Construction 2018 Comparisons

Last Updated July 10, 2018

Law and Practice

Authors



Skau Reipurth & Partnere Advokatpartnerselskab has established itself as an elite law firm in Copenhagen and has one of the strongest teams in the various areas of commercial law. Skau Reipurth & Partnere’s mission is to combine the very best professional standards with uncompromising integrity. They take pride in providing personal advice based on value-creating commercial know-how. Real estate and especially construction are significant practice areas for Skau Reipurth & Partnere. The firm’s construction law practice is considered among the best in this field and recognised with leading individuals within the construction law practice area.

Except for the Danish public procurement legislation, there is no specific legislation for entering into construction contracts. However, a wide range of industries, associations and public authorities representing both contractors, developers and consultants from the Danish construction industry have agreed on a number of documents that are incorporated into the majority of the Danish construction contracts.

Within the Danish construction industry, a large majority of disputes (those that are not settled amicably) are settled by arbitration.

Except for AB-Consumers, all of the AB Standards contain provisions stating that disputes are to be settled by an arbitration tribunal appointed by the Danish Building and Construction Arbitration Board, and that the decisions made by such tribunals are final.

The arbitration tribunals appointed by the Danish Building and Construction Arbitration Board consist of a High Court judge or a Supreme Court judge and two expert arbitrators.

If so required by one of the parties, the Danish Building and Construction Arbitration Board will appoint two additional High Court and/or Supreme Court judges to the arbitration tribunal. This option is generally only applied in arbitration proceedings of significant value.

The parties may agree that a single professional arbitrator or expert arbitrator can settle the case. This is often the case in small claims cases in order to reduce legal costs.

The parties are also free to substitute the arbitration agreement included in any of the AB Standards with another dispute settlement agreement. The arbitration tribunal will only be competent if the parties have entered into an arbitration agreement.

Disputes involving a consumer are usually settled by the ordinary Danish courts.

When interpreting a contract, the Danish courts or the arbitration tribunals may apply various principles of interpretation.

The following are a few important examples:

Under Danish law, importance is attached to the parties’ intended purpose of the contract. When determining the intended purpose, the Danish courts or arbitration tribunals may take into account any mutual understanding of the parties, as shown by eg their previous conduct, if the parties have had business relations before, or previous negotiations between the parties.

If no mutual understanding between the parties is found, the contract will usually be interpreted in accordance with customary understanding.

If the wording of a contract clause is ambiguous, the clause can be interpreted against the interests of the drafter (the contra proferentem rule). This principle of interpretation is very important in relation to construction contracts. According to section 2, subsection 2, of AB 92/ABT 93:

“Bids shall be made on the basis of the information contained in the tender documents. The contents of these documents must be unambiguous and presented so as to make quite clear the extent and nature of the services to be provided.”

If the contract is ambiguous regarding the extent or nature of work to be provided, the contractor may be entitled to claim additional payment for work that the employer considered included in the contract price.

Negotiating documents and other correspondence made prior to entering into agreement may be used for interpretation if the wording of the agreement is ambiguous.

In the event that the agreement is silent on a given matter, earlier draft agreements, negotiating reports etc may also be used to clarify the parties’ intent.

The conduct of the parties after entering into a contract may also be used in the interpretation of the contract, as the parties may be deemed to have accepted conduct which deviates from the wording of the contract.

Under Danish law, the contracting parties are generally bound by their mutual declaration of intent; however, under certain circumstances a declaration of intent may be deemed invalid.

Declarations of intent made by a party lacking authority, competence or capacity could be deemed void. The legal effect of such a failure depends on the specific circumstances.

Declarations of intent which are a result of fraud, duress or exploitation may result in the entire contract being void. Clerical errors and contracts contrary to the principles of good faith (sections 32 and 33 of the Danish Contracts Act) could give reason for the courts to disregard the wording of the contract with reference to the vitiating factors.

Furthermore, subject to section 36 of the Danish Contracts Act (also known as the “General Clause”), a contract or other legal transaction may be modified or set aside – in whole or in part - if it is unreasonable or contrary to a general principle of good faith to enforce it. Notwithstanding that the provision is often pleaded, the scope of application is very limited.

Especially with regard to consumers and employment conditions, Danish law contains several mandatory rules which cannot be deviated from to the detriment of the consumers or employees.

