®

Constructionin 36 jurisdictions worldwide

2013

Contributing editor: Robert S Peckar
Published by
Getting the Deal Throughin association with:
AB & David Law
Achour & Hájek sro
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WongPartnership LLPcontents®

Construction 2013

Introduction Robert S Peckar Peckar & Abramson, PC

3

Contributing editor:
Robert S Peckar
Peckar & Abramson, PC

Australia Greg Campbell and Paul Woods Maddocks

4

Austria Johannes Lindner and Dimitar Anadoliyski Fiebinger Polak Leon Rechtsanwälte

12

Business development managers
Alan Lee
George Ingledew
Robyn Hetherington
Dan White

Belgium Lieven Peeters and William Timmermans Altius

17

Brazil Júlio César Bueno Pinheiro Neto Advogados

24

Canada Bruce Reynolds, Sharon Vogel and Yvan Houle Borden Ladner Gervais LLP

35

Marketing manager
Alice Hazard

Chile José Manuel Larraín Larraín Rencoret & Urzúa Abogados

43

China Wang Jihong, Gao Lichun, Zhang Xiaofeng, Fang Xing and Liu Ying V&T Law Firm

50

Colombia Santiago Jaramillo-Caro Gómez-Pinzón Zuleta Abogados

57

Czech Republic Gabriel Achour Achour & Hájek sro

63

Finland Aimo Halonen Mäkitalo Rantanen & Co Ltd

70

France Isabelle Smith Monnerville and Julien Maire du Poset Smith Violet

75

Germany Jörg Gardemann and Alexander Herbert Buse Heberer Fromm

83

Ghana David Ofosu-Dorte, Isabel Boaten and Ferdinand Adadzi AB & David Law

88

Greece Theodoros Skouzos Iason Skouzos & Partners

93

India Sunil Seth and Vasanth Rajasekaran Seth Dua & Associates

99

Japan Miho Niunoya, Masayuki Matsuura and Daniel Hounslow Atsumi & Sakai

106

Lebanon Karim Khalaf and Rana Kahwagi Alem & Associates

111

Lithuania J ovitas Elzbergas, Donatas Lapinskas and Valentas Mitrauskas
Motieka & Audzevičius

117

Luxembourg François Collot Kleyr Grasso Associés

123

Mexico Roberto Hernández Garcia Comad, SC

130

Netherlands Thabiso van den Bosch Conway & Partners NV

135

New Zealand Garth Sinclair and Craig Wheatley Webb Henderson

140

Nigeria George Etomi, Efeomo Olotu and Ivie Ehanmo George Etomi & Partners

148

Norway Simen Skaar Kristoffersen and Mads Dahl Karlstad Kvale Advokatfirma DA

153

Poland Andrzej Tokaj and Przemysław Kastyak Magnusson Kancelaria Prawnicza		

158

Qatar Marcus Boeglin, Stefan Jury, Ramy Saleh, Georges Racine, Matthias Scherer
and Melina Llodra Lalive in Qatar LLC

164

Russia Vladimir Lipavsky Ost Legal

169

Saudi Arabia H ani Al Qurashi, Rami Al Qulaiti and Saeed Basuhil
Hani Qurashi Law Firm in cooperation with Kilpatrick Townsend

175

Singapore Christopher Chuah and Tay Peng Cheng WongPartnership LLP

181

Sweden Andreas Magnusson Foyen Advokatfirma AB

187

Switzerland Matthias Scherer, Michael E Schneider, Sam Moss, Nathalie Subilia-Bigler
and Eleanor Cashin Ritaine Lalive

193

Turkey Ziya Akıncı and Cemile Demir Gökyayla Akıncı Law Office

199

Ukraine Timur Bondaryev, Svitlana Teush and Volodymyr Grabchak Arzinger

206

United Arab Emirates Thomas Philip Wilson, Rabih Tabbara and Scott Hutton
Kilpatrick Townsend Legal Consultancy

213

United Kingdom Stacy Sinclair Fenwick Elliott LLP		

220

United States Robert S Peckar and Michael S Zicherman Peckar & Abramson, PC

229

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Publisher
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Construction 2013
Published by
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Atsumi & Sakai

japan

Japan
Miho Niunoya, Masayuki Matsuura and Daniel Hounslow
Atsumi & Sakai

1

Joint ventures

4

Labour requirements

Are all members of consortia jointly liable for the entire project or may

Are there any laws requiring a minimum amount of local labour to be

they allocate liability and responsibility among them?

employed on a particular construction project?

