One step ahead

At first glance the success of English law firms in developing and sustaining markets for their services in international construction may appear as improbable as export successes like the M&S sandwich and Four Weddings and a Funeral.

In reality our leading position in this market results from a number of factors.

First, as a result of British involvement in ambitious global projects, such schemes are frequently let on conditions of contract produced by the International Federation of Consulting Engineers (FIDIC), which have close affinities with forms produced by the UK's Institution of Civil Engineers. In large and complex cases, employer and contractor alike will frequently seek English legal advice at an early stage as a result.

FIDIC forms of contract provide for arbitration according to International Chamber of Commerce (ICC) rules and many funding institutions favour off-shore arbitration provisions of this kind. While international contracts frequently provide for local law, a specialist English practice will often be appointed alongside a local firm because of its knowledge of ICC procedures and experience of large scale construction disputes.

A second factor results from UK economic circumstances. The recession has led UK contractors, consultants and developers to seek foreign work.

Bovis, for example, anticipates that 80 per cent of future turnover will come from overseas. A prime focus currently is Berlin and the new German Bundeslaender; examples of major projects in Berlin include the massive Potsdamer Platz development and the refurbishment of the Reichstag; McKenna & Co advised on both projects. This influx is likely to have a major impact on future contracting and should create more opportunities for the UK construction industry and its lawyers.

The third element, inevitably, is finance. Increasingly, major international projects are either partly funded by private finance or agencies such as the World Bank or through some form of privatisation process. The legal problems thrown up by UK

privatisations and privately funded schemes have led to specialist law firms building up expertise which has enabled them to become international market leaders in this field.

Also, public sector or host government clients are becoming more aware of the importance of specialist legal advice. In the past such clients often relied on internal legal resources when negotiating agreements and on occasion this has resulted in private sector participation in schemes without significant transfer of risk. Providing for effective risk transfer is probably the most important requirement for a client in such circumstances. The Indian government, for example, recently took the initiative by prompting its State Electricity Boards to seek independent legal advice.

Such is the demand for infrastructure improvements, especially in Asia and the India, that projects which are attractive to outside investors are at a premium; the government often must adapt its legal regime to assist this. There is increasing demand for advice on

reforms to compulsory purchase regimes or the monopoly powers of state bodies, needed to provide the necessary degree of investment certainty.

Henry Sherman is a construction litigation partner at McKenna & Co.