This article was featured in our 2023 Construction Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the construction industry and presents a goldmine of information based on data available on Jus Mundi and Jus Connect as of May 2023. Discover updated insights into construction arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on construction projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHORS:
E. Daniel McKiernan, Legal Expert, Vinge
Alexandra Tamm, Associate, Vinge
Sweden is a country which is well known for its commitment to environmental sustainability. Over the past few decades, Sweden has implemented a wide range of policies and initiatives for the purpose of reducing its environmental impact and promoting sustainable development. One of the key features of Sweden’s approach to sustainability is its focus on green energy, with a goal of achieving 100% renewable energy by 2040.
Another notable feature is the country’s association with environmental activists such as Greta Thunberg, who has contributed to raise awareness about climate change on a global scale. Sweden is also the home to innovative initiatives such as green steel production, which aims to reduce carbon emissions in the steel industry, and advanced consumer waste management systems that promote recycling and reduce waste. These various features make Sweden a leader in sustainable development and a role model for other countries to follow.
In summary, environmental sustainability is an important topic in Sweden, both politically and socially. Since the construction sector is responsible for approximately 20 % of Sweden’s greenhouse gas emissions, it is also a trending topic in the construction industry. As a result of this, the use of sustainability standards in Sweden has increased rapidly in the last decade.
In this article we aim to address the topic of disputes related to environmental sustainability standards for use in the construction industry.
Sustainability Standards in Sweden
Sweden is known for its commitment to sustainable building and construction practices, and there are several sustainability standards and certifications used in the country. Some of the more commonly used standards for construction in Sweden are Miljöbyggnad, BREEAM, LEED, Svanen, and Passive House.
- Miljöbyggnad is a Swedish certification system for sustainable buildings, which evaluates buildings based on several environmental criteria, including energy use, indoor environment, and materials. It is is widely used in Sweden and is recognized by the Swedish Green Building Council (a Swedish non-profit organization and member of founded by Swedish developers, contractors and consultants, which is a member of the World Green Building Council).
- BREEAM is a widely recognized sustainability standard system for buildings that evaluates environmental performance based on several criteria, including energy efficiency, water use, materials, and waste management. It is used in Sweden for many commercial and public buildings.
- LEED is a global certification program that promotes sustainable building design, construction, and operation. Many buildings in Sweden have achieved this certification, including offices, hotels, and hospitals.
- The Nordic Swan Ecolabel is a Nordic standard that sets strict requirements for products and services in terms of environmental impact, health, and quality. It is used for building materials and products in Sweden, including paints, flooring, and insulation.
- Passive House, is a standard for energy-efficient building design that aims to minimize energy consumption and reduce carbon emissions. It is becoming increasingly popular in Sweden, particularly for residential buildings.
In addition to the above, there are many more initiatives and programs that promote sustainable building practices, including those focused on energy efficiency, waste reduction, and sustainable materials.
Also, the Swedish parliament adopted a new Climate Declaration for Buildings Act (2021) in 2022, according to which all construction developers are responsible for filing a climate declaration for their new buildings.
The climate declaration describes the building’s climate impact and is calculated based on the greenhouse gas emissions from the construction stage, including extraction of raw materials, manufacture of construction products, work at the construction site and transports.
The intention is, according to the Swedish authorities, that the climate declaration gives the developer more in-depth knowledge of various resource flows in the building, their climate impacts, and a documented climate performance. An estimated climate calculation in early construction stages provides a quantitative basis for making well-grounded decisions on how the building’s climate impact can be reduced. Increased knowledge provides greater opportunities to reduce the amounts of materials and waste. The costs can thereby also decrease in both the short and long term.
Although the developer is liable for filing the declaration, the contractor may often be involved in the production of necessary calculations and documents.
Defects in Sustainability Standards
If the client under a construction contract in Sweden, such as FIDIC or the Swedish AB system, has included a reference to a sustainability standard as a functional requirement in the Particular Conditions – a failure to attain such a sustainability standard for the building may be considered as a defect, or, depending on the particular construction contract, as a breach of a warranty, condition, or indemnification for which the contractor may be held liable.