A consortium is typically established as a form of partnership, in
which case (or if it is operated so as to seem to be legally a partnership) all members will be jointly and severally liable for obligations
assumed by the consortium or for which it is held liable; members ofsuch a consortium may allocate liabilities of the consortium between
themselves as they see fit, but this would not bind third parties unlessthey are aware of the allocation. If a consortium is established as acompany then the consortium company is liable for the project tothe extent of the agreements it enters into (as will the members of
the consortium company be for individual contracts they enter into).

There is no requirement for local labour to be employed on construction projects in Japan. However, in order to obtain a construction
licence, a foreign contractor must show it employs engineers with acertain level of practical experience. Also, it is often difficult for a
foreign national to obtain a working visa and work in Japan without
special skills. As a result, foreign contractors have little choice but torely on local labour in most cases.
5

Local labour law
If a contractor directly hires local labour for a project, are there any

2legal obligations towards the employees that cannot be terminatedForeign pursuit of the local market
If a foreign designer or contractor wanted to set up an operation
to pursue the local market what are the key concerns they should
consider before taking such a step?

A foreign designer or contractor may operate its business in Japan,
if it sets up a subsidiary or a branch. In order for a subsidiary or abranch to obtain a construction licence, it needs to have an operations manager and a technical specialist, who may be a foreign
national. However, for construction projects in Japan, almost all the
relevant contracts, specifications, designs, and other documents are
written in Japanese, as are the regulations applicable to construction
projects, which are quite complicated. Therefore, it is essential to hire
Japanese persons who are familiar with the practice, customs andregulations applicable to construction projects in Japan.

upon completion of the employment?

As a general rule, parties to a labour contract may agree the timingof, and consequences of, termination of the contract. However, even
if the parties agree that no rights or obligations under the contract
will continue after completion of the employment, unperformed obligations (eg, unpaid salaries) may continue and the contractor, foreignor otherwise, can be liable for expenses or damages arising from injuries caused during the period of employment. Also, the contractor
may be required to provide social insurance (eg, medical insurance
and pension insurance) for employees, and if not paid, payment may
be enforced even after completion of the employment.
6

Close of operations
If a foreign contractor that has been legally operating decides to close3

Licensing procedures
Must foreign designers and contractors be licensed locally to work
and, if so, what are the consequences for working without a licence?

Foreign construction contractors are required to obtain one of 28
categories of construction licence to perform work in Japan. A licenceissued by the minister of land, infrastructure, transport and tourism
is required to establish offices in more than one prefecture, and alicence issued by the prefectural governor is required to establish an
office or offices within the prefecture. Operating a construction business without an appropriate construction licence can be punishedwith imprisonment for not more than three years or a fine of not
more than ¥3 million, or both.
Although foreign design companies themselves do not need toobtain a licence, the individuals who conduct design work for suchcompanies are required to have obtained an architect’s licence.

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its operations, what are the legal obstacles to closing up and leaving?

Since a foreign contractor needs to establish a branch office or subsidiary company in Japan in order to do business in Japan, it will
be necessary to go through the process of closing the branch office
and/or dissolution and liquidation of the subsidiary company when
it withdraws from its Japanese business. Both require specific procedures to be followed, which can be quite time consuming and lengthy.
There are no specific legal obstacles to effecting such closures, thoughcreditors may object to the closures and will need to be dealt with.
When a foreign contractor ceases operations in Japan, it is likelythat employees engaged in the project will need to be dismissed. In
the case of fixed-term labour contracts, employers cannot generally
dismiss employees during the term of the contract, except where
there are unavoidable grounds for doing so. For labour contracts
where there is no fixed term, dismissal is treated as an abuse of rights
and is invalid under labour laws if it lacks objectively reasonablegrounds and is not considered to be appropriate by social standards.
The closure of a branch office or liquidation of a subsidiary company is usually considered sufficient grounds for a valid dismissal,

107japan	Atsumi & Sakai
though in practice employers need to offer substantial amounts incompensation for dismissal.
Except as stated above, there are no generally applicable obstacles to withdrawal from business in Japan.
7Construction contracts
What standard-contract forms are used for construction and design?
Must the language of the contract be the local language? Are there

construction fees or other costs. This gives the contractor the right torefuse to deliver the building until it receives payment of those feesor costs, and the right to receive payment of its construction feesand other costs from a successful bidder at any compulsory auctionof the building.
Contractors also have a statutory lien on construction work
to secure claims pertaining to expenses for the construction work.
However, as the lien requires registration in advance, it is rarely usedin practice.

restrictions on choice of law and the venue for dispute resolution?

