THE BOTTOM LINE
- Dispute Board Rulings Can Be Overturned: An appellate court in the Dutch Caribbean has shown it will conduct a full, independent review of a construction dispute board’s decision, leading to a significant recalculation of a multi-million dollar delay claim. Arbitration or dispute board clauses are not always the final word.
- Undefined Contract Terms Create Major Financial Risk: The contract called for a “reasonable markup” on delay costs without defining the percentage. The court rejected the contractor’s 17% claim and, in its own discretion, imposed a 10% markup, substantially reducing the final award.
- Documentation is King in Delay Claims: The court meticulously scrutinized the contractor’s direct cost calculations, reducing the award for what it deemed insufficiently substantiated or overstated personnel and equipment costs, demonstrating that robust, contemporaneous evidence is critical.
THE DETAILS
This case stems from significant delays in the construction of a new hospital in Curaçao, a major project awarded to the Dutch contractor Ballast Nedam Infra B.V. (BNI) by the development foundation, Sona. When the client failed to provide timely access to the construction site, BNI incurred substantial extra costs and filed claims with a Dispute Adjudication Board (DAB). The DAB largely sided with BNI, awarding significant compensation. Dissatisfied, the client’s legal successor, HNO, took the case to the regular courts. The Joint Court of Justice set aside the DAB’s award, conducting its own deep-dive analysis into what compensation was truly owed under the project’s contract, based on the Uniform Administrative Conditions for Integrated Contract Forms (UAV-GC 2005).
The court’s primary task was to interpret the contract’s compensation clause, which entitled the contractor to “all direct and indirect costs” resulting from the client-caused delay. It carefully weighed competing expert reports and ultimately trimmed BNI’s claim for direct costs, citing inflated personnel expenses and accounting duplications. More significantly, the court re-categorized the costs. It allowed claims for price indexation (inflation) and inefficiency damages but rejected a large claim for “under-recovery” of overhead and profit. The court reasoned that such costs were not a separate, indirect loss but were intended to be covered by the contract’s general markup provision.
The most commercially significant part of the judgment centered on the interpretation of a “reasonable markup for general costs, winst and risk.” The contract did not specify a percentage for this markup. In the absence of a contractually defined figure or a clear industry standard, the court had to determine what was “reasonable.” It dismissed the contractor’s claim based on a 17% calculation as excessive. Instead, exercising its judicial discretion, the court established a 10% markup as fair and equitable (ex aequo et bono). This single decision substantially lowered the final amount due and serves as a powerful reminder for executives and legal counsel: vague terms like “reasonable” in high-value contracts can cede significant financial control to a judge’s interpretation.
Source: Joint Court of Justice of Aruba, Curaçao, Sint Maarten and of Bonaire, Sint Eustatius and Saba
