In this article we outline the effect of the Dutch government's COVID-19 measures on construction projects in the Netherlands, as well as the possibilities for relief under Dutch law and the UAC 2012, the general conditions most commonly used in Dutch construction projects.
What measures has the Dutch government taken?
Initially, on 15 March 2020, the Dutch government ordered the closure of certain public places such as museums, concert halls, theatres, bars, restaurants, coffee shops and sports clubs until 6 April (since extended to 28 April). On 23 March, it announced additional, more stringent measures (government news item dd. 23 March in Dutch). One of these measures is a requirement that individuals keep a distance of at least one and a half metres from each other. Another is a ban on gatherings, including those of less than 100 people, until 1 June. There are a few exceptions to this ban, however, such as gatherings that are necessary for the continuation of a company's daily operations, subject to a maximum of 100 people and provided that the 1.5 metres distance rule is observed.
Under the relevant order, fines can be imposed on companies and individuals in the event of non-compliance with the 1.5 metre distance rule in a public area. It seems, however, that construction companies cannot be fined pursuant to that order, since a construction site is not a public area. A survey conducted by the Netherlands Trade Union Confederation (FNV) among its members revealed that it is difficult to always observe the above distance rule on construction sites, due to a lack of supervision and the fact that it is often necessary for workers to work within less than 1.5 metres of each other. For this reason among others, several employer and employee organisations called for customised measures for the construction industry. Accordingly, the government and the construction sector adopted "Samen veilig doorwerken", a protocol on safe working practices on construction sites under the present circumstances. The protocol, which was published on 27 March, is in accordance with the RIVM's guidelines and is supported by a number of trade unions, sector associations and other organisations. It will be amended as necessary if new measures are ordered by the government.
Key guidelines in the protocol:
- Workers should work in small teams at fixed locations.
- Workers should keep a distance of at least 1.5 metres from each other. Where this is not possible, the period during which they work in closer proximity should be kept to a minimum.
- Workers should each use their own vehicle to travel to the construction site; only if this is not possible should they travel together. When travelling with colleagues, each worker should keep as much distance as possible from the others and use the same seat in the bus each time.
- With regard to canteens and meeting rooms:
- Posters should be put up with the necessary rules and instructions.
- A maximum occupancy should be set to enable compliance with the 1.5 metre distance rule.
- Workers' break times should be spread out.
- Canteens and meeting rooms should be cleaned more frequently.
Does COVID-19 constitute force majeure under Dutch law?
Force majeure refers to a situation in which a party to a contract is unable to perform a contractual obligation due to an event beyond that party's control. The starting point for determining whether force majeure (in Dutch: overmacht) can be invoked is by reference to the provisions of the Dutch Civil Code. Successful recourse to force majeure results in a party being relieved (temporarily or permanently) of its obligations under the relevant contract and released from liability for damages or any other remedy for breach of contract. Under case law, labour disturbances of a general nature affecting a contractor, as well as nationwide strikes, are among the events that can constitute force majeure.
Thus far, it appears that at least two foreign governments are treating COVID-19 as force majeure. The French minister of finance has announced that the French government will assume force majeure in the event that a small company fails to perform obligations under a government contract due to COVID-19. Meanwhile, the Chinese government is even issuing force majeure certificates to local exporters that are unable to fulfil contractual obligations towards overseas buyers.
In our view this implies that if the COVID-19 measures preclude the performance of a contractual obligation, this would qualify as force majeure under the Dutch Civil Code. However, it should be noted that this might not apply for all contracts.
Is the contractor entitled to relief?
This depends on the terms of the contract. § 8(5) UAC 2012 entitles the contractor to an extension of time for completion of the work in the event of a delay that is not attributable to the contractor. As stated above, an unavoidable delay due to COVID-19 would probably constitute force majeure and hence entitle the contractor to an extension. Under case law based on the UAC 2012, additional time-related costs resulting from a delay due to force majeure are in principle not eligible for compensation.
In the case of non-time related additional costs, the contractor may be entitled to compensation under the Dutch Civil Code. Section 7:753 DCC provides for a right to compensation for cost increases that are not attributable to the contractor provided that, at the time the contract was concluded, the contractor was not obliged to take into account the likelihood of the occurrence of the circumstances that led to the relevant increase. The UAC 2012 contains a similar provision, under which the contractor is entitled to compensation if the cost increase is a substantial one (generally more than 5% of the total contract value).
For government contracts, it should be noted that the Dutch government has stated that it will be lenient towards contractors about delay-related penalties where a delay is due to COVID-19.
§ 6(13) UAC 2012 provides that the consequences of compliance with any government orders that come into force after the date on which the contract was concluded shall be for the principal's account, unless it must reasonably be assumed that the contractor could already have foreseen those consequences on that date. At this stage the government has not issued general orders to shut down construction sites. It should be noted, however, that the measures currently in place were not all taken on the same legal basis. Depending on the legal basis underlying the measure in question, it might be possible in some cases to successfully argue that a contractor is entitled to relief.
Lastly, relief could potentially be sought on the grounds of "unforeseen circumstances". In practical terms, this would primarily be relevant if a claim for relief on the grounds of force majeure was unsuccessful.
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