Two standard forms of construction contracts are widely used, theGeneral Conditions of Construction Contract (which is provided bya private-sector association)and the General Conditions of Construction Contract for Public Work (which is provided by the Central
Council on Construction Contracting Business). The former is used
if the employer is a private company and the latter if the employer
is a public institution.
For design contracts, a General Conditions of Design and Supervision contract is provided by a private association, and is widely
used.
There are no restrictions on choice of contract language or governing law. However, it is common practice for the Japanese language
and Japanese law to be specified as the contract language and governing law because the construction work is conducted in Japan. In
terms of venue for dispute resolution, Japanese law does not restrict
the choice of jurisdiction or arbitration forum. However, in the General Conditions of Construction Contract for Public Work and theGeneral Conditions of Construction Contract, the Committee for
Adjustment of Construction Work Disputes is the specified forum
for the resolution of disputes.
In the case of public works, even if the General Conditions ofConstruction Contract for Public Work is not used, it would be difficult to persuade the public institution employer to agree to the useof a foreign law, language or jurisdiction.
8

Competition
Do local laws provide any advantage to domestic contractors incompetition with foreign contractors?

There are no laws in Japan that provide any advantage to Japanesecontractors over foreign contractors.
9

PPP and PFI
Is there a formal statutory and regulatory framework for PPP and PFI

11 Tort claims and indemnity
Do local laws permit a contracting party to be indemnified against allacts, errors and omissions arising from the work of the other party,
even when the first party is negligent?

It is possible to stipulate in contracts that a contracting party be
indemnified against all acts, errors and omissions arising from thework of the other party, regardless of whether the first party was negligent in any way, and such provisions are, at least in principle, valid.
However, the Construction Industry Act requires parties to construction contracts to enter into fair contracts based on an agreement
on an equal footing. Therefore, contracts that expose one party toexcessive responsibility are more likely to be determined to be invalid
due to violation of the principle of faith and trust. Such indemnity
provisions may also become an issue in terms of abuse of a superiorbargaining position. Parties should therefore exercise caution when
including such clauses in agreements.
12 Liability to third parties
Where a contractor constructs a building that will be sold or leased
to a third party, does the contractor bear any potential responsibility
to the third party? May the third party pursue a claim against thecontractor despite the lack of contractual privity?

Pursuant to the Civil Code, a person whose action has negligently or
intentionally infringed any right of another shall be liable to compensate that person for any damages resulting from that act. Therefore,
in the context of building construction, if there is any defect in thebuilding that causes damage to third parties, the contractor will be
liable to the third parties for that damage. However, since the third
parties need to prove negligence or intentional infringement by thecontractor, it can be difficult to establish a liability. Nevertheless, inrecent years there have been a number of cases in which courts haveaccepted tort liability on the part of a contractor, particularly in thecase of illegal defects.

contracts?

The PFI Act stipulates the basic policy and procedures of the government in promoting and operating PFI projects. The PFI Act was
substantially revised in 2011 and one of the main changes was theintroduction of a concession system which enables public institutions
to offer business rights to the private sector in relation to public
facilities. The PFI Act stipulates items that must be set forth in suchconcession agreements, though it does not provide any formal framework for other PFI contracts.
The PFI Promotion Office, a governmental agency, has also
released a Standard PFI Contract, Guidelines on PFI Contracts, anda paper entitled Basic Approaches to Issues on PFI Contracts.
10 Payment of fees
How may a contractor secure the right to payment of its costs andfees from an owner? May the contractor place liens on the property?

13 Insurance
To what extent do available insurance products afford a contractor
coverage for: damage to the property of third parties; injury to workers
or third parties; delay damages; and damages due to environmental
hazards? Does the local law limit contractors’ liability for damages?

The extent of insurance coverage is a purely commercial matter
determined by the insured. Contractors commonly purchase construction insurance (which covers damage arising from any accident, for example, fire, during the construction), damages insurance(which covers compensation claimed by a third party, for example, athird party who was injured or suffered damage to their property due
to the construction by the contractor), and labour insurance (which
covers injury, etc, suffered by employees of the contractor, and is inaddition to the coverage by the government labour insurance). Local
law does not limit contractors’ liability for damages.