The general limitation period according to the Danish Limitations Act is three years, calculated from the first day on which the claim holder could demand that their claim be fulfilled.

Regarding claims arising from breach of a contract, the limitation period is calculated from the day that the breach occurs. For non-contractual claims (tort claims), the limitation period is calculated from the day the event (causing the damage) occurs.

Before the parties enter into a contract, the parties do not as such have a special obligation to act in a manner that purposely attempts to safeguard the opposite party’s interests. Parties potentially entering into a contract are, however, obliged to act honestly, ie one party must refrain from misleading the other party or exploit misconceptions or ignorance. Furthermore, a duty to disclose material facts applies under the law.

When a contract negotiation falls through and a contract is not entered into due to one party ending the negotiations, the other party, having been disappointed by having negotiated in vain, may want a financial compensation for the loss the negotiations may have inflicted on them (the reliance damages).

According to Danish law, the requirements for imposing damages in such a situation (culpa in contrahendum) are rather strict and characterised by exceptions. In order to impose damages in such a situation, an obvious breach of the law by means of unfair conditions or a clear breach of current rules for entering into the agreement or breach of an existing contract (eg a preliminary agreement) must have occurred for a party to become liable for damages for stopping the negotiations.

Damages for culpa in contrahendo are only awarded if the general requirements regarding causality and foreseeability are fulfilled.

Under Danish law, formal requirements (eg written documentation, registration, signing or approval) are not conditions for a contract to be valid.

However, in the event of lack of written documentation of an agreement having been entered into, the party claiming that an agreement exists has the burden of proof.

Although there is no formal requirement under Danish law that an agreement has to be in writing in order to be valid, the parties – especially when it comes to agreements of a certain significance, eg construction contracts of significant value – will often not be deemed contractually bound until a formal, written agreement has been signed.

It is normal to presume that the parties do not wish to commit until a formal, written agreement has been signed.

However, in certain situations the negotiations may have progressed in such a manner that the parties could be deemed to have entered into an agreement without a formal, written agreement having been signed.

For example, if the parties have agreed on the substantial terms, the courts/arbitration tribunals may deem that an agreement has been entered into. The remaining matters to be decided on by the parties could be deemed to be of minor importance and are often supplemented with the general principles of Danish contract law.

When deciding whether an agreement has been concluded in the absence of a formal written contract, the conduct of the parties will be taken into account by the court or arbitration tribunal.

If one party, after negotiations with the other party, considers an agreement to be concluded and this is obvious to the other party, the other party may be bound by that perceived agreement if they do not object.

If the parties have agreed on the substantial terms and conditions (see above, under ”Absence of a Formal Contract”), the actions or lack thereof of the parties may be a factor when the court or arbitration tribunal decides whether an agreement has been concluded on the agreed terms.

If construction work has commenced (and the employer has paid for the work performed) without a formal contract being made, an agreement will often be considered concluded anyway.

The courts/arbitration tribunals will then typically rely on what has been agreed during the parties’ negotiations supplemented with the general principles of Danish contract law when determining the content of such agreement.

If a formal contract has not been concluded, and the work has, nevertheless, been carried out with the employer’s knowledge, the general rule is that the work will be deemed performed on an account-rendered basis according to the general principles of Danish contract law. It could be said that Danish law is based on the principal theory that, to the extent that value has been added, the employer has to pay for that added value.

Thus, as a general rule it is the employer’s risk if the employer has not yet agreed to a fixed price regarding services and scopes, but the employer allows the contractor to start work without any such agreement.

To the extent that an agreement is silent regarding specific matters, the interpretation of the ordinary law of contracts and torts will precede.

This includes eg that work is expected to be carried out according to craftsman-like practice, without substantial delay etc.

Danish construction contracts are often very short in form and subject to the judicial implication of the general principles of Danish contract law.

The AB Standards do not contain an entire agreement clause, and it is unusual to include such a clause in a Danish construction contract.

Danish courts or the arbitration tribunals often take into consideration correspondence between the parties and other information, eg information found in promotional material, when assessing how to interpret a contract. However, the usual basis for the assessment will be the wording of the contract and customary understanding thereof.

The AB Standards do not contain an exclusive remedies clause, and it is unusual to include such a clause in a Danish construction contract.

