Presentation on theme: "‘CHANGES IN LAW’ Contractual Provision September, 2012 Topic for discussion Business Confidential Foster Wheeler Iberia/Chile Sep/2012."— Presentation transcript:
‘CHANGES IN LAW’ Contractual Provision September, 2012 Topic for discussion Business Confidential Foster Wheeler Iberia/Chile Sep/2012
1. RATIONAL FOR THE “CHANGES IN LAW” PROVISION 2. EXAMPLE 3. SIMILAR PROVISIONS 4. KEY ELEMENTS TO BE CONSIDERED 5. YPF - FW IBERIA PRACTICAL CASE INDEX 1.
Uncertainty of unforeseen events (as changes in law). Actual/potential impact of such events on certain contract T&C (mainly price and schedule). Contractual mechanism to grant the contractor’s right to revisit such particular affected T&C. Such mechanism to entitle a contract variation or contract termination. 2. 1. RATIONAL FOR THE “CHANGES IN LAW” PROVISION
“If the Contractor (FW) suffers (or will/may suffer) any delay and/or incur on additional costs and/or be affected in any manner, as a result of a Change in Law, then the Contractor will be entitled to an adjustment of price, and/or extension on time and/or the re- consideration of any term and/or condition of the Contract that may affected by such a circumstance. The contract must deliver notice to the Client within ____ days from the occurrence of such Change in Law or the date in which the Contractor knew about the potential impact of an incoming Change in Law, identifying the change in law and the contractual impact, even as potential, of such change. The Parties will proceed as per the procedure in Clause ___ to agree or determined these matters. If the Contractor is prevented of performing its obligations under the Contract and this cannot be remedied by a contract variation or the Client has refused to grant a variation, then the Contract may give notice of termination in accordance with Clause ____.” 3. 2. EXAMPLE
FORCE MAJEURE CLAUSE: Essentially releases both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term ‘Act of God’ (such as hurricane, flooding, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non- performance entirely, but only suspends it for the duration of the force majeure. HARDSHIP CLAUSE: Intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium of a contract resulting in an excessive burden being placed on one of the parties involved. CONTRACT VARIATION CLAUSE: Any changes made to a contract are ineffective unless made in writing and signed by or on behalf of both parties and is intended to prevent informal or inadvertent oral variations. 4. 3. SIMILAR PROVISIONS
Duration of the contract Type of contract and subject/scope Country of applicable law The date from which the changes are relevant Different types of changes of law When the change should be effective (draft laws or laws in force) “Scope” of the change of law definition Allocation of the risk Determination of the impacts of the change in law Excessive impact of the change in law Obligation to mitigate Change in tax law Who will determine whether a change of law has occurred and its resulting contract Contract implementation of changes in law 5. 4. KEY ELEMENTS TO BE CONSIDERED
5. YPF- FW IBERIA PRACTICAL CASE Two contracts signed by FW for La Plata Project: “LS Engineering Services” “Engineering and FOB equipment and material supply for Coker Heater” Current situation in Argentina: Argentina’s import restrictions Breaking off Double Treaty between Argentina and Spain Nationalization of YPF (via expropriation of Repsol’s shares) Change in Law provisions in both Contracts: → Changes Orders (to mitigate impacts in cost, scope and/or performance period). CP 4.02 compliance See Attachment for detailed information 6.
THANK YOU Topic for discussion Business Confidential Foster Wheeler Iberia/Chile Sep/2012
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