Offshore Wind COVID-19 Webinar summary: UK RENEWABLES x HFW
COVID-19 has put the U.K. into a national lockdown. While power utilities workers have been deemed essential, wind power operations were still disrupted.
Companies such as Siemens Gamesa had to halt production due to the lockdown measure. Upon resuming operations, the company needs to abide by additional safety measures to prevent the spread of the virus, causing extra time on installations.
Moreover, the British government has not issued a stimulus package so far for the wind sector. RenewableUK, the trade association for wind power in the U.K., has held a webinar with Law firm HFW to provide directions for companies to mitigate the impacts of COVID-19.
According to the UK’s FIDIC Red Book1999 and the NEC4, contractors can file claims under four different circumstances:
Under the terms of the “specific contract clauses” of FIDIC 1999, a contractor shall be entitled to an extension of time for project if completion of the works “is or will be delayed by unforeseeable shortages in availability of personnel or goods caused by epidemic or government actions.”
The second one is “Force Majeure,” which is defined by FIDIC 1999 as “an exceptional event or circumstance” that is beyond a Party’s control, including natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity. However, a Party affected by a Force Majeure shall be entitled to an extension of time but no additional costs. Also, the affected Party must give a notice within 14 days after the Party became aware of the consequences of a Force Majeure event.
The third one is “Change in Law,” which is probably the most promising one among the four approaches. The Change in Law clause allows a contractor to claim relief in forms of an extension of time or costs for delays or loss and expense caused by government interventions. A contractor has the burden of proving that the loss is caused by government’s action rather than the epidemic or measures taken by the contractor.
The last one is insurance. A Party may file business interruption claims for disruptions caused by COVID-19 to projects being handed over in phases. However, such insurance claims are subject to policy types and could be rejected.
Wind InfoLink opinion:
COVID-19 has challenged offshore wind farm construction in various practical aspects. For instance, lockdown and border control in many countries has disrupted shipments and movement of professional personnel. Stringent measures imposed by local governments, such as cleaning, quarantine, and contact-tracing, may also cause postponement.
According to international law consultation firms, the two main factors that affect approval of the “Force Majeure” claims are whether the pandemic constitutes a force majeure event and what date is considered the date of occurrence of such event. The latter has a direct impact on the issue of compliance with a Party’s application. In cases where the complaint lacks sufficient clarity, complying with government regulations, maintaining open communication and keeping detailed records can serve as proof and avoid dispute in the future.
Wind Industry & COVID-19 Response Hub
Turbulent waters: Covid-19 and offshore construction