With regard to defects, the AB Standards contain provisions which generally allow the contractor to carry out remedial works. Where the contractor is entitled to do so, other remedies are usually not available to the employer.

If the parties fail to agree on a price, and the employer, in spite of this, instructs the contractor to commence the work, the employer is obliged to pay the contractor on an account-rendered basis.

With regard to work performed on an account-rendered basis, the employer bears the risk of the work becoming more expensive than they had expected. The principal rule is that the employer must pay the price the contractor demands – unless the employer can prove that the price is unconscionable, cf the principles in section 5 of the Danish Sale of Goods Act.

The employer has to prove whether or not the demanded price is un-duly unreasonable. In arbitration case law (KFE 80.42 and KFE 10.078), however, it has been established that the contractor must provide sufficient documentation in order for the employer to assess whether the price demanded is fair or not.

In practice, it is often discussed what the employer may demand from the contractor in order to meet the fundamental documentation requirements. Some guidance is found in section 13, sub-section 4 to 6, of the Danish Marketing Practices Act regarding sufficient documentation. The provisions do, however, only apply directly to consumers.

Disagreements will often be solved under the rules of inspection and survey by an expert appraiser (syn og skøn).

With regard to payment terms, construction contracts will follow the general conditions of AB 92/ABT 93, section 22, if a specific payment plan is not agreed upon.

This section states that, upon written request to the employer, the contractor is entitled to receive payment once a month for work performed. Within 15 working days of receipt of such a request, the employer must pay the amount for work and materials provided on the site.

In contracts between businesses regarding goods and services, the maximum payment period of 30 days can only be deviated from if the creditor has expressly agreed on an extended payment period and the payment period is not unfair to the creditor.

If a payment period of more than 30 days is stipulated in the debtor’s general commercial conditions, the debtor must call the creditor’s attention to the extended payment period in order for that extended payment period to be deemed expressly approved by the creditor.

As most EU countries have implemented a maximum payment period of 60 days, an extended payment period that does not exceed 60 days will normally not be deemed unfair.

In contracts between a public authority and a business regarding goods and services, in which the debtor is the public authority, the maximum payment period of 30 days can usually not be deviated from.

If the parties have agreed on a payment schedule providing for instalments at certain times and the creditor has expressly approved the payment schedule, the aggregate payment obligation may exceed the maximum payment period. This exception applies to contracts for goods and services between businesses and between a public authority and a business, where the debtor is a public authority.

In such cases, the maximum payment period of 30 days applies to each of the instalments.

The creditor is entitled to interest from the day following the end of the payment period. This is mandatory for contracts for goods and services between businesses and between a public authority and a business, where the debtor is a public authority.

Except for the aforementioned mandatory rules of the Danish Interest Act, the parties are, in accordance with the freedom of contract principle, generally free to agree on the payment terms they wish.

However, if the payment terms or other contract terms are deemed unreasonable by the Danish courts or the arbitration tribunals, there are several ways that such contract terms can be disregarded. In addition, section 36 of the Danish Contracts Act can be used as legal basis to change unreasonable contract terms.

If one party’s general commercial conditions include terms that are onerous to the other party and the terms were not discussed prior to entering into a contract, such terms may be disregarded on the basis that they have not been accepted by the other party.

In commercial relationships, the parties are normally presumed to have known the terms of the contract. However, even in relation to contracts between professional parties, the Danish courts or arbitration tribunals sometimes choose to disregard contractual terms.

In a ruling from 2015, the arbitration tribunal – in a dispute be-tween a main contractor and a subcontractor regarding a claim for additional work – stated the following concerning a “pay-when-paid” clause:

”It is irrelevant that there is a clause in the contract stating that claims for additional work will only be honoured to the extent that the employer pays and accepts.”

In the summary of the ruling, the specific circumstances were not apparent, and the ruling can therefore not be used to conclude that “pay-when-paid” clauses are generally void.

They may, however, be deemed unreasonable.

Assuming that the AB Standards have been agreed, section 23 of AB 92/ABT 93 states that if the employer fails to pay the amount due within the agreed time limit, the contractor may suspend the work after giving a written notice of five work days.

