Trends, developments and prospects
What is the general state of the construction sector in your jurisdiction, including current trends, notable recent transactions/developments and future prospects?
The current economic climate has been good for the construction sector. Interesting trends include the redevelopment of existing buildings, sustainability/circularity and innovation. The demand for housing, logistics and data centres and flexible office concepts is also high and investors have shown an appetite for forward-funded projects. Further, new tax rules will likely lead to different ways of structuring projects, which will affect the number of entities used, financing and the moment of legal transfer.
Examples of notable projects include:
- the large-scale redevelopment of a former prison compound in Amsterdam;
- the construction of the highest tower in Rotterdam;
- the turnkey sale of the high-tech redeveloped building Edge Amsterdam; and
- multitude of developments of solar parks on roofs.
The ongoing ZuidasDok project, which moves the A10 motorway underground in the Amsterdam business district, is also worth mentioning.
What primary and secondary legislation governs the construction sector in your jurisdiction?
Construction projects must comply with the relevant legislation and require several permits. The primary and secondary legislation governing the construction sector is spread over many laws and regulations. First, laws and regulations must be considered with regard to zoning, integrated environmental permits and exemptions. Second, specific construction-related permits and other approvals must be obtained and complied with and legislation relating to building and administrative integrity is also relevant. Lastly, with respect to specific environmental aspects of construction projects, legislation may apply to:
- soil protection;
- water abstraction;
- noise and vibration abatement;
- nature conservation; and
Depending on the specifics of a project, other laws and regulations may apply.
Which authorities regulate the construction sector and enforce construction law, and what is the extent of their powers?
The municipal executive is one of the most important authorities regulating the construction sector, and is the competent authority for integrated environmental permits for building activity and the enforcement authority for construction projects within its municipal boundaries. Sometimes enforcement is outsourced to the fire department or environmental agencies acting on behalf of the municipal executive. For some permissions, the provincial executive is the licensing authority. The Social Affairs and Employment Inspectorate is responsible for inspections relating to working conditions and foreign nationals.
Under certain conditions, the competent authorities may stop building work or impose fines. Certain violations of the law may result in imprisonment.
What licensing requirements and procedures apply to construction projects in your jurisdiction (eg, planning consents)?
Usually, an integrated environmental permit is required for building activity. This type of permit is granted if a building plan complies with the zoning plan, regulations and decrees. If so, the regular procedure will apply, taking eight to 14 weeks. If this deadline is not met by the municipal executive, the permit will be deemed granted by operation of law.
If the building plan conflicts with the zoning plan, the permit application will be considered to include an application for an exemption. Depending on the exemption, the extended procedure may apply, with a decision deadline of 26 weeks possibly extended by six weeks. This procedure requires a draft decision, to which any third party can submit an opinion.
Professional licensing and qualification
What licensing requirements and procedures apply to construction professionals, including any required qualifications?
The law allows the competent authority to investigate the integrity of a company or person applying for an integrated environmental permit before it is granted. During the integrity screening, the applicant may be asked to provide additional information, including details of financing. Failure to submit such information can result in an application being set aside or a permit being withdrawn. The competent authority may also conduct such an investigation with regard to parties to be contracted in certain real estate transactions; however, this does not apply to mere construction contracts.
Do any special rules and restrictions apply to foreign construction professionals?
Foreign professionals from outside the European Union that work on a construction project in the Netherlands must have a work permit requested by the employer, which in this case is the contractor employing said foreign professionals.
In the absence of a work permit, the Social Affairs and Employment Inspectorate may impose fines on contractors, but also on the (legal) persons that provided the assignment (ie, the contractor’s principal). Further, contractors and their principal will be registered in a publicly available register as companies that have violated the Foreign Nationals (Employment) Act.
Project structures and relationships
What corporate/formal structures are available for construction projects in your jurisdiction? What are the advantages and disadvantages of each? Are any structures explicitly prohibited?