A contractor has a statutory right of retention with respect tothe building being constructed in order to secure a claim for

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Getting the Deal Through – Construction 2013

Atsumi & Sakai
14 Insolvency and bankruptcy

japan
18 Political contributions

Where major projects have been interrupted or cancelled, do the local

Is the making of political contributions part of doing business? Iflaws provide any protection for unpaid contractors who have performed

so, are there laws that restrict the ability of contractors or design

work?

professionals to work for public agencies because of their financial

The Civil Code provides that when bankruptcy procedures havecommenced in respect of a project owner, either the contractor or
the bankruptcy administrator may terminate the existing construction contract and the contractor may claim for any unpaid work inthe bankruptcy procedure.
If a project is terminated without the insolvency of the project
owner, the issue of unpaid fees would be dealt with as per the termsof the construction contract. Under the Civil Code, if a contract isterminated due to it being breached by a party, the breaching party
must compensate the other party (or parties) for consequential damages suffered. The Civil Code also provides that the project owner
may terminate the project at any time, even if the contractor has
not breached the relevant contract, provided the project owner compensates the contractor for the damages it suffers as a result of thetermination.

support for political candidates or parties?

Under the Political Funds Control Law, companies and organisations
are banned from making political donations to individual politicians(including political candidates) or organisations other than politicalparties.
Donations to political parties do not constitute part of doing
business in Japan. Therefore, contractors or design professionals cannot be subject to any restrictions when working for public agencies
because of their financial support for a particular political party.
19 Arbitration of private disputes
What is the prevailing attitude towards arbitration of construction
disputes? Is it preferred over litigation in the local courts?

A government agency cannot claim sovereign immunity as a defence
to a contractor’s claim for payment.

There are three types of private arbitration bodies for construction
disputes in Japan: the Construction Dispute Examination Board(which operates nationally, with each prefecture having its own
board), the Resident Disputes Examination Board and the Arbitration Center (operated by the bar associations). Arbitration is widelyused as the resolution of construction disputes as they need highly
specialist experts and confidentiality is protected during the arbitration process. Court proceedings are also used in many cases.

16 Dispute resolution with government entities

20 Force majeure and acts of God

15 Contracting with government entities
Can a government agency assert sovereign immunity as a defence toa contractor’s claim for payment?

May government agencies participate in private arbitration and be

Under local law are contractors excused from performing contractual

bound by the arbitrators’ award?

obligations owing to events beyond their control?

It is possible for government agencies to participate in private arbitration and be bound by its award, though it would be unusual for a
Japanese government agency to do so.
17 Bribery
If a contractor has illegally obtained the award of a contract, forexample by bribery, will the contract be enforceable? Are bribe-givers
and bribe-takers prosecuted and, if so, what are the penalties they
face? Are facilitation payments allowable under local law?

Contracts commonly stipulate that if a contractor wins a bid by collusion (eg, with other bidders to fix the bid), it can have the following effects: invalidation of the bid, the bid rigger(s) being banned
from contracting for the project, invalidation of any contract alreadyexecuted, and the bid rigger(s) being liable to financial penalties. In
contrast, provisions regarding bids won as a result of bribery are lessclear, but contracts could still be invalidated on the basis of a violation of ‘public order and morals’.
Both the bribe-giver and the bribe-taker can be indicted, andthe bribe-giver(s) can be punished with imprisonment for not morethan three years or a fine of not more than ¥2.5 million, while thebribe-taker can be punished with imprisonment for not more than
20 years.
Furthermore, if a contractor has won a contract by an illegal
act such as bribery, the contractor may be subject to administrative
sanctions such as business instruction, suspension of business and/or
revocation of the licence, and may also be prevented from participating in bidding on future public works projects.
Facilitation payments are not allowed and are illegal in Japan.

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There are no laws or regulations pertaining to the handling of obligations in the case of force majeure in relation to construction work inJapan. Therefore, the parties are not automatically exempted fromcontractual obligations. However, if a construction contract specifies that the contracting parties can terminate the contract or will
be exempted from performing contractual obligations in the caseof force majeure events, then the contracting parties may terminate
the contract pursuant to such clause and may be relieved from their
obligations. It is common practice to include such provisions.
The Construction Industry Act requires a construction contract
to stipulate any change in its terms or liability for damages (and themethod of calculation of such damages) due to a natural disaster orother force majeure.
21 Courts and tribunals
Are there any specialised tribunals that are dedicated to resolving
construction disputes?

The Construction Dispute Examination Board and the Resident Disputes Examination Board mentioned in question 19 are only used forconstruction disputes.
22 Limitation periods
Are there any statutory limitation periods within which lawsuits must
be commenced for construction work or design services and are
there any statutory preconditions for commencing or maintaining suchproceedings?

The Civil Code sets a limitation period of three years from completion of the construction for claims, such as for the non-payment forwork done.

109japan	Atsumi & Sakai
23 Dispute review boards

28 International environmental law

Are dispute review boards (DRBs) used? Are their decisions treated as

Is your jurisdiction party to the Stockholm Declaration of 1972? What

mandatory, advisory, final or interim?

are the local laws that provide for preservation of the environment and

Dispute review boards established for each project are not used inJapan.
24 Mediation
Has the practice of voluntary participation in professionally organised
mediation gained acceptance and, if so, how prevalent is the practiceand where are the mediators coming from? If not, why not?