Moreover, the contractor may suspend the work immediately upon the employer’s bankruptcy or suspension of payments, or if negotiations are initiated on enforced compositions, or if the general financial situation of the employer proves to be such that it must be assumed that they are unable to fulfil their obligations under the contract. See AB 92/ABT 93 section 23, subsection 2.

However, AB 92/ABT 93 section 23, subsection 2, will not apply where the employer has provided, or does so at the request of the contractor, adequate security for the performance of their obligations under the remaining part of the contract.

The provision is sometimes deviated from in special conditions of contract. For example, it is often stipulated that prior to the work being suspended, an expert determination must be made according to eg AB 92, section 46.

If the AB standards have not been agreed upon, a similar right to suspend the work on grounds of no payment most likely exists.

The AB Standards do not include provisions that provide for a certifier to assess a contractor’s entitlements under the contract, and having a certifier assess a contractor’s entitlements is not common in Danish onshore construction contracts.

A construction contract will usually refer to a time schedule that sets out the date(s) for the work to be completed.

If no binding deadline has been agreed upon, the contractor is only under an obligation to complete the work without undue delay. Such a deadline can only be determined by taking into consideration the specific circumstances, such as the nature and scope of the work, circumstances calling for extension of time etc.

The AB Standards (see eg AB 92/ABT 93 section 24) determine that the contractor is entitled to an extension of time in the event of delay of the work caused by:

1) alterations in the nature and extent of the work ordered by the employer;

2) circumstances relating to the employer or delay on the part of another contractor;

3) circumstances for which the contractor cannot be blamed and which are outside their control, eg war, unusual natural events, fire, strikes, lock-out or vandalism;

4) the occurrence of precipitation, low temperature, strong winds or other weather conditions which prevent or delay the work because they are essentially greater than what is usual for the season and region concerned; or

5) public orders of bans which were not issued because of the contractor’s own situation.

However, the contractor must endeavour to avoid or limit the extent of the delays by means of such measures as can reasonably be required and, where the contractor considers themselves to be entitled to an extension of a time limit, they must inform the employer thereof in writing without delay. The contractor must, upon request, substantiate that the delay was caused by the circumstances which they had relied upon.

It is without doubt that matters 1) and 2) may be interpreted as generally usable in construction matters whether the AB Standards are agreed to or not. The provisions express the general principles of the law of contracts and torts.

It is questionable whether the risks presented in 3) to 5) will also be considered as general principles of the law of contracts and torts. However, the question (to which the answer is probably yes) is not essential because AB Standards are typically adopted.

If the AB Standards have been agreed between the parties, according to AB 92/ABT 93, section 25, delays which do not entitle the contractor to an extension of time will be considered the liability of the contractor.

The AB Standards do not include provisions for resolving the problem of concurrent delay.

If delay is caused by both a contractor’s risk event and an employer’s risk event, the Danish courts or the arbitration tribunals will generally divide the liability between the parties.

According to AB 92/ABT 93, section 24, subsection 2, the contractor is obliged to – in this respect as well as in others – have reasonable regard to the employer’s interests. Thus, if it is possible without additional costs or undue difficulty, the contractor must organise their work accordingly.

To the extent that acceleration is not feasible without additional costs and undue difficulty for the contractor, the common rule in Danish jurisprudence is that the contractor has neither the right nor the duty to accelerate.

Acceleration requires that the parties agree to it. It is argued that there are two modifications to this.

Firstly, if the employer has made an unwarranted demand for damages for delay (liquidated damages) and the contractor defend themselves by accelerating to avoid such claim. The unwarranted claim is on its own considered a breach of contract and should enable the contractor to demand their costs in connection with acceleration covered.

Secondly, if there is a delay giving rise to liability on the part of the employer pursuant to AB 92/ABT 93, section 27, an analogy from section 27 results in the claim for acceleration being upheld. The contractor’s claim for acceleration should be within the costs that the employer otherwise would become liable to pay to the contractor, pursuant to AB 92/ABT 93, section 27.

The two types of claims are not directly a part of the Danish legal tradition, which essentially is based on claims due to causative effect and foreseeability.

In arbitration case law, however, there is an understanding of the complex nature of construction work, including difficulties when objectively documenting the connection between a specific circumstance and a given cost. Most notably, the arbitration case regarding The Great Belt Bridge (KFE 1997.45) has in construction law literature been used to imply that global claims are recognised.