No corporate structures are explicitly prohibited for construction projects. Sectoral legislation may contain restrictions for certain parties to be involved in construction projects. The advantages and disadvantages of different structures may differ depending on the circumstances.
Frequently used corporate formations include:
- private limited companies;
- limited partnerships; and
- to a lesser degree, the general partnership and the foundation.
A corporate structure often includes a combination of corporate formations.
Special purpose vehicles are also frequently used, mainly for ring-fencing purposes aimed at avoiding the cross impact of project liabilities arising from other projects. In these situations, corporate guarantees are commonly stipulated when dealing with special purpose vehicles.
Tax aspects must be considered when choosing corporate structures.
Are there any special considerations for managing relationships with:
Joint venture partners (where applicable)?
Parties to a joint venture in construction projects are regularly active in different segments of the market. The responsibilities are often divided in such a way that one partner provides the funding, while the other contributes the knowledge, expertise and project management required for the specific project.
The protection of the partners’ interests is important. As joint venture vehicles are often set up for a specific project and do not have endless resources, the parent companies will likely be required to provide sufficient security. The arrangements between the partners should also include exit scenarios (eg, a stipulation allowing the partner providing the funding to continue the project alone in certain situations).
Contracting government entities in public-private partnerships (or other construction projects with a public element)?
Government contracts are treated as ‘regular’ contracts governed by the Civil Code. However, the award of government contracts for construction work and services is governed by the Procurement Act. Contracting authorities generally have to tender these contracts via a transparent and non-discriminatory procedure.
The public procurement rules affect the content of government contracts. The contractual provisions are influenced by the proportionality principle, allowing little room to deviate from standard general conditions drawn up in joint consultations with the construction industry.
Changes to government contracts afterwards may conflict with the same rules regarding impermissible ‘material amendments’. In such cases, the amended contract should be publicly tendered again, but there are exceptions to this rule. A breach of the rules may result in the contract being voided.
Under the Civil Code, contractors are entitled to engage subcontractors for the execution of construction work. Such engagement does not constitute a direct legal relationship between the employer (the principal to the main contractor) and the subcontractor. When engaging subcontractors, contractors remain responsible and liable for the work undertaken.
Construction contracts often stipulate conditions in favour of employers for the engagement of subcontractors. Standard general terms and conditions often attach conditions to subcontracting. Further, employers can stipulate the obligation that contractors impose back-to-back conditions of the main contract on their subcontractors. At the same time, contractor liability for subcontractors prescribed by employers can be limited.
Architects, designers, engineers and any other related professionals?
Architects, engineers and other consultants are generally on board early in construction projects. The standard general conditions of The New Rules 2011 generally apply to contracts with consultants, which include limitations of the consultant’s liability.
By forming a building team, it can be ensured that all consultants and contractors involved are cooperating. The participants jointly work on the preparations for the project and the construction contract. Building information modelling is a relatively new, digital working method used in this phase.
There are several labels which can be applied to construction projects for the sustainability of buildings (eg, the Building Research Establishment Environmental Assessment Method (BREEAM)), which requires another consultant and a certified BREEAM assessor.
Any other relevant parties typically involved in construction projects?
Other relevant parties typically involved in construction projects include:
- the project developer;
- the civil law notary;
- tax advisers;
- the insurers;
- financers and/or investors; and
- possible lessees.
In addition, the municipality plays an important role as the competent authority pertaining to permits, but often for the allocation or sale of land. Finally, neighbours must be considered, as they may lodge objections against permits and file civil complaints against projects.
Contracts and performance
Standard contract forms
What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?
Professional parties commit their agreements on paper, often using standard form contracts. The most commonly used contracts for consultancy services, construction work and integrated work are based on:
- The New Rules 2011;
- the Uniform Administrative conditions for the Execution of Works and Technical Installation Works 2012; and
- the Uniform Administrative Conditions for Integrated Contracts 2005.
