entering into an international construction contract. Summary: 16.1 Legal Awareness International Contract Forms and Provisions Political Risks Obtaining Foreign Contracts.

Legal Awareness Beware: laws relating to international contracts may be based on a fundamentally different legal philosophy. Make sure you are aware of: –all local laws (not just contract law, for example, environmental regulations, labor employment laws, etc..); –available legal remedies (from arbitration through to litigation).

International Contract Forms and Provisions There are many forms of contract worldwide. An International Contractor may not be familiar with local forms of contract in the host country: –both parties will be at a disadvantage; –a solution is to use a commonly used international form of contract; –forms that have a wide acceptance will likely be understood by both parties, and thus lead to a quicker agreement of terms; –commonly used forms are published by FIDIC (International Federation of Consulting Engineers Association).

4 When entering into a foreign contract, you are subject to political risks: –political uprisings; –strikes; –vandalism; –terrorism, or war, etc... Minimize your risk by obtaining knowledge of the risks. Check: –US Department of State; –Other contractors; –International Banks; etc.. Minimize your risk by obtaining knowledge of the risks. Check: 16.3 Political Risks

5 Sources of information: –International periodicals: ENR; International Construction Week; etc..; –National Publications: Commerce Business Daily, etc..; –Competitors who may need assistance on large projects; –Organizations: International Banks; US Embassies; US and Foreign Chambers of Commerce; etc Obtaining Foreign Contracts

6 Contacting the Controlling Entity: –Send a firm resume to the controlling entity, as an indication of commitment; –send a representative of the firm to give a presentation.

7 17 Legal Considerations in International Contracts. Summary: 17.1 Financing the Project Choices of Law and Forum.

Financing the Contract Sources of foreign financing. –Private capital: banks, insurance companies, etc.. –Multinational lending agencies: International Bank for Reconstruction and Development (IBRD) which only lends to government or government backed enterprises; –US Agency for International Development (AID) which offers aid to finance projects in less developed countries;

Choices of Law and Forum Choice-of-law (or forum) clause: –stipulates which legal system (or forum) will be used to resolve any litigation; –if enter into contract with government agency, a choice of law will not usually be permissible; –without such a clause, the law that is applied is usually that of the place of the project. Calvo clauses: –the contractor waives its right to have its government intervene on any claims it may have against the contracting state. Limitation of liability clauses: –reduces contractor’s risk from claims; –must be reasonable and concurrent with standard limitations to ensure enforceability.