The AB Standards contain several provisions stating that a party must give notice to the other party.

The following are a few important examples:

  • The employer’s changes to the work and the parties’ claims regarding changes to price, time and security must be notified in writing, and the consequences of any change must be agreed upon as soon as possible thereafter in writing (section 14 of AB 92/ABT 93).
  • If the work cannot be carried out in accordance with the contract, the contractor must as soon as possible notify the employer and follow their instructions (section 15 of AB 92/ABT 93).
  • If a party considers itself entitled to an extension of time, the party must immediately inform the other party there-of in writing (sections 24 and 26 of AB 92/ABT 93).
  • The employer must notify the contractor in writing of any defects discovered following the handing-over of the construction work. Notification must be given within a reasonable time after such defects were or should have been discovered, except in the case of gross negligence on behalf of the contractor (section 31 of AB 92/ABT 93).

It is usually presumed that there are two ultimate foreclosed provisions in which failure to give notice results in rights being forfeited.

Those are claims regarding damages for delay (liquidated damages) and submission of final account. Other rules of notices are largely considered burden of proof rules.

In the event of failure to give notice at the time when a delay has commenced according to the employer, the employer must make a claim for liquidated damages against the contractor, as they will not be entitled to any liquidated damages until such a claim has been made.

If the employer does not receive the final account at the expiry of the period provided, see AB 92/ABT 93, section 22, subsection 9, they will forfeit their claim for payment for extra work performed on an account-rendered basis as well as for reimbursement for wage and price increases.

The employer’s primary remedy is not indemnification (or claim for reduction of the contract price), but a claim for rectification of the defects.

AB 92/ABT 93 section 31 stresses the characteristics, which, with regard to defect liabilities, distinguish construction law from other aspects of private law.

The contractor is obliged (and has the right) to rectify the defects.

If the contractor does not rectify defects in due time, the employer may make a claim for the costs of having such defects rectified by another contractor, see AB 92/ABT 93, sections 31 and 32. Alternatively, the employer may demand a reduction in the contract price, see AB 92/ABT 93, section 34.

If the construction work is delayed due to the employer, the contractor may claim damages for their loss, including lost profit by not being able to perform other work during the delay period.

The objective of a claim for damages is to compensate the injured party for the loss sustained.

Damages are usually calculated based on the principle that the injured party should be placed in the position that they would have been in if the breach had not occurred (expectation damages).

Under Danish law, if the contract is terminated the injured party may – instead of claiming expectation damages – choose to claim damages based on the principle that the injured party should be placed in the position the injured party would have been in if the contract had not been entered into (reliance damages).

Pursuant to AB 92/ABT 93, section 35, subsection 2, the contractor is not liable for consequential damage, operational loss, loss of profit or other indirect loss suffered due to defects.

According to general principles of Danish law, a liability limitation may be disregarded if gross negligence or wilful misconduct has been exercised, meaning that the party who, wilfully or by irresponsible behaviour, has caused a loss cannot exclude liability.

If nothing else is agreed upon, interest is calculated according to the Danish Interest Act.

Since 1914, the bank rate of the Danish National Bank has been the basis of calculation when charging interest on overdue payments.

The imposed percentage addition may be changed every other year, but cannot be below 8%. With the latest amendment of the Danish Interest Act, the rate of interest has been amended to be the Danish National Bank’s official lending rate as of the latest January 1st and July 1st plus 8%.

In order for a contract to be terminated for default, the breach must be material.

In relation to construction contracts, a termination will often imply large financial losses and the requirements for a termination are thus stricter than in most other contractual relations.

Pursuant to AB 92/ABT 93, section 40, the following circumstances provide an employer with the right to terminate a construction contract:

  • if, without entitling them to an extension of time, the contractor is the cause of material delay in the performance of the work, and where such delay causes considerable inconvenience to the employer; or
  • if the contractor is otherwise the cause of material delay in respect of matters of decisive importance to the employer, unless the interests of the latter have been sufficiently safeguarded in another way, eg by the possibility of discontinuing payments or by the provision of security; or
  • if the quality of the work performed is such that the employer has reason to believe that the contractor will not be able to complete the work without material defects.