To a lesser degree, the International Federation of Consulting Engineers’ conditions (FIDIC) are used mostly in windmill projects.
In practice, these general terms and conditions are often deviated from, taking into account project-specific risks, but also to secure employers. Examples of deviations concern securities by contractors, penalties in case of delay and contractor liability.
Definition of ‘construction work’
How is ‘construction work’ legally defined?
Dutch civil law provides no definition of ‘construction work’. Construction work commissioned to a contractor is qualified as a work agreement as defined in the Civil Code. Pursuant to this agreement, a contractor is commissioned to carry out and complete work of a tangible nature against payment by the employer. The term ‘construction work’ is used only once in the Civil Code. A statutory 20-year limitation period applies to defects after the completion of construction work.
Dutch public law defines ‘building activity’ and ‘structure’. Such activities and objects are subject to the Environmental Permitting (General Provisions) Act, the Housing Act and related laws and regulations.
Are there any rules or restrictions on the governing law of construction contracts?
Parties that jointly undertake a construction project are, in principle, free to agree on the law that governs their construction contract. Usually though, Dutch law is chosen as governing law for projects being realised in the Netherlands. However, without a choice of forum the contract will be governed by the laws of the country in which the contractor is domiciled. Despite another choice of law, Dutch public law will apply to construction projects realised in the Netherlands.
With regard to the governing law, government contracts do not differ from regular civil law contracts. Consequently, the rules described above apply equally to government contracts.
Are construction contracts subject to any formal requirements?
Parties have a considerable degree of freedom of contract concerning contracting parties and the content of such agreements. Construction agreements can be made in any form, including verbally. However, written agreements are preferred.
The general rules on contract law impose minimum requirements and offer an outcome in case of, for example, shortcomings or unlawful actions by the parties. These rules mostly concern regulatory law from which the parties can contractually deviate.
The Civil Code also includes specific rules for various special agreements. Agreements for services and work are particularly important for construction practice. These rules apply to contracts with consultants and contractors, and mostly concern regulatory law.
Are there any mandatory or prohibited provisions in relation to construction contracts?
Any provision contrary to public order, morality or the law is void. Mandatory rules applicable to construction contracts are included in the Civil Code. For example, there are mandatory rules on the construction of a house commissioned by a consumer, which cannot be deviated from to the detriment of said consumer. Other relevant rules are predominantly found in regulatory law. However, the following rules cannot be deviated from to the detriment of employers:
- contract variations and cost increasing circumstances (contractors must warn employers of any cost increases);
- judicial intervention in the case of dissolution due to the probability of breach; and
- the non-disclosure of hidden defects.
Can any terms be implied in construction contracts?
Agreements between parties are not derived solely from the text of the written contract. The determining subjective factor is what the contracting parties were reasonably entitled to expect on the basis of each other’s statements and behaviour and all other relevant circumstances. This rule may result in an agreement deviating from the literal text of a contract. Further, a contract may not only have the legal effects agreed to by the contracting parties, but also those which, according to the nature of the contract, apply by virtue of law, use or the standards of reasonableness and fairness. However, the text is decisive as a basic rule for contracts between professional parties.
How are risks typically allocated between parties to construction contracts?
In a traditional legal relationship, contractors are responsible for implementation work on the basis of the design provided by employers. Contractors are liable for their personnel, subcontractors, materials, equipment and recourses, and for damage to the project or third parties. Save for its obligation to warn for evident faults, contractors are not liable for design faults.
Under the traditional legal relationship, employers are liable for the risks relating to permits, soil and changes in legislation.
Risk allocation differs for more integrated contracts. The risk in a construction project is generally allocated to the party that is able to control the specific matter.
Limitation of liability
How and to what extent can parties to construction projects contractually limit or exclude their liability?
Employers and contractors are free to make arrangements regarding their liability. Construction contracts often include limitations of liability, in particular pertaining to design, and indemnification by contractors against claims from third parties. Third parties are not bound by these agreements, but they regulate the way in which employers and contractors mutually allocate liability and process incidents of damage and risk.
