Risk management in mining construction projects: the variables to consider
Market Insight 17 May 2022 17 May 2022
Projects & Construction
During the online meeting, the experts talked about the critical issues that have been seen in constructions in recent times, from the practical perspective in the management of mining and energy projects worldwide. Risks in construction projects, renegotiation of contracts and impacts of the variables that can affect a mining construction in general, were the main topics of the second session of the webinar "Strategy under uncertainty", organized by Halpern Pino. The event featured presentations by Clyde & Co partner Mary Anne Roff, Clyde & Co partner Nathaniel Horrocks-Burns and Halpern Pino partner Juan Pablo Halpern.
In the presentation, Juan Pablo Halpern noted that "the coronavirus pandemic has had profound effects on the global construction industry, there will likely continue to be substantial delays and cost impacts as a result of labor shortages, supply chain disruption and financial pressure, so we expect a repeat of the disputes that have occurred in the last two years. That is why in these uncertain times, it is worth stopping to reflect on the situations that repeatedly give rise to conflict."
To that he added that "beyond the health crisis, we are living a real revolution in our way of working, trying to return to normality by applying the same previous contracts would be a mistake. Yesterday we talked about the approach of the projects to make them more sustainable, today we want to talk about the change of approach and design of the contracts from the experience that the most recurrent conflicts leave us."
In the first instance, Nathaniel Horrocks-Burns spoke about the approach of common law versus civil law. "International projects bring together different cultural and legal backgrounds, so the main examples of key differences between the approach of customary law and civil law are codified or uncodified jurisprudence, the contract of freedom, good faith, limitation periods, gross negligence and disclosure of documents," he explained.
Regarding the allocation of risks and force majeure, the executive explained that the most important points to consider are:
Focus on force majeure during the pandemic
Allocation of risks depending on the wording of the contract
Evolution of the approach to risk allocation and force majeure
Predictability of risk and associated with the pandemic
Alternative ways of recovery
Collaboration and pragmatism
Importance of a good record
For her part, Mary Anne Roff analyzed the discrepancies in the contract and explained the importance of consistency in large and complex contracts. "You should know the terms like 'Front End', which is used in basic legal and commercial terms. On the other hand there are the 'Back end' contracts that go into more technical details, specifications, plans, etc," he said.
The executive added that "as for the interpretation of the contract, it is necessary to take into account the clauses of order of precedence and interpret the contract as a whole. On the other hand, to prevent disputes it is pertinent to have a proactive approach to the management of risks or problems and it is very important to keep track of each of them."
Regarding disputes, possibility of avoiding them and alternatives for their solution, Roff points out that "disputes are sometimes inevitable, however it is very important to have a proactive approach in the development of a dispute management strategy, for that you have to establish the fundamental facts that must be proven, identify critical documents and early consideration of document management, interview key people/witnesses to understand the scope of the dispute and the arbitration of these issues."
This article was first published by Mineria Chilena on January 14, 2022. Read the original article in Spanish here: [https://www.mch.cl/2022/01/14/gestion-de-riesgos-en-los-proyectos-de-construccion-minera-variables-a-considerar/#]