Stadium construction in Denmark: recent highlights

For the last five years DLA Piper has advised the owner and developer of the Royal Stadium – Copenhagen’s newest stadium, and the biggest multi-events arena in Denmark hosting concerts, sports events, etc. The owner has entered into more than 30 construction contracts and legal advice has covered the handover procedure and related to several subsequent legal disputes at the Danish Building and Construction Arbitration Board. Amongst the cases that went to arbitration one was of particular significance.

The arbitration took place in February 2017 in Copenhagen and was between the stadium as the employer (for whom DLA Piper partners Kurt Bardeleben and Kristian Skovgaard Larsen acted as party representatives during merits hearings) and a Spanish steel contractor. The case concerned a trade contract with a contract value of around €9 million. During construction, certain difficulties arose in reaching the agreed milestones. In particular, a major steel bar collapsed during transportation from the assembly site to the crane site. All assembly work on the steel structure was stopped immediately and the 30 trade contractors claimed for loss and expenses for more than a month afterwards. During the construction, four additional agreements were entered into as amendments to the original trade contract. Subsequent disputes arose on various issues, including the determination of agreed time limits and their extension, as well as liquidated and ascertained damages.

After considering the evidence, the arbitration tribunal held that the Spanish trade contractor was not entitled to any extension of time. This was because, as admitted by the contractor, strong winds on the site would have stopped construction in any case even if the steel bar had not collapsed, and this would have entitled the contractor to an extension. The contractor did not dispute their responsibility for the collapse of the steel bar. However, they claimed an extension of time based on what is known as the "Malmaison doctrine" which entitles the contractor to "time but not money" in the event of a concurrent delay.

However, the arbitration tribunal ruled that the contractor had not lifted their burden of proof and ruled accordingly for the stadium.

In another landmark decision from summer 2018 (case T:BB 2018.649), reported in the Danish construction journal Tidsskrift for Bolig- og Byggeret, where DLA Piper associate Charlotte F. Malmqvist acted on behalf of a major contractor, an arbitral tribunal confirmed the applicability of the Malmaison doctrine not only in international construction law, but also in Danish construction law.

Contractor’s design responsibility and modular construction

Especially in very large and complex construction projects, it can become unclear during either the design or construction phase which of the multiple parties has responsibility for the design of the project. Disputes in this area are often seen within stadium construction projects such as the one mentioned above regarding the stadium in Copenhagen where the Spanish contractor also contended that they did not have any part of the design responsibility and the decision on this dispute – as is often the case – was based on the wording of the contract.

In recent years, project delivery methods, with various degrees of design responsibility falling to the contractor, have become increasingly widespread within the construction sector. It is now quite common for the contractor to undertake design to a greater or smaller degree, outside the conventional turnkey project delivery method. The contractor’s design responsibility is often agreed as a sub-project, for example, in connection with modular construction or procurement based on functional requirements.

The contractor’s contractual duty to design has given rise to a number of disputes in recent years. One example is the 2018 case mentioned above, where the main contractor had undertaken a modular construction contract. Disagreement arose between the parties as to the scope of the contractor’s design duty and, in particular, interfaces. Based on a thorough reading of the contract, including the tender documents, the Arbitration Board ruled that, in the interfaces between the modular construction job and the rest of the construction project, the duty to design rested with the owner.

The new standard form construction contract and contractor’s design responsibility

In view of these developments in the area of the contractor’s design responsibility, the Standard Form of Construction Agreement in Denmark (AB 18), covering general conditions for the provision of works and supplies within building and engineering, includes a new section 17 concerning the contractor’s design responsibility. Some of the key provisions are outlined below.

Under section 17(1), the contractor is to design the Works of part thereof only if agreed between the parties. This means that if the contractor makes any design proposals to the owner, this does not in itself entail agreement that the contractor is to carry out any design.

If an agreement has been concluded providing for the contractor to be responsible for the design, the owner is obliged to appoint a design manager who will represent the owner in connection with planning and carrying out the design and who can receive and give notices between the parties.

If undertaking design, the contractor must comply with "good design practices." This means that the design documentation must be prepared in accordance with relevant professional standards and comply with current guidelines and regulations. However, the level of detail required depends on the specific task and the phase during which the design is carried out. By way of example, the explanatory notes to section 17 of AB 18 list (i) design of ventilation systems based on functional requirements, (ii) design of concrete elements and (iii) design of fire alarm systems. The design levels for the three tasks differ because they will, due to the nature of the work, be implemented differently in the combined project. However, common to them all seems to be that the design level must be sufficiently detailed for the project to be quality assured by a party other than the designing party, for example, the owner’s consultant. There is no requirement for the contractor to state how a modular construction job is structured; nor is there any requirement for design in project interfaces if that does not follow naturally from the design task.

In respect of interfaces, rules have now been laid down. The contractor must state the connection of the project with the interfaces of the other aspects of the project even if it is for the owner to coordinate the combined project, including determining the interfaces. Moreover, the contractor is required to undertake a cross-disciplinary inspection of the combined project. This provision is a welcome one, as interface issues are very often the cause of disputes between the parties. In the decision cited earlier, one of the reasons for the dispute was the disagreement as to which party was responsible for design in the interfaces and where the interfaces of the project in question actually were. Whether that dispute could have been avoided altogether if the new provision on the contractor’s design responsibility had been agreed is not certain, as that would have required a considerable level of detail in the interface specification. However, had the provision applied, it is likely that each party would have made (greater) efforts to ensure the interface specification, thereby reducing the risk of dispute.

There is a general requirement for the contractor to perform quality assurance, possibly including inspection of their own project. AB 92 (the previous standard form for the provision of works and supplies within building and engineering) did not contain any provision requiring the contractor to perform quality assurance, but left it to the parties to agree on that issue. That led to a number of disagreements, as it was not clear from AB 92 whether a specific agreement was required; section 36(2) merely specified that any claim by the owner for defects will continue for more than five years as from the hand-over if "agreed quality assurance measures" have failed materially.

The contractor is now also required, if proven methods and materials were not used, to state this in writing as well as stating any risk involved. One motivation for this new provision may be the recent focus on building materials used as air barriers – known as MgO boards – which were popular in the Danish construction industry from around 2010 up until 2015, when it was found that the boards often have rather unfortunate moisture-drawing and salt-releasing properties. Until now, provisions like the one in AB 18 have primarily been included in the specific construction contracts and consultancy agreements, including with reference to the Danish Executive Order, on quality assurance in construction work, etc, which set out similar, albeit more detailed, requirements for information to the owner in connection with construction and renovation work in subsidized construction projects.

The contractor is required to give notice in writing to the owner once the project has been completed. The notification of completion must be accompanied by the results of the quality assurance carried out by the contractor. The owner must, as soon as possible, state whether the project can be approved and/or whether there are any defects or reservations relating to the project. The owner’s approval does not, however, mean that the responsibility for the design passes from the contractor to the owner. Section 18 of AB 18 introduces more detailed provisions on the contractor’s right and obligation to remedy any defects.

Generally, the provisions on the contractor’s design responsibility clearly reflect the intense focus by the AB committee on practices developed since 1992 within the building and construction area, including the issues causing the highest number of disputes between the parties. By imposing on both parties explicit requirements for self-monitoring, inspection and provision of proper information to the other party, etc, it is hoped that the number of disputes within the construction sector will be reduced.

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