An exclusion of liability for gross negligence or wilful misconduct is generally deemed to be void according to settled case law. Further, an exoneration clause does not apply to the extent that, in the given circumstances, it would be unacceptable according to standards of reasonableness and fairness.
How are liquidated damages typically calculated and to which liabilities are they usually applied?
Liquidated damages are usually linked to the compensation due by contractors in case of delay. Most construction contracts include a final completion date which include a penalty if not met by a contractor.
Unless otherwise agreed on, the contractual penalty will replace a claim for damages. The court may award supplementary damages to the employer if it is evident that fairness so requires. The damages can be reduced following the contractor’s demand if reasonableness so requires. Generally, the courts are less inclined to award such demands by employers or contractors having explicitly agreed on the penalty clause, with the exception of exceptional circumstances.
How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?
Force majeure events are defined in the Civil Code as a failure in performance which cannot be attributed to the obligor if it is neither due to its fault nor for its account pursuant to the law, a juridical act or generally accepted principles. As a result of force majeure, the contractor will not default and cannot be held liable for a delay in completing the project.
Parties to a construction contract can limit or extend the circumstances that constitute force majeure. This is common practice in some areas of the construction sector. The rules of mandatory law and the standards of reasonableness and fairness apply and may restrict such arrangements.
General performance obligations
What are the general performance obligations of contractors and employers?
The contractor’s main performance obligation is to carry out and complete work that meets the terms of the construction contract. The exact scope of work depends on its description and the assignment itself. Contractors must also warn employers for any evident design faults.
The main obligation of employers is the timely payment for work carried out. Generally, employers must provide contractors with the design, permit and access to the construction site. On completion, the employer accepts the work. Acceptance can take place explicitly (verbally or in writing) or implicitly (failing to cooperate in an inspection can be construed as acceptance).
How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?
Construction contracts usually record when construction work is due to start and must be completed by the contractor. The construction period can be expressed in days, working days or workable working days. A penalty clause is usually linked to the contractual completion date, giving employers some assurance for timely completion.
Contractors are, in principle, in default during the period that completion is delayed. During execution, contractors must keep employers informed of the project’s progress. Employers may demand accelerating measures from contractors. However, if the delays are not attributable to a contractor, it will not be subject to penalties and may be entitled to an extension period and additional payment.
To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?
Under the Civil Code, employers can assign variations such as additional work to contractors which are, in principle, obliged to execute it. Contractors must warn employers about the financial consequences thereof, unless employers should have understood the need for additional payment.
In practice, construction contracts include extensive provisions regarding variations. These provisions include:
- restrictions and procedures for variations (to the design or work);
- payment for variations;
- the requirement of a written assignment; and
- the possible extension of time variations.
Lastly, provisional sums, estimate quantities and adjustable quantities are also considered variations. These types of variation are usually settled by their own specific arrangements.
What are acceptable grounds for the termination of a contract?
Both parties may terminate a contract if the other is in breach. However, termination must be justified by the breach and generally requires a prior notice of default to the failing party.
The Civil Code provides employers the right to cancel a contract at any time. Employers are then obliged to pay the agreed contract sum minus the contractors’ savings.
Further, employers can ask the courts to dissolve a contract if it is likely that the work will not be completed properly or on time. Contractors can do the same if it is probable that an employer will not fulfil its payment obligation.
Moreover, construction contracts usually include clauses allowing termination in cases such as bankruptcy or suspension of payment.
Remedies for breach
What remedies are available for the breach of construction contracts?
In the case of a breach of contract, the other party has the remedies provided by the Civil Code, unless deviated therefrom in the construction contract. The other party can claim performance of the obligation breached. If performance is no longer possible or if the defaulting party remains in default, the other party can terminate the contract, provided that termination is justified.