Pursuant to AB 92/ABT 93, section 41, the following circumstances provide a contractor with the right to terminate a construction contract:

  • if the employer or another contractor is the cause of material delay, and the employer does not demonstrate reasonable endeavours for the purpose of furthering work as much as possible, or
  • if the employer is the cause of material delay in respect of matters of decisive interest to the contractor, and the contractor’s interests have been sufficiently safeguarded in another way, eg by the possibility of them suspending work or by the provision of security.

When assessing whether a contract can be terminated, importance is not only attached to how severe the breach is, but also to the consequences of the breach, ie it is easier to terminate a construction contract if the work has not commenced than if the construction work is at an advanced stage.

In order to terminate a construction contract for default, the party terminating the contract must, prior to termination, have notified the other party of the breach and provided the other party with reasonable time to try to rectify the breach.

Without previous notice, a termination will usually be deemed unwarranted.

Besides the aforementioned cases of breach of contract, the AB Standards also include provisions allowing a party to terminate a construction contract due to certain matters pertaining to the other party, eg in the case of bankruptcy, suspension of payments, composition etc.

However, in some of these situations mandatory provisions in the Danish Bankruptcy Act may prevent the other party from terminating the contract.

In general, a termination of a construction contract is only effective in respect of the further performance of the contract (ex nunc). The employer must thus pay for the work which has been performed up until the date of the termination.

Only under exceptional circumstances is it possible to terminate a construction contract in respect of work already performed (ex tunc).

AB 92/ABT 93, section 41, sets out that the contract cannot be terminated if the contractor’s interests can be sufficiently safeguarded in another way, e.g. by suspending work or by providing security.

In case of default of payment, the work may be suspended pursuant to AB 92/ABT 93, section 23.

If this is not sufficient and the other conditions for the contractor to terminate the contract are present, termination may occur.

Subject to AB 92/ABT 93, section 40, the contractor must be in material breach according to the general termination condition for the employer to be able to terminate.

With regard to the quality of the work performed during the construction, the employer must prove that the contractor will not be able to complete the work without material defects, with reference to the work already performed.

Regarding delay in construction contracts, a double materiality condition applies. The delay not only has to be material, in addition, it must also involve material disadvantages for the employer or determine the employer’s outcome without his interests are otherwise considered. The first-mentioned condition implies an assessment of the past course of events and the latter a forecast for the future. The assessment cannot be made solely based on the employer’s circumstances. It should also be considered how much of a burden the termination would be to the contractor. It is less critical to allow termination before the work has started than during the performance of the work.

If the parties have not agreed on AB 92/ABT 93/ABR 89, or where the arbitration agreement contained therein has been deviated from, disputes will be settled by the Danish courts.

Since the vast majority of contract work in Denmark is based on the terms and conditions in AB 92/ABT 93/ABR 89, professional construction disputes are only on a minor scale settled by the Danish courts.

If AB-Consumers has been agreed, the Danish courts are qualified.

In cases involving consumers, an arbitration agreement entered into before the dispute arises is according to the Danish Arbitration Act not binding on the consumer. In such cases, the consumer can demand that the dispute is settled by the ordinary Danish courts, but can also opt for using the arbitration agreement.

The consumer is only bound by the arbitration agreement, if such agreement has been entered into after the dispute arises.

AB 92/ABT 92, section 47, stipulates that disputes between the parties will be settled by the Danish Building and Construction Arbitration Board whose awards will settle the matters finally and conclusively.

The arbitration tribunal will appoint three arbitrators, one professional arbitrator (typically a High Court judge or a Supreme Court judge) and two expert arbitrators. In smaller cases, the parties may choose only to appoint one single arbitrator, just as it is possible to appoint up to five arbitrators in more complex cases, three professional arbitrators and two expert arbitrators.

Arbitration awards are generally recognized and enforced by the ordinary court system, since Denmark is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards of 1958.

The majority of disputes between professional players are settled by arbitration tribunals appointed by the Danish Building and Construction Arbitration Board.

According to the Danish Arbitration Act, arbitration cannot be agreed in advance by consumers. In such cases, arbitration must be separately agreed after the dispute arises. An arbitration agreement, involving a consumer, will thus be deemed void if it has been entered into before the dispute arises. A consumer would have to agree to arbitration after the arising of the dispute.