Similarly, if the client otherwise has defined what is required in the sense of environmental sustainability, such as the use of a certain percentage of green steel, green concrete, recycled materials, or reductions of greenhouse gas emissions – a deviation from such a set standard may also be considered as a breach of contract for which the contractor may be held liable.
In addition, it may also constitute breach of contract if the contractor has acted negligently in relation to its involvement, if any, with the climate declaration.
It should be noted that the Swedish Supreme Court is quite active in relation to construction law and the most prevalent common forms of construction contract.
In a Swedish Supreme Court judgment dated 17 July 2018 (case n° NJA 2018 p. 653), which concerned inter alia the extent of the contractor’s obligation to remedy defects, the Court held that the contractor’s obligation to remedy defects can be considered to include not only the remedy of the defect itself, but also work, that was foreseeable at the time of the agreement, for accessing the defect and restoring the area afterwards. This applies even if the works required for access and restoration concerns something other than the contractor’s own performance. However, the obligation only covers work that has a direct and necessary connection with the remedy of the defect. When the client has the right to remedy the defect themselves at the expense of the contractor, compensation for cost requires that the client has acted reasonably and limited the cost of remedy.
In summary, this means that if the contractor is found to be liable for the defect, that liability covers remedying the defect including works accessing the defect or compensating the client for remedying the defect. If the client is entitled to remedy the defect on behalf of the contractor, the client will be able to claim compensation for costs.
However, there are many practical questions that will arise when arbitrating a complex issue such as environmental sustainability defects.
Practical Approach to Arbitrating Sustainability
In our opinion, there are three principal legal and technical questions to go through before referring any sustainability dispute to arbitration.
First, is it a defect under the applicable construction contract?
- Has a sustainability standard been agreed upon? Who is liable for the design/functionality of the building or plant?
- Has the client requested any design or technical solutions, or otherwise provided any incorrect information, which could affect the energy performance or any other component of the sustainability standard?
- Has the defect been caused by faulty maintenance or otherwise by the client?
Second, what remedies are available under the construction contract?
- Is it possible to remedy the defect?
- Is it possible to identify which parts of the works that have contributed to the failure to attain the sustainability standard, and which parts that it would be necessary to remedy?
- If not, is it possible to claim damages? If yes, is it still possible to claim damages?
Third, is the client liable for any part of the damages?
- Has the client mitigated the damages?
- Has the client fulfilled all contractual requirements for submitting a claim?
- Has the client requested any remedy outside the original scope?
- Has the client provided any incorrect information which could affect the costs?
Depending on the answers to the questions above, the contractor may or may not be liable for a defect in relation to not attaining the sustainability standard. As always, careful analysis of the particular circumstances of the case is required.
Conclusion
In conclusion, while Sweden is a leader in sustainable development and a role model for other countries to follow, it is important to continue to monitor and address sustainability standards in the construction industry.
As environmental sustainability has become a trending topic in the construction industry, the use of sustainability standards has increased within construction projects. However, the increase of sustainability standards may also increase the number of disputes related to defects in such standards where the contractor may be held liable. Contractors should be aware of their obligations and liabilities under construction contracts that reference sustainability standards and strive to meet these standards to promote a better future for all.
ABOUT THE AUTHORS
E. Daniel McKiernan is a legal Expert, at Vinge. Daniel specializes in Swedish and international arbitration with a focus on construction. Daniel has represented Swedish and international parties before courts and arbitral tribunals under various rules, such as ICC and SCC. The disputes have concerned construction, infrastructure, advanced technology plants, wind power as well as other energy projects, and challenges of awards before the Appellate Court in Stockholm.
Alexandra Tamm is an Associate at Vinge. Alexandra focuses on the area of Dispute Resolution and Arbitration, but has also worked with Real Estate, Construction and Environmental Law. Alexandra has represented Swedish and international parties before courts and arbitral tribunals, as well as advised clients in transactions.
Find more data-backed insights in our 2023 Construction Arbitration Report