If attributable to the defaulting party, it can be held liable for the damage and loss caused by such breach. Damages can be in addition to the performance of the obligation and as a replacement therefor. Lastly, the other party may be entitled to postpone its own obligations and to offset against claims of the defaulting party, or to invoke provided securities.
Types of financing
What types of financing are used for construction projects in your jurisdiction? Which are the most common? Are there any restrictions on available financing methods?
A wide variety of equity and debt finance methods are available. Construction projects are often financed by local banks, for which no financing restrictions apply. In addition, investors have developed an increased appetite for forward-funded projects, acquiring the land prior to completion and paying the contract price in instalments (often to the contractor directly).
The part not financed externally is frequently financed by shareholders, whose funding is usually split between an equity part and a shareholder loan part. For corporate income tax purposes, interest expenses due on shareholder loans are in principle deductible, whereas payments on equity instruments (eg, dividends) are not.
A general interest deduction limitation entered into effect on 1 January 2019. This rule limits the net borrowing costs and will likely affect the financing methods chosen by project developers and investors and also the choice for an asset or share deal.
What forms of security are used in construction project financing?
Construction projects are often commissioned by a special purpose vehicle that owns the land on which the project is realised. In the case of project financing, lenders take security over the entity’s shares (and related shareholder loans). Further, lenders take security over all of the entity’s assets, the most notable being the land and claims against insurers and contractors. Lenders typically negotiate a step-in right with the contractor upfront to avoid a deadlock which may arise if an employer becomes insolvent. In the case of a forwarded funded turnkey transaction, investors likely stipulate security over claims against insurers and contractors as well as a step-in right.
Methods and timing
What are the typical methods and timing of payment for construction work? Are there any restrictions on ‘pay when paid’ and ‘pay if paid’ provisions? Do any other rules, restrictions or procedures apply?
Contractors often require payment in instalments per completed milestone. Instalments usually become payable in line with the progress of the work, and contractual procedures on inspection, approval and invoicing must be followed. For payments in advance, employers usually stipulate security and transfer of title.
Contractors do not generally accept payment arrangements on a pay-when-paid or pay-if-paid basis. However, there are no legal restrictions in this respect. Otherwise, contractors will stipulate securities from their employer.
Lenders typically require that the owners of the project inject all of the required equity (ie, sponsor equity) before the credit line can be used for payment of instalments due towards the contractor. Lenders often pay instalments due directly to the contractor.
How can the contractor secure itself against non-payment by the employer? Under what circumstances can the contractor suspend work for non-payment?
Contractors can secure themselves against non-payment by invoking the statutory right of retention. If so, they can close off part of a project site and deny access to employers and third parties. Sometimes this right can also be invoked against a mortgagee.
In addition, the contractor may suspend work in the case of non-payment by an employer. Both the suspension right and the right of retention can be duly exercised only if certain legal requirements have been met and have not been contractually waived.
The security for collecting a claim after a court decision can be provided by a bank guarantee (if provided) or a pre-judgement attachment. In practice, the contractor can attach all employer assets, such as the land on which the project is realised, other real estate and bank accounts.
How can subcontractors secure themselves against non-payment by the contractor? Under what circumstances can subcontractors suspend work for non-payment?
The statutory right of retention is considered a remedy for subcontractors in case of non-payment by contractors. In certain circumstances, subcontractors can deny contractors and third parties access to (part of) the project site by closing it off. Sometimes this right can also be invoked against a mortgagee.
In addition, subcontractors may suspend work in case of non-payment by a contractor. Both the suspension right and right of retention can be duly exercised only if certain legal requirements have been met and have not been contractually waived.
The security for collecting a claim after a court decision can be provided by a bank guarantee (if provided) or a pre-judgement attachment. In practice, subcontractors can attach all contractor assets, such as materials, equipment, real estate and bank accounts.
On what grounds can payments be withheld?