The three bodies referred to in question 19 provide mediation services. There are no obstacles to voluntary participation in suchmediation.

wildlife while advancing infrastructure and building projects?

Japan is a party to the Stockholm Declaration of 1972. Japan has
many laws and regulations to protect the environment, for example,
the Basic Environment Law, the Water Pollution Prevention Law, theAir Pollution Prevention Law, the Soil Pollution Prevention Law, theLaw on Restriction of Noise and the Environmental Assessment Law.
The Environmental Assessment Law and an environmental assessment by prefectural or municipal ordinance provide for the protection of the environment and wildlife while advancing infrastructure
and building projects.
29 Other international legal considerations

25 Confidentiality in mediation
Are statements made in mediation confidential?

Statements in mediation are confidential and cannot be used in subsequent litigation or arbitration; the confidentiality is contract-based,
and a breaching party is liable to a penalty for its breach.
26 Arbitral award

Are there any other important legal issues that may present obstacles
to a foreign contractor attempting to do business in your jurisdiction?

There is no such legal issue. However, in practice, foreign contractors are not active in the construction market in Japan, mostly due
to business and commercial reasons such as language, the need for
local engineers, the size and competitiveness of local contractors, andthe need for specialist skills, such those needed for the constructionof buildings to cope with earthquakes.

Is there any basis upon which an arbitral award issued by a foreign orinternational tribunal may be rejected by your local courts?

The Arbitration Law in Japan provides the basis of rejection of anarbitral award issued by a foreign or international tribunal, which isthe same basis provided by the New York Treaty (New York Convention on the Recognition and Enforcement of Foreign ArbitralAwards).
27 Governing law and arbitration providers
If a foreign contractor wanted to pursue work and insisted by contract
upon international arbitration as the dispute resolution mechanism,
which of the customary international arbitration providers is preferred
and why?

The Japan Commercial Arbitration Center is preferred by Japaneseparties, otherwise there is no major preference for any international
arbitration providers. The Singapore International Arbitration Centre is also popular because of its location and its clear rules andprocedures.

30 International treaties
Is your jurisdiction a signatory to any investment agreements forthe protection of investments of a foreign entity in construction andinfrastructure projects? If so, how does your model agreement define‘investment’?

Japan is a signatory to economic partnership agreements witha number of countries. The EPAs provide stronger protection forinvestment into Japan, including national treatment at the approvalstage. One such agreement defines ‘investment’ as every kind of asset,
particularly including ‘rights under contracts, including turnkey, construction, management, production and revenue-sharing contracts’.
31 Tax treaties
Has your jurisdiction entered into double taxation treaties pursuant
to which a contractor is prevented from being taxed in various
jurisdictions?

Japan is party to 53 double taxation treaties.

Miho Niunoya

miho.niunoya@aplaw.jp

Fukoku Seimei Building
2-2-2 Uchisaiwaicho
Chiyoda-ku
Tokyo 100-0011
Japan

Tel: +81 3 5501 2111
Fax: +81 3 5501 2211
www.aplaw.jp

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Getting the Deal Through – Construction 2013

Atsumi & Sakai
32 Currency controls
Are there currency controls that make it difficult or impossible tochange operating funds or profits from one currency to another?

There are no such controls in Japan.
33 Removal of profits and investment
Are there any controls or laws that restrict removal of profits andinvestments from your jurisdiction?

There are no such controls or laws in Japan, other than transfer
pricing taxation.
34 Contractual matrix of international projects
What is the typical contractual matrix for a major project in yourjurisdiction in terms of the contractual relationships among the various
construction project participants?

Construction project participants typically form a contract-based
consortium and all the members of the consortium sign a construction contract directly with the owner.

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japan
Subcontractors are commonly used for small portions of theconstruction work. However, in principle it is prohibited under theConstruction Industry Act to use a subcontractor for all or the major
portion of the construction work except in private projects, where
all or the major portion of the work may be subcontracted withthe owner’s written consent; there is no such exception for publicprojects.
35 Local environmental responsibility
What duties and liability do local laws impose on developers andcontractors for the creation of environmental hazards or violation of
local environmental laws and regulations?

Each environmental law provides a different sanction depending on
the nature and seriousness of the violation, for example, a contractor that does not have a licence for the treatment and disposal of
construction waste and either disposes of the waste itself or entrusts
it to a company that does not have such a licence either, is liable tofive years’ imprisonment or a fine of up to ¥10 million.

111

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