Change the precedent, change the world

Change the precedent, change the world

Global sustainability

“I want you to act as if the house is on fire, because it is”      Greta Thunberg, 24 January 2019

As lawyers, and particularly as construction lawyers, should we be using our specialist knowledge and expertise to help tackle climate change? And how?

The traditional view has been that sustainability issues are not legal issues and are best left in the specification part of contract, or left up to the designer.

In this blog, I shall ask if it is time to leave this view behind and for lawyers to step forward to add sustainability provisions to the non-specification parts of the contract, the contract conditions? And, are aspirational provisions good enough? Should we be providing our clients, wherever they are in the construction chain, with properly enforceable responsibilities, obligations and incentives in relation to sustainability? Should we be including these types of provisions in our standard drafting, and proactively asking clients if they want these provisions included, not waiting to be instructed specifically to include them?

The construction industry is one of the biggest contributors to climate change and there are any number of initiatives aimed at reducing construction’s carbon footprint and building in a more sustainable and efficient way. There is a mass of environmental legislation, strategy documents, national and international guidelines and principles, and industry body advice. While these are all important, they do not deal with the drafting of contract conditions.

So, what types of provisions can we look at including, and where can we find useful precedents? What do the standard form contracts say, and how might we be amending them?

The Chancery Lane Project

The Chancery Lane Project is a good place to start. https://chancerylaneproject.org/

The Project is a volunteer body which enables lawyers to come together with the purpose of developing new contracts and model laws to help fight climate change. Do take a look at their website for a fuller explanation of their aims and how they are organised. Lawyers sign up for sessions and give their time and expertise. The Project’s goals are to:

  • Convene and inspire a diverse range of lawyers from across the profession to focus on climate change issues and solutions in fun and innovative ways
  • Co-create and publish a “Climate Contract Playbook” of precedent clauses and a “Green Paper” of model laws and regulations
  • Disseminate, promote and track the clauses and model laws created. Encouraging all lawyers to amplify their impact
  • Work with others to create new market norms to bring about change and ensure lasting impact

The Project has created clauses for all sorts of contracts, each one named after a child. The third edition of the Climate Contract Playbook was published in September. The Project is organised online, via “hackathons”, the most recent of which has just concluded, and lawyers from all over the world participate and contribute pro bono.

The construction section currently contains:

  • Mary’s clause – amendments to the JCT Standard Design and Build contract to make achieving energy efficiency obligations a prerequisite to Practical Completion. This clause lists environmental requirements.
  • Luna’s clause – incentivises a contractor to propose a “green” variation to the works.
  • Estelle’s clause – requires the contractor to comply with green objectives in carrying out the works.
  • Edgar’s clause – to be used in landscape architect appointments or building contracts, this clause requires landscape design to be carried out in an environmentally positive manner.
  • Tristan’s clause – imposes a carbon budget on the project with penalties for exceeding it.
  • Francis’ clause - imposes additional obligations in respect of waste management and usage of materials.

The Playbook also contains draft clauses for employment, commercial, corporate, finance and capital markets, insurance, planning, real estate, litigation and arbitration and public procurement. Work on adding new drafting for different types of contract is ongoing.

As well as the Playbook, the Project also publishes a glossary of climate related definitions and Model Laws.

Industry standard contracts

Most construction projects in the UK and major international projects rely on a series of standard building contracts, produced by industry bodies, which are frequently amended by lawyers to suit the particular project, the parties and the allocation of risk. The three main standard contract drafting bodies are JCT, NEC and FIDIC, although there are others.

How do these three organisations deal with sustainability? The general approach would appear to be that sustainability is a matter for the specification, not for the legal drafting in the contract.

The JCT

In 2011, the JCT produced “Building a Sustainable Future Together”, which it describes as “a guidance note to assist management teams, design teams, the construction industry and its clients (both public and private sector) in dealing with environmental sustainability within contracts used in the procurement of construction projects.” This followed a consultation which showed that the preference was for sustainability to be dealt with in the project specification, rather than the contract itself.

The JCT contracts are primarily drafted on the basis therefore that sustainability should be dealt with in the specification and design criteria, and found in the preliminaries, the preambles and the specification, or set out in a schedule.

The JCT has introduced sustainability provisions into its Framework Agreement, Construction Excellence Contract, Preconstruction Services Agreement and JCT Consultancy Agreement.

The 2016 suite of building contracts contain a sustainability option in the Supplemental Provisions, whereby the contractor can suggest “economically viable amendments” which if accepted can be instructed as a Change. Contrast this with the supplemental provision whereby the Contractor can suggest cost savings and value improvements, which includes a procedure for the contractor to be paid a share of the financial benefit that results.

NEC

The approach of the NEC is that sustainability issues are predominantly technical and should be included in the technical specification included as part of the Scope.

FIDIC

As an organisation, FIDIC is committed to sustainability. It publishes a three part sustainability pack, which consists of the:

  • Project Sustainability Management applications manual - a guideline for consulting engineers implementing major sustainability issues in projects
  • Rethink Cities - a white paper on societal challenges
  • Project Sustainability Logbook - a tool to support owners and their partners with collaborative work on sustainability

The standard FIDIC contracts do contain some sustainability provisions. For example clause 4.18 of the FIDIC Red Book and Silver Book requires the contractor to take all necessary measures to protect the environment and to limit damage resulting from pollution, and to comply with standards for emissions, surface discharges and effluent in the Specification or local law. At clause 6.9, the Engineer can require the removal of any person who persists in any conduct which is prejudicial to the protection of the environment.

The primary place for sustainability obligations in FIDIC contracts is the works specification.

Drafting suggestions

This review of clauses shows that there are positive steps that can be taken to include sustainability considerations in the contract conditions, not just as an aspiration, but which impose real responsibilities, obligations and incentives on the parties.

Should we therefore be considering amending our standard drafting by:

  • Adding a clause, along the lines of a deleterious materials clause, listing or identifying environmentally unfriendly materials which must not be used, or alternatively identifying environmentally friendly materials which must be used?
  • Amending the definition of practical completion so it is not achieved until a measurable energy efficiency rating has been achieved?
  • Imposing obligations on designers and contractors to achieve specific BREEAM ratings?
  • Allowing extensions of time if environmentally friendly materials are on longer lead in times or temporarily unavailable?
  • Adding requirements for dealing with site waste?
  • Including incentives for proposals which improve efficiency or sustainability and reduce environmental impact?
  • Always including the JCT supplemental provision on sustainability, and consider expanding this to add incentives?
  • Thinking about a “carbon budget” for the project?

As we consider the options, more possibilities will come to light.

Will it make a difference?

I shall leave you with the words of Edmund Burke, one of the great thinkers of the eighteenth century: “No one could make a greater mistake than he who did nothing because he could do only a little.”

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