Employers can suspend payments to contractors if certain legal requirements have been met. For example, where a contractor:
- has not yet performed the relevant work;
- has not followed prescribed administrative duties pertaining to the payment;
- is in default with other obligations; or
- has not remedied defects to the work or compensated third parties to which it is liable.
Most construction contracts also include arrangements allowing employers to suspend payment in case of contractor bankruptcy, the suspension of payment or similar circumstances.
What recourse is available to employers in the event of the contractor’s insolvency?
As a general rule under insolvency law, a construction contract will remain in force in case of a contractor’s bankruptcy. An employer may address a contractor’s bankruptcy trustee and demand that it indicates whether the contract will be honoured. If not, the trustee will lose its right to demand fulfilment from an employer, and the employer may terminate the contract.
Following contract termination, the employer is free to engage a different contractor. The damage and loss suffered as a result of the termination can be submitted in the contractor’s bankruptcy.
Further, the employer may be entitled to offset additional costs incurred following the contractor’s bankruptcy with any payments due. Further, the employer may invoke the securities provided by the contractor.
What mandatory insurance coverage applies to parties involved in construction projects? Is any additional coverage recommended?
There is no mandatory insurance for construction projects. Parties can and usually do agree that one or more of them take out specific insurance. The desired insurance depends on the characteristics of the project and the parties involved. Contractors generally take out construction all risks insurance, business liability insurance and professional indemnity insurance. Architects and other consultants are generally required to take out professional indemnity insurance. Hidden defects insurance and the warranty and indemnity insurance are less common in construction practice.
What tax liabilities arise in relation to construction projects?
- Chain liability – contractors can be held liable for any unpaid turnover tax, wage tax, social security contributions and insurance premiums due by subcontractors in relation to work executed under a subcontract. This is a risk liability which exists from the moment a contractor engages a subcontractor with employees working on a construction project. If qualified as a self-contractor by the tax authorities, a similar risk liability exists for employers. Measures to mitigate this risk can be taken and are often included in (sub)contracts.
- Fiscal unity – companies within the same group can form a fiscal unity for corporate income tax (a CIT group), under which tax is levied from the parent company as if the CIT group is one taxpayer. However, each company of a CIT group is jointly and severally liable for the corporate income tax due by the fiscal unity for the period that company was part thereof. Further, it is possible to form a fiscal unity for value added tax (a VAT group), as a result of which, among other things, no VAT needs to be charged on intra-VAT group supplies. Different rules and requirements apply in order to qualify as a CIT group or a VAT group.
Are there any tax incentive schemes to promote construction and development in certain areas?
Real estate transfer tax (RETT) is important to consider in the construction sector. On the transfer of real estate, in principle, RETT is levied on the purchase price, which may be considered a cost item attached to a construction project. The percentage of RETT for transfers pertaining to residences was lowered from 6% to 2% during the financial crisis to encourage house building.
As of 1 January 2019, the corporate income tax rates have been lowered. There are some tax incentives which provide a tax deduction for investment obligations entered into for qualifying environmental and energy friendly investments in real estate. These incentives are designed as investment rebates, a fiscal incentive in the form of an additional deduction equal to a percentage of the investment.
What environmental protection legislation and regulations apply to construction projects in your jurisdiction?
Environmental protection legislation aims to prevent (or remove) soil and water pollution and adverse effects of noise and vibrations. These rules affect construction projects (or vice versa). A variety of laws and regulations aim to protect the environment as a whole.
The primary environmental protection legislation includes:
- the Environmental Permitting Act;
- the Environmental Management Act;
- the Activities (Environmental Management) Decree;
- the Water Act;
- the Nature Conservations Act;
- the Noise Abatement Act;
- the Soil Protection Act; and
- the Heritage Act.
What environmental authorisations and certifications are required for construction projects and how are they obtained?
The environmental authorisations and certificates required depend primarily on the nature and location of the construction project.
Companies that engage in activities which could potentially have a detrimental effect on the environment must submit the relevant notification.