The AB Standards do not contain provisions providing for an adjudicator to settle disputes between the parties.

In case of disputes between the parties, e.g. regarding whether the work performed is defective or in order to establish proof of a matter, a party may request the Danish Building and Construction Arbitration Board or the Danish courts to appoint an expert appraiser to provide a technical assessment.

The expert appraiser can inspect the work at the construction site, register his findings (“inspection”) and make a technical assessment based on his inspections (“survey”). It is not the expert’s task to express his opinion on legal matters.

It is possible to have the Danish Building and Construction Arbitration Board appoint an expert and have the assessment conducted at very short notice.

After having received the expert appraiser’s assessment, it is often possible for the parties to reach an out-of-court settlement. However, the expert’s assessment is not binding for the parties.

During a subsequent trial or arbitration case, it is thus possible to submit further evidence, and the expert’s technical assessment may be disregarded.

The expert appraiser’s assessment will, however, often be of major importance, especially in cases with no expert judges/arbitrators.

Disputes regarding Danish construction contracts are only to a limited extent settled by expert determination.

The AB Standards only contain two types of disputes, which may be referred to an expert, see AB 92/ABT 93, section 46:

1) disputes regarding the justification of claims made for the release of security, and

2) disputes regarding the justification of holding back payment or setting off claims.

The parties can also agree to have disputes regarding other matters settled by an expert, but this only takes place on a small scale.

If a party requests an expert determination, the Danish Building and Construction Arbitration Board appoints an independent expert, often an architect or an engineer, to make a decision regarding the dispute at hand, including any legal issues.

The Danish Building and Construction Arbitration Board can lay down short time limits for the parties to bring forward their statements in the case, after which the expert makes his decision.

The expert decides on the distribution between the parties of costs related to the expert’s decision. Otherwise, each party pays its own costs, including lawyers’ fees.

An expert determination regarding the justification of claims made for the release of security is binding on the parties and the guarantor, if so agreed in the guarantee, and the expert’s decision must be adhered to within three working days.

The decision is not enforceable, but if it is not adhered to, the receiver of the security will be able to obtain judgment against the guarantor.

A decision regarding the justification of holding back payment and/or setting-off claims is not binding on the parties.

Expert decisions are not final and a party may thus choose to bring the case before an arbitration tribunal, including for the purpose of claiming back payments made.

During a subsequent arbitration case regarding the material dispute, the arbitration tribunal is not bound by the expert’s decision but is free to make its own decision.

The use of mediation in Denmark is quite insignificant unlike countries using the Anglo-Saxon legal system (e.g. England, Australia and USA), just as mediation is widely used in France.

The vast majority of disputes within the construction industry are usually settled by arbitration tribunals appointed by the Danish Building and Construction Arbitration Board.

In 2004, the Danish Building and Construction Arbitration Board adopted rules for conciliation and mediation. In order to bring focus on the possibilities and to provide clarity, the Danish Building and Construction Arbitration Board adopted a new, collected set of rules for conciliation and mediation in 2015.

Besides the Danish Building and Construction Arbitration Board, the Danish Mediation Institute can be used for appointing mediators.

The Association of Danish Law Firms has throughout a number of years educated mediators, just as the civil courts in the case preparation as a pilot scheme has offered mediation.

Regardless of the insignificant use, there is focus on this area and it is expected that in connection with the audit of the AB Standards that possibilities for alternative dispute resolution will be incorporated. To ensure qualified mediators with knowledge of the business and to increase advisors and experts’ knowledge and understanding of the process, the Mediation Institute and the Danish Building and Construction Arbitration Board offer a mediator education from 2015 focusing on disputes in the building and construction industry.

Skau Reipurth & Partnere Advokatpartnerselskab

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+45 3841 1441

+45 3841 1440

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Skau Reipurth & Partnere Advokatpartnerselskab has established itself as an elite law firm in Copenhagen and has one of the strongest teams in the various areas of commercial law. Skau Reipurth & Partnere’s mission is to combine the very best professional standards with uncompromising integrity. They take pride in providing personal advice based on value-creating commercial know-how. Real estate and especially construction are significant practice areas for Skau Reipurth & Partnere. The firm’s construction law practice is considered among the best in this field and recognised with leading individuals within the construction law practice area.

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