74
Legal Focus
OCTOBER 2013
Construction Law -
This month we take a look at the issues surrounding the Chinese construction industry by speaking to Ms. WANG Jihong, executive partner of Grandway Law Offices.
What are the main issues to be aware of within construction law in your jurisdiction?
One of the significant issues to be aware of is the new model construction contract in China. The Ministry of Housing and Urban & Rural Development and the Administration of Industry and Commerce have jointly issued a model construction contract this year to replace the one issued in1999. The 1999 version fails to cater to the need of the developing market in terms of contract structure and content, nor reflects the changes in the evolving legal system. The new 2013 model construction contract was issued to establish better legal compliance in terms of project management, quality management, safety production,
environmental
investing in the aforementioned projects located in China, it is necessary to make a corresponding social stability risk analysis in advance to ensure the progress of the projects. Since the implementation of the Law on Bid Invitation and Bidding in January 2000 the construction engineering project bidding activities in China have been normalized. However, the implementation of the law has met some obstacles: on the one hand, ambiguousness of
rules causes bidding protection,
occupational health and construction warranty, and to reflect legal changes and updates in the Construction Law, Contract Law, Safety Production Law, Labor Contract Law, Bidding Law and other laws in China. What’s more significant is that it better integrates with the FIDIC system in various aspects such as performance bond, construction insurance, pricing terms, etc.
In August 2012, the National Development and Reform Commission issued "Interim Measures for Social Stability Risk Assessment of Major Fixed Assets Investment Projects”. The Measures provide that eligible fixed-asset projects shall undertake social stability risk investigation and analysis at the early stage of the work, and provide preventive measures and solutions for risk as well as relevant emergency plans, which shall be stated in an independent chapter and integrated as an important content of project feasibility study reports and project application reports. The specific evaluation of risk is measured and administrated by local government or designated evaluation units. Therefore, for domestic or foreign enterprises
falsification, on the other hand, excessive administrative supervision leads to government intervention in the bidding procedures. To overcome these drawbacks, in 2012, the state council promulgated the "Regulation on the implementation of the law on bid invitation and bidding”, and its main contents cover the whole bidding process. This regulation includes stipulations to: (1) Better define the projects subject to open bidding; (2) Fix the amount, form and use of bid bonds; (3) Detail falsified bidding, collusive bidding, obstructing fair bid evaluation and legal consequences of those acts; (4) Clarify that target, price, quality and time of performance of the contract constitute the substantial contents of the contract. The implementation of the regulation will contribute to improve and enrich the Law on Bid Invitation and Bidding, to normalize bidding conduct, to promote fair competition, and to prevent and punish corruption, and so on.
What challenges and complexities do you face when dealing with legal issues surrounding the construction sector in your country? How do you navigate these complexities? How can you help your clients to avoid potential pitfalls?
Some existing laws and regulations need to be revised to keep up with the development of the economy. Meanwhile, discretional law enforcement of the government agencies is a main challenge in the construction sector in
China. Taking the filing of contracts for example – here, the government agencies are not supposed to make substantive review of the contracts filed with them in honor of the legal principle of autonomy of will. However, in reality, it is common for the agencies to review the content of the contract. To avoid unsuccessful attempts at filing, we would communicate with the agencies in advance or assist in the drafting of the contracts at an early stage.
do you anticipate any legislative changes in the construction sector?
The Construction Market Administration Rules are expected to be passed soon. The Draft Construction Market Administration Rules were released at the end of 2012 by the state council for public comments, aiming to (1) specify government supervision scope and prevent government
intervention in construction
projects, (2) build up an information disclosure system to strengthen legal compliance and create a credit system, (3) improve construction fund management to control cost and prevent delay of payment; and (4) prevent illegal subcontracting and arbitrary shortening of construction period, construction quality. LM
so as
contact: Ms. Wang Jihong telephone: 86-10-88004223; 86-137 0122 9834 Email:
wangjihong@grandwaylaw.com
Grandway Law offices 5th&12th Floor, tower a, no.1 Financial Street, Xicheng district, Beijing, 100033, china
to ensure
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