Year in review
In keeping with the past few years, in 2021 the Danish construction sector has been characterised by a high level of activity and a correspondingly high number of disputes, predominantly driven by large public construction and infrastructure projects. Many disputes necessitate a fast dispute resolution process and contracts entered into on the terms of the updated AB Standards allow for an expedited process. Additionally, in 2021 the first disputes regulated by the updated AB Standards have started to arise. Combined with the new procedural rules introduced by the Arbitration Board in 2019 to facilitate a faster process, the way is paved for a faster dispute resolution process in the Danish construction industry. Highlighted below are the key takeaways from three noteworthy cases from 2021.i TBB 2021.796 VBA
The case concerned punctuality of payments made by a public authority acting as the building owner. The tribunal stated first of all that under Danish law, payments are considered punctual when received by the creditor on the due date. Then, the tribunal decided that in accordance with Section 3 b(1) of the Danish Interest Act, it is mandatory for a public authority to make payments within 30 calendar days, counted from when the contractor forwards its request for payment and until the payment is available to the contractor. The tribunal stipulated that in accordance with the EU Directive underlying the Interest Act, a Danish public owner cannot agree upon or enforce a payment delay of more than 30 days.ii TBB 2021.162 VBA
A key issue in this case was the principle of Danish law known as the 'threshold of sacrifice', which entails that a contractor is not obliged to overcome any obstacle whatsoever to ensure contractual performance. The contractor concerned had agreed to replace 586 entrance doors for a contract sum of approximately €791,000. The doors proved not to meet the thermal insulation requirements of the tender documents and, according to the expert's report, the remedial cost was approximately €600,000. Noting that the purpose of the contract was to bring the doors up to a contemporary standard and that the municipality would not have approved the doors, the tribunal did not find that the threshold of sacrifice had been reached. This conclusion was reached although the heat loss suffered by the tenants was limited. The key takeaway is that the threshold of sacrifice is not easily reached and that it is judged in relation to the purpose of the contract.iii AFGR.2021-1004-3
The case concerned an arbitrator's impartiality. An expert's opinion had been obtained and an Arbitration Board tribunal had appointed a High Court judge to decide whether the expert's report should be set aside. On 30 August 2018, the judge ruled not to set aside the expert's report. One of the parties objected, stating that the tribunal should appoint another judge to make a new ruling on the matter. On 24 September 2018, the same judge (who had made the first ruling) decided that no new judge should be appointed. The Supreme Court noted that the procedure to obtain an expert opinion had been initiated in accordance with the dispute resolution measures in the AB Standards, but no arbitral proceedings had been initiated. According to Section 13(3) of the Danish Arbitration Act, for the courts to rule on an objection to the impartiality of a judge, it is a precondition that the impartiality is in relation to ongoing arbitration proceedings. The question then was whether the ruling made by the judge on 30 August 2018 was an arbitral ruling. The Supreme Court found that the procedure to obtain an expert opinion was not arbitration, because its purpose had not been to decide a dispute with binding effect on the parties. Therefore, the case was rejected.