If a project is likely to cause (significant) harm to natural habitats or disturb the natural way of life of certain animals, the project and its potential implications must be assessed. The authorities can grant the required integrated environmental permit only after having ascertained that said project will not adversely affect the integrity of the area concerned. Exemptions may be required for certain activities.
There is no general legal requirement to remove asbestos in buildings, unless the (type of) asbestos exposes users to risk. However, from 2024 asbestos-containing roofs are prohibited in the Netherlands. Further, reconstruction and demolition work that involves the removal of asbestos must adhere to strict legal requirements to prevent human exposure to asbestos.
Special rules apply to the fire safety of buildings, especially for publicly accessible buildings and buildings that provide commercial night-time accommodation.
Notifications must be submitted to, and permits must be applied for at, the respective municipal authorities of the municipality where the project is located.
‘Green’ regulations and incentives
Are there any regulations or incentive schemes in place to promote the construction of energy-efficient and low-carbon buildings?
There are several types of fiscal incentive, subsidy and other measures to encourage investment in sustainable real estate.
Examples include investment rebates in the form of an additional corporate income tax deduction equalling a percentage of the investment. The two most important investment rebates are:
- the energy investment allowance (EIA) to encourage investments in energy-efficient assets; and
- the environmental investment rebate (MIA) to encourage the use of environmentally friendly products or assets.
Only investments or products listed in the annually updated Environment List and Energy List (published by the Netherlands Enterprise Agency) are eligible for the EIA or MIA.
The Investment Scheme Sustainable Energy (ISDE) is applicable when sustainable energy devices or installations are acquired to heat buildings. The cost of these investments can be reimbursed if the ISDE’s conditions are met.
Two examples of other measures prescribed by legislation for an energy neutral built environment by 2050 include the energy label and the periodical energy audit, which may require changes to be made to buildings.
Employment and labour law
What employment and labour legislation applies to construction projects in your jurisdiction? What rights and protections are provided to construction workers?
Employees are entitled to the statutory minimum wage (ie, €1,594.20 gross per month based on full-time employment).
There is a collective labour agreement and statutory pension arrangements in place for the construction sector. Further, special provisions exist for foreign construction workers in this collective labour agreement. The collective labour agreement is binding most of the time, which means that it applies regardless of whether the employer or employee are members of an employer’s organisation or union.
Further, the Health and Safety Act and Working Time Act are important pieces of legislation for construction workers. They provide regulations for on-site working conditions.
Occupational health and safety
What occupational health and safety regulations apply to construction projects?
The following health and safety legislation applies to construction projects:
- the Working Conditions Act;
- the Working Conditions Decree; and
- the Working Conditions Regulations.
These laws and regulations mainly address employers (ie, the party employing construction workers). Construction contracts usually include obligations for the contractor in this respect.
Employers are responsible for a safe and healthy working environment and must implement a company-wide policy, which should include general rules regarding health and safety. There are specific mandatory obligations for employees and employers, with specific regulations for the construction sector and the specific allocation of responsibilities for the entire construction process.
What types of employment contract are typically used for construction work? Are there any mandatory or prohibited provisions in relation to employment contracts?
Employers and construction workers can conclude only a limited number of temporary contracts, after which an employment relationship will be considered to be for an indeterminate period. Employers can also choose to hire agency workers if they do not wish to conclude an employment contract. However, there are specific clauses in the applicable collective labour agreement regarding agency workers in the construction sector. A collective labour agreement can also apply to companies employing or hiring workers that have their corporate seat outside the Netherlands if their work is executed in the Netherlands.
What rules, restrictions and considerations apply to the hiring of foreign workers?
Work permits are required if third-country nationals (from outside the European Union) work on a project in the Netherlands. If no work permit was obtained, the Social Affairs and Employment Inspectorate can impose a fine on the contractor as the employer, but also on the (legal) person that has given the assignment (ie, the contractor’s principal). Fines amount to €8,000 per foreign worker. If foreign workers are working temporarily in the Netherlands, certain employment law rules (eg, the Minimum Wage Act) apply, as well as part of the collective agreement in the construction sector.
