Building law and regulation in Sweden during Covid-19

The two Swedish standard agreements (AB 04 and ABT 06) that are used for contracts regarding construction works, contain some certain regulation that may apply to circumstances that have arisen as a result of COVID-19. Time extension is one example.

The Swedish government continuously reviews various kinds of support for companies in financial crisis due to COVID-19. The Swedish government has announced packages relating to tax, employment law, financing of rent reduction e.g. There is as of now no specific support for construction works or the construction industry available.

The effects of the Epidemic can possibly be deemed to a legal concept similar to force majeure. The two Swedish standard agreements (AB 04 and ABT 06) that are used for contracts regarding construction works contain certain regulation regarding hindrances and extension of the contract period. The contractor can be entitled to any necessary extension of the contract period, if he is prevented from completing the contract work within the contract period by circumstances further stated in AB 04 and ABT 06. Only if the circumstances (hindrances) are due to the employer, or to some state of affairs on his side the contractor might be entitled to compensation from the employer for the cost thereby incurred. However, the Epidemic might generally not constitute hindrances that are considered to depend on the employer. The hindrances are more likely to be due to e.g. general shortage of goods and personnel because of closed borders. In such case the contractor is not entitled to compensation from the employer. If the construction contract does not refer to AB 04 or ABT 06 the answer on whether the effects of the Epidemic are deemed to be force majeure depends on the wording/regulation in the specific contract.

The Epidemic itself does not give rise to termination rights to either party. According to the two Swedish standard agreements (AB 04 and ABT 06) both parties shall have the right to terminate the contract insofar as remaining works are concerned if - owing to circumstances not caused by the parties - the total works have to be suspended for such a long period of time that the conditions on which the fulfilment of the contract depends are substantially disrupted. However, what is required for the conditions for the performance of the contract to be considered substantially disrupted is unclear. It is exceptional that this rule can be applied in order to terminate a construction contract. If the construction contract does not refer to AB 04 or ABT 06 the answer on whether the Epidemic give rise to termination rights depends on the wording/regulation in the specific contract.

The measures currently taken in relation to the Epidemic might amount to change in law. Both standard agreements (AB 04 and ABT 06) contain regulations regarding change in statutes and regulations or similar that come into force after the date of the contract.

There might be several other issues relevant to COVID-19. For example if the construction contract is signed during the ongoing COVID-19 pandemic, it might be more difficult for the contractor to be entitled an extension of the contract period since the contractor might be considered to have been aware of the circumstances at the time of signing the contract and the acceptance/approval of the time schedule for the construction works.