EPC Contracts and Limitation of Liability Provisions under Turkish Law

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EPC Contracts and Limitation of Liability Provisions under Turkish Law Author Ömer KESIKLI Founding Partner T: +902163482924 omer@omerkesikli.av.

1 EPC Contracts and Limitation of Liability Provisions under Turkish Law Author Ömer KESIKLI Founding Partner T: Bağdat Caddesi, No.149/5 Selamicesme, Kadıkoy/Istanbul Phone: Fax: Web:

2 EPC Contracts and Limitation of Liability Provisions under Turkish Law

3 TERMS OF USE & DISCLAIMER The content of this document is intended to provide a general guide to the subject matter. Legal advice should be sought about your specific circumstances. Information in this document should not be construed as legal advice or a substitute for legal counsel. Lawyers at Kesikli Law Firm assume no liability or responsibility for the accuracy or validity of any information provided herein. As information changes rapidly, the user is strongly advised to verify any information before relying on it. The materials and information on this document are not guaranteed to be updated. There are many issues and details involved with international arbitration so it is important that you get specific advice prior to making any decisions on your business transactions. No person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

4 TOPICS TO BE COVERED PENALTIES DEFECTS LIABILITIES INDIRECT DAMAGES OVERALL LIMIT OF LIABILITY

5 OWNER s PRIORITIES BUDGET SCHEDULE EFFICIENCY & QUALITY

6 OWNER s RISKS A. PERFORMANCE RISKS (DEFICIENCIES) B. DELAY RISKS C. DEFECTIVE WORK D. OTHER DAMAGES

7 A. B. What can be claimed for delays and performance deficiencies? Penalties Breach of contract (time schedule or performance values) Fault (Fault Presumption) Not required to prove damages Probably with a cap arrangement Damages Breach of contract (time schedule or performance values) Fault (Fault Presumption) Extent of Damages Casual Link between the damages incurred and the breach

Illustration Owner suffered damages due to delay 1.000.000 USD Applicable penalties 600.

8 Illustration Owner suffered damages due to delay USD Applicable penalties USD Can the Owner recover the exceeding part of its damages even if there is a cap for penalties? If yes, then how: Fault + Damages must be proved by Owner

9 Quick Result for Owners Know your risks Know your additional burden in case of excessive damages - Prove Fault & Damages Determine & Negotiate the penalties accordingly

aware that the cap itself may not protect you You may add an

10 Quick Result for Contractors Know your risks You can use the penalties as a way of limiting your risks or liabilities Be aware that the cap itself may not protect you You may add an additional safeguard Limitation is valid subject to certain exceptions

C. Damages Incurred due to Defective Works

limited or disclaimed subject to certain

11 C. Damages Incurred due to Defective Works Fault presumption applies Liability can be limited or disclaimed subject to certain conditions Statutes of Limitation is : - 2 years for movables (materials and equipment) - 5 years for civil works - 20 years in any case of gross negligence Statutes of Limitation can not be decreased by agreement

D. Indirect & Consequential Damages Excluding Indirect Damages A Common Law practice Not established under Turkish Law or Court Precedents Being

12 D. Indirect & Consequential Damages Excluding Indirect Damages A Common Law practice Not established under Turkish Law or Court Precedents Being specific is recommended while excluding the relevant damage items Might be successfully excluded except where liability arises due to gross negligence

Certain risk items recommended not to be subject to the overall limit Exclusions:

13 Overall Limit of Liability An overall liability (a certain percentage of the Contract Price) a market practice Admissible to the extent not arising out of gross negligence Certain risk items recommended not to be subject to the overall limit Exclusions: Title, intellectual property, physical damages, damages reimbursed by insurance companies

14 Conclusion Copy & Paste Clauses Not Recommended Tailor your contract to the requirements of the governing law Risks can be allocated, managed and/or limited Just begin with knowing your risks

15 Thank you! Ömer KESİKLİ Kesikli Law Firm

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