What regulations and procedures are in place to combat corruption, bribery, fraud, collusion and other dishonest practices in the construction sector in your jurisdiction?
Anti-bribery and anti-corruption legislation is set out in the Penal Code, which includes rules regarding active and passive bribery of public officials (public bribery) and non-public officials (commercial bribery). Further, the Code of Criminal Procedure contains the obligation for public bodies and officials to report public offences, including bribery. The Public Prosecution Service has issued two instructions containing reference points that it considers when determining the discretion to be used to investigate and prosecute public bribery. Other regulations that apply to specific types of individuals and institutions are spread over several acts. These regulations do not directly criminalise bribery and corruption but relate to sound and ethical business operations.
What best practices are advised to ensure compliance with the relevant anti-corruption rules?
Best practices to ensure compliance with the relevant anti-corruption legislation within a company include:
- establishing anti-corruption policies and codes of conduct;
- conducting periodic risk assessments;
- anti-corruption training and education;
- careful selection of business partners; and
- refusal of facilitation payments.
What courts are empowered to hear construction disputes in your jurisdiction? Are there any specialist construction courts?
Contracting parties are, in principle, free to agree whether a dispute will be settled by the ordinary court or a specific arbitration body. If parties have not agreed on a forum, the ordinary court will have jurisdiction to settle the dispute.
The system for civil legal proceedings has three instances. The district court is the first body to which a dispute can be submitted. If a party in proceedings disagrees with a court judgment, an appeal can be lodged with the Court of Appeal. If one of the parties disagrees with the Court of Appeal decision, an appeal in cassation can be brought to the Supreme Court.
What issues are commonly the subject of construction disputes?
Some of the most common issues which can lead to disputes during the construction process or after completion concern:
- the testing of design documents produced by the contractor against the contractual requirements;
- the scope of work;
- contract variations or additional work and the possible consequences thereof in costs and time;
- delays; and
- defects to the construction work after completion.
Most construction contracts include clear arrangements pertaining to these issues. However, disputes cannot be precluded despite the parties’ best intentions and endeavours.
Statute of limitations
What is the statute of limitations for filing construction-related claims?
When the employer discovers a defect, it must inform the contractor promptly. If a complaint is not made within reasonable time, the employer may no longer be entitled to call the contractor to account. The definition of a timely complaint depends on the circumstances of the case; the contractor must not end up in a worse (legal) position to prove its case.
On the completion of construction work, the 20-year statutory limitation period will start for claims against contractors relating to any defects.
Following a complaint, each right of legal action concerning the relevant defect will lapse after two years. Employers can interrupt limitation periods through an act of interruption (eg, a notice of default claiming fulfilment of the contractor’s obligation).
Is pre-litigation mediation required or advised for construction disputes?
There is no obligation to attempt mediation before submitting a construction-related claim before court. However, construction contracts can stipulate that mediation must be tried before a claim is admissible before court.
Mediation can be an alternative to settle disputes, because disputes in construction projects are often rather factual or technical. This is especially true where the parties have mutual interests in completing the project.
How often is arbitration used to resolve construction disputes? What arbitration forms and institutions are typically used?
Disputes in the construction sector are frequently settled by arbitration. Parties may agree in the construction contract, or at a later stage, which arbiters or arbitration court will be appointed to settle a dispute.
The Arbitration Board for the Building Industry specialises in construction disputes and is often appointed as the arbitral tribunal to settle construction disputes. Some standard general terms and conditions used in the construction sector appoint or mention the Arbitration Board for the Building Industry as the competent institution.
Construction disputes are also regularly settled by the Netherlands Arbitration Institute. Decisions cannot be appealed unless agreed otherwise by the parties.