Building law and regulation in Ireland during Covid-19

The Health (Preservation and Protection and Other Emergency Measures in the Public Interest) Act 2020 gives the Government wide powers to prevent, limit, or slow the risk of infection due to Covid-19 including “safeguards required to be put in place by owners or occupiers of a premises (including the temporary closure of such premises)". The government announced new measures which took effect at midnight on 28 March 2020 until 18 May 2020 which requires all people to stay at home except for certain limited circumstances. This has effectively closed building sites in Ireland. These are recommendations/requests, were reflected in regulations made under the above Act effective 8 April 2020.  The Government has now published its proposed plan for a gradual easing of the restrictions in a 5 phased process starting on 18 May 2020 (subject to final confirmation by the Government).  Each phase in the process is subject to review and approval.  In the first phase, all construction site will be able to open subject to undertaking sufficient procedures to limit the spread of the COVID 19 on the site.  The Construction Industry Federation has published standard operating procedures for construction sites (the “SOP”).  The SOP are general in nature and are not mandatory.  However, limiting the spread of COVID19 is considered a health and safety issue and the failure to take measures to provide adequate protection against the spread of COVID19 on site is a violation of the health and safety obligations of the contractor.  As with all health and safety measures, the sites are subject to inspection by the Health and Safety Authority who have powers to close the site where appropriate health and safety measures are not in place.

The Emergency Measures in the Public Interest (Covid-19) Act 2020 provides for a temporary wage subsidy scheme to help employers maintain jobs and incomes during the Covid-19 crisis and amends the redundancy payments legislation to remove the entitlement for employees to seek a statutory redundancy payment after 4 weeks of lay-off.

The Royal Institute of the Architects of Ireland (the "RIAI") publishes the most widely used standard form construction contract in Ireland. This contract provides for extensions of time for Force Majeure but the term 'Force Majeure' is not expressly defined. As such, it is for the contractor to argue that the Epidemic constitutes a Force Majeure event. However, for larger projects, the conditions of the standard form contract are often amended and either delete Force Majeure or include an express definition of Force Majeure. These amendments can define Force Majeure with reference to very specific events which may limit the contractor's ability to claim an extension of time on the basis of the Epidemic.

Generally, where a contractor is entitled to make a claim for Force Majeure, it will be entitled to an extension of time but will not be entitled to additional costs associated with the delay.

In the Irish government form of contract (used in relation to public sector construction procurement) (the "GCCC form of contract"), there is no Force Majeure clause.

Under the RIAI standard from construction contract, the contract can be terminated by the employer where the contractor (i) without reasonable cause suspends the Works before completion; or (ii) fails to proceed with the Works with reasonable
diligence". Where the Epidemic is not a Force Majeure event under the contract or where the contract does not provide for Force Majeure as a excusable reason for delay, the employer may attempt to rely on these provisions to terminate the contract. However, where there has been an outbreak of the Epidemic on a site, the contractor can argue that, compliance with health and safety requirements, it is reasonable to suspend the works. Where the government has directed or regulated for the closure of construction sites, this should be a 'reasonable cause' to suspend the Works. Although each of the above limbs are separate, if the contractor is entitled to suspend the works, it should be relieved of its obligation to diligently proceed with the works.

The contractor is entitled to terminate the contract if the employer is in breach of making a payment due under a payment certificate. Force Majeure does not apply to the employer under the standard form contract so the employer is still required to make any payments that are due to the contractor and the contractor may terminate where the employer fails to do so even during the Epidemic or a site closure. Where either party becomes insolvent during or following the Epidemic, the solvent party will be entitled to terminate the contract.

Under the GCCC form of contract the employer may terminate the contract where (i) the contractor, except where permitted under the contract, suspends the execution of the Works; or the contractor fails to proceed regularly and diligently with the execution of the works. Under this form of contract, the contractor must comply with all Legal Requirements (which includes complying with any Law) and is entitled to an extension of time for delay caused the order or other act by a public authority exercising authority under Law. Where it is required or entitled to suspend the work it should also be relieved of the obligation to regularly and diligently proceed with the works. However, this clause may not apply where the site is closed due to recommendations / directions make outside of regulations under a Law such as the Health (Preservation and Protection and Other Emergency Measures in the Public Interest) Act 2020. The employer may also terminate the contract if the contractor becomes insolvent due to the Epidemic.

There are no specific long-term measures that have been put in place beyond the general support offered to all businesses (see 2 above).  

The current measures are directions / recommendations by government at this time. The government intends to have the current restrictions reflected in regulations made under the Health (Preservation and Protection and Other Emergency
Measures in the Public Interest) Act 2020 but until such time as those regulations come into force, there is no change of law.

When those measures do come into force:

• The RIAI standard form contract provides for increases (and decreases) in the contract sum where the performance of the contract is increased as the result of any legislative enactment or exercise of government powers. The specific examples of cost increases refer to increases in duties or tariffs or restriction of importation licenses or otherwise affecting the cost of labour. The emergency measures which have the effect of closing construction sites do not directly relate to the cost of labour or materials or the cost of performance of the contract. The contractor may have difficulty proving that it has an entitlement under this clause. The appropriate relief would therefore likely be restricted to a claim for an extension of time.
• Under the GCCC form of contract, allows for the contractor to claim for an increase in the contract sum where a change in law increases the cost of performing the contractor's obligations under the contract but is limited to increases due to changes in VAT, customs or excise duties, requirements for a licence to import or export any commodity or pay-related social insurance. Should the current measures be reflected in regulations, the contractor is unlikely to be entitled to a claim for change of law unless the regulations also specifically make any of the changes list above.
• The GCCC form of contract also provides for extensions of time for delay to the Works caused by the order or other act of a public authority. There is no entitlement to additional costs.

The construction industry should also be aware of the impact the Epidemic has on insurances (primarily in relation to prolong site closures) and contract security and any terms that might relieve or release the surety from performance under the contract security.