Bernard Ang of Pinsent Masons, the law firm behind Out-Law, whose work includes projects in Myanmar, said both employers and contractors working in the country should review their contracts and undergo alternative scenario planning given the volatile situation in Myanmar to determine the best options for them.

“It rarely happens that an event or two like this leads to the simultaneous application of so many clauses in a project contract that are often seen as ‘academic’ in contract negotiations,” Ang said. “The events in Myanmar have these clauses and their application certainly moved into the spotlight. “

Contractual regulations on force majeure, employer risks, epidemics, strikes and riots have according to the Ang. Many other provisions increase the complexity of the risk analysis – including risk distribution for unforeseeable goods and personnel shortages, changes in the law, official measures, suspension and termination.

Contractors and suppliers who are unable to carry out work in accordance with the contract can base their defense on a number of alternative contractual provisions. Ang cautioned, however, that the consequences of each determination and its long-term operation must be carefully worked out and compared. He said the volatile situation in Myanmar made future events such as sanctions or even civil war plausible and such events could trigger even more contractual options and / or require containment plans and exit strategies to be updated.

As events progress, new remedies also appear. For example, lender withholding funding could trigger termination rights for contractors under the FIDIC forms if it does not allow the employer to ensure that financial arrangements are in place to enable the project to be carried out.

Distressed project employers also have their own options, including suspending their project through partial or total suspension, or opting to terminate it, whether for prolonged suspension, acts of God, or even out of convenience, Ang noted. He said the aftermath Any method of mothballing the project would have to be carefully weighed against a number of factors including the likelihood of a quick return to normal, the relative cost of each option in terms of safeguards and restoration on resumption, and the likely state of the market if resumption is certain – including the availability of construction expertise and resources in Myanmar.

Ang said all of these factors were unlikely to have been adequately accounted for under existing contracts as no one foresaw the combination of these two events. He concluded, “It is likely that reasonable parties outside of existing contracts will act amicably, including settlement agreements, that result in a win-win situation, or at least seek to minimize losses for both of them.”