Redefining public project obligations – Esquível Advogados

Increasing budgetary pressures mean that there is a need for continued creativity among financiers, investors and concessionaires as Portugal’s Government seeks to stop, reassess and in some cases renegotiate existing contracts, says José Luís Esquível, Founding Partner of Lisbon projects boutique Esquível Advogados.

“Parties have to be aware that while many project tenders may have started, and in some cases the concrete already begun to be poured, the State can no longer afford to comply with all of its commitments and so parties to projects contracts need to consider their positions.”

Dialogue between all the signatories to an agreement is therefore essential in order to ensure that each understands the relative financial, contractual and even political pressures and risks being faced, he says.
“In such a scenario, nothing is fixed. Everything is up for negotiation or renegotiation and this is becoming evident in the extension and revision of contract terms, time frames and even payment schedules.”

Contracts previously entered into may therefore begin to change shape, says Esquível. Parties need to pre-empt issues before they arise and to think strategically about any impact this may have on these and other operations and commitments.

“The question to be asked is, ‘what would happen if the terms of an agreement were amended?’; will it leave you in a better or worse position?” This is particularly so when it comes to planned construction or repair works, says Esquível.

“There is always the option to fight, through litigation or arbitration, but often the Administration needs help to confront and overcome issues and those parties that pro-actively present credible alternative scenarios are being perceived more favourably by the State.”