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Brexit and construction: no need to panic

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It is just over 3 weeks since the UK voted for BREXIT and matters have been moving quickly, at least in the world of politics.

This article is written as part of a collection of articles in the GD Online special edition on BREXIT and examines the key issues in construction in the UK and the potential effect of the leave vote on construction law in England and Wales.

The first point to note from a legal perspective is that the referendum result is advisory and the status quo will remain until the Prime Minister invokes Article 50. The post-Article 50 negotiations will then have a significant bearing on the extent to which legislation derived from the European Union will be amended, maintained or repealed. Until such time that this is clarified the status quo will be maintained.

Notwithstanding the short term uncertainty, very little is likely to change as the main pieces of construction related legislation are not derived from the European Union, albeit there are exceptions in relation to environmental protection, health and safety and public procurement. Even in the absence of the European Union, the public interest would demand that similar legislation is put into effect by Westminster. In the case of health and safety law it is noted that this is not entirely derived from the European Union and Parliament has enacted legislation to protect workers’ safety since as far back as the Factories Act 1844 which of course pre-dated the UK’s entry into the Common Market (as it then was).

The legal framework for arbitrating construction disputes is independent of any European Union interference. Indeed, the Arbitration Act 1996 was introduced in attempt to harmonise English arbitration laws with the UNCITRAL Model Law and to sit within the international framework of the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.  While participants in cross border construction may be concerned by the potential lapsing of the Brussels Regulations (1215/2012), under which judgments of Member States are recognised subject to limited formalities, there remains comfort in the fact that arbitral awards will remain enforceable in the Courts of Member States that have ratified the New York Convention. Alas, BREXIT provides further support for advocates of international arbitration.

The Housing Grants, Construction and Regeneration Act 1996 which has subsequently been amended by the Local Democracy, Economic Development and Construction Act 2009 (The Construction Act) is fundamental to the entire running of the construction industry in the UK. The Construction Act introduced the statutory right of adjudication, the statutory right of suspension, the statutory right to periodic payments and has been extended to cover oral contracts rather than only contracts evidenced in writing.  As people who have been in the industry for a long time will know the genesis of the Construction Act is driven by the Latham Report of 1994, which was required to review procurement and contractual arrangements in the UK construction industry.

Just to finish off on the legal part before looking at our legal system, it will be recognised that the law of contract and tort are at the heart of the development of contract law. The common law remains unaffected by BREXIT and as such fundamental changes are not anticipated. Equally, statutes such as the Limitation Act 1980 will continue to operate in their current form. As such, the fundamental principles that underlie construction law will continue to operate as they always have.

Turning now to our legal system and by that I am referring to the forms of contract and the court system.  Construction in the UK is dominated by the use of the JCT form of contract which dates back to the old RIBA form and is a distinctly British contract.  The other major contracts used in the UK are the NEC3 form, drafted in the UK and then a series of smaller forms all of which, with the very exception of the very exceptional use of FIDIC (which itself is based on a English construction contract) are all UK based contracts so there will be no change there.

England and Wales has the oldest established specialist construction and engineering Court in the world and is at the forefront of construction law for the majority of the common law world.  Again this in not going to change even if some of the laws might.  Indeed, construction law in the UK is at the forefront of construction law in the world and the UK Society of Construction Law (“SCL”) is one of the leading organisations for the furtherance of construction law.  The SCL has spawned a whole series of international societies of construction law all across the common law areas and increasingly into traditionally civil law jurisdictions like the Gulf and South America.  Indeed, the SCL International Conference in September this year will be held in Sao Paulo in Brazil.

Turning to the market itself none of the major projects earmarked for construction, the additional runway for London, Cross Rail, HS2, Cross Rail 2 have been cancelled and all look to be going ahead.  While there are concerns in the property market which flow from the changing attitude to risk of investing in the UK (and by extension those companies that specialise in construction of major buildings and housing – who themselves will have concerns about the status of migrant workers in a sector that is renowned for domestic skills shortages), BREXIT is not likely to have a major effect on construction law will no doubt provide opportunities, if necessary, to alter the way in which environmental protection, health and safety and public procurement are regulated by Parliament.

This article was written by Richard Bailey, Partner, Construction, with assistance from Kieran Fano, Solicitor, Construction, and Caroline Mathews, Trainee Solicitor.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.