Fate of five of 12 loss-making projects uncertain with EPC contractors out of reach

May 23, 2020 | 20:15
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The fate of five of the 12 notorious loss-making projects, which have disputes over engineering, procurement, and construction (EPC) contracts, remain uncertain because taking Chinese contractors to the court is impossible.
fate of five of 12 loss making projects uncertain with epc contractors out of reach
The fate of five of the 12 loss-making projects remains hanging in the balance

According to the latest report of the government about the 12 loss-making projects of the industry and trade sector, the common point in these disputes at five of the above projects is the presence of a Chinese contractor. The projects are Ninh Binh fertiliser plant, Ha Bac fertiliser plant, DAP 2 Lao Cai fertiliser plant, Dung Quat Shipbuilding Industry Co., Ltd., and Phase II of the expansion project of Thai Nguyen Iron and Steel Complex.

In general, Chinese contractors are known for bidding low to win contracts, then asking for more, citing unexpected cost overruns. Most Chinese-contracted projects are completed behind schedule, amassing further costs.

The investors and contractors negotiated with each other to deal with disputes but failed. Thus, the government’s report mentioned two solutions for these projects. The first solution is taking the disputes to the court or international arbitration.

However, the government mentioned that the consultant teams for the investors of these five projects, especially the three projects under the management of Vinachem, opined that it would not be feasible to take Chinese contractors to court as their chances of winning these lawsuits is quite low. In addition, the ensuing expenses as well as compensation for the contractor in case the investors lose would be much higher than the money the two parties are disputing.

The second alternative is for the investors to settle the contract in accordance with Circular No.64/2018/TT-BTC in case contractors either refuse to finish the contract or refuse to complete their contractual obligations. Regarding this solution, the government asked the Ministry of Finance to co-operate with the relevant authorities to guide investors in implementing the contract settlement themselves based on the particular circumstances of each project.

The government required the investors to proactively hire consultant teams to restructure the entire EPC contract for each project, and carefully review the disputes.

In addition, the government asked investors to discuss plans inlcuding mediation, litigation, or the termination of the contracts to choose an optimal definitive resolution.

By Ha Vy

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