1. 1 General Issues in International Construction. Summary: 1 International Performance Characteristics (lecture 19 and Appendix 7). 2 International Contracts and Payments (lecture 20). 3 International Disputes and Arbitration (lectures 21 & 22). 4 Boycotts and Bribes (lecture 24). 5 Selecting Consultants, Engineers and CMs (lecture 25). 6 Examples from the Near East, N Africa, and Developing Nations (lectures 26, 27, & 28). 7 FIDIC (lectures 29 & 30).

2. 2 1 International Performance Characteristics. Performance standards in international construction can vary significantly from the domestic scene: –timely completion of work (quite similar to domestic): contractor can be excused in certain circumstances: –force majeure - particularly relevant to the international international scene, and includes factors beyond control such as: war and new import/export restrictions; but also earthquakes, floods, riots, etc..; foreign governments and employers often require greater assurance that the international contractor has the necessary expertise and financial support: –due to less knowledge of the contractor; –reduced ability to sue the contractor in the event of total default;

3. 3 –quality expectations of owners may be different internationally: lower in many developing countries: –however, often international contracts are large, prestigious facilities where quality must meet the highest international standards; ISO 9000 (International Standards Organization): –aimed at providing a quality system that helps ensure a product that meets the purchasers requirements; –increasingly adopted in industry (but still minimal in construction); –see Appendix 7 for overview of this standard. –safety standards may be different: may be stricter or less strict than US, however: –must meet legal requirements (make sure you understand your obligations, relevant agencies, actions to take in case of accidents); –humanitarian, moral, ethical obligations; –economic issues (reduced premium if good safety record);

4. 4 2 International Contracts and Payments. Documentary payments: –An added dimension in international contracts is: buyer wants to receive goods and services before payment (large delivery lag times, greater probability of damage..); the seller would like payment before it hands over the product: –a solution to this dilemma is to operate payments through an international bank system: a common form of this is the Documentary Credit System: an international bank (issuing agent) is used for this purpose; buyer inform bank of payment issuing bank produce documentary evidence of existence and shipment of goods seller payment

5. 5 3 International Disputes and Arbitration. Disputes are commonplace in construction contracts: –for international contracts: greater risk and more uncertainty = greater possibility of disputes; as a foreign contractor, often less likely to get a fair judgement in local courts; legal process likely to be unfamiliar = disadvantage.

6. 6 Litigation can be: –expensive; –cause delays; –lead to a poor working relationship; –the foreign contractor is often at a disadvantage. therefore, try to avoid litigation: –negotiation is the best approach if an amicable solution can be achieved in a reasonable period of time; –placing an engineer between the contractor and owner can facilitate the negotiation; –the next level of recourse is conciliation - introduction of a third independent party (in place of the engineer) can suggest, but not compel the terms of a settlement;

7. 7 –the next level of recourse may be arbitration: provides an impartial forum (equality for both parties); its independent of the jurisdiction of a foreign legal system; often faster than referring to the judicial process. –FIDIC contracts provide for dispute resolution through arbitration via the ICC Court (International Chamber of Commerce): consequently, 20-25 % of the 300 cases started annually are construction cases; however, the local arbitral center may not accommodate the use of the ICC rules.

8. 8 4 Boycotts and Bribes. Boycotts: –a technique whereby one state attempts to exert economic pressure on another to achieve some desired political end: primary boycotts: country X refuses to do business with country Y; secondary boycotts: country X refuses to do business with companies in country Z that do business with country Y. –beware, this can impact your companies ability to secure future contracts;

9. 9 Bribes: –most countries criminalize bribery: yet, in some countries, it may be accepted as a way of doing business, and rife even at the government level; differentiate from legitimate agency/commission fees paid to bona-fide person for rendering services necessary to do business in a foreign country; keep thorough records of all financial transactions in case you are audited; penalties can be severe, with heavy fines and years of imprisonment; depending on the current political environment, you could find yourself being made an example.

10. 10 Required General Reading: Chapter 27: Construction in Kuwait. Chapter 28: Contract Arrangements in Developing Nations Chapters 29 & 30: FIDIC Clauses