Getting the Deal Through 2015 - Construction Danish Chapter

1. in 31 jurisdictions worldwide
Contributing editor: Robert S Peckar
2015
Published by
Getting the Deal Through
in association with:
Construction
AB & David
Advokatfirmaet Schjødt as
Akinci Law Office
Arzinger
Atsumi & Sakai
Bahar & Partners
Borden Ladner Gervais LLP
Buse Heberer Fromm Rechtsanwälte
Steuerberater PartG mbB
Fasken Martineau
Fenwick Elliott LLP
Foyen Advokatfirma AB
George Etomi & Partners
Gómez-Pinzón Zuleta Abogados
Lahiri LLC
Lalive
Lalive in Qatar LLC
Larraín Rencoret & Urzúa Abogados
Legance – Avvocati Associati
Lett Law Firm P/S
Mäkitalo Rantanen & Co Ltd
Motieka & Audzevicˇius
OMG
Ost Legal
Peckar & Abramson, PC
Pinheiro Neto Advogados
Pinsent Masons LLP
Seth Dua & Associates
Severijn Hulshof advocaten
Shalakany Law Office
Smith d’Oria

2. www.gettingthedealthrough.com 1
CONTENTS
Construction 2015
Contributing editor:
Robert S Peckar
Peckar Abramson, PC
Getting the Deal Through is delighted to
publish the fully revised and updated eighth
edition of Construction, a volume in our
series of annual reports, which provide
international analysis in key areas of law
and policy for corporate counsel, cross-
border legal practitioners and business
people.
Following the format adopted throughout
the series, the same key questions are
answered by leading practitioners in each
of the 31 jurisdictions featured. New
jurisdictions this year include Indonesia,
Italy, Norway and South Africa.
Every effort has been made to ensure
that matters of concern to readers are
covered. However, specific legal advice
should always be sought from experienced
local advisers. Getting the Deal Through
publications are updated annually in print.
Please ensure you are referring to the latest
print edition or to the online version at www.
gettingthedealthrough.com.
Getting the Deal Through gratefully
acknowledges the efforts of all the
contributors to this volume, who were
chosen for their recognised expertise.
Getting the Deal Through would also like to
extend special thanks to contributing editor
Robert S Peckar of Peckar Abramson,
PC for his continued assistance with this
volume.
Getting the Deal Through
London
July 2014
Introduction3
Robert S Peckar and Michael S Zicherman
Peckar Abramson, PC
Brazil4
Júlio César Bueno
Pinheiro Neto Advogados
Canada14
Bruce Reynolds, Sharon Vogel and Yvan
Houle
Borden Ladner Gervais LLP
Chile22
José Manuel Larraín
Larraín Rencoret Urzúa Abogados
Colombia29
Santiago Jaramillo-Caro
Gómez-Pinzón Zuleta Abogados
Denmark35
Henrik Puggaard, Lene Lange and Kristian
Skovgård Larsen
Lett Law Firm P/S
Dominican Republic 42
Laura Troncoso Ariza and Mairení Silvestre
Ramírez
OMG
Egypt48
Ahmed Amin and Farah El Nahas
Shalakany Law Office
Finland54
Aimo Halonen
Mäkitalo Rantanen Co Ltd
France59
Isabelle Smith Monnerville, Jean-Olivier
d’Oria and Julien Maire du Poset
Smith d’Oria
Germany68
Jörg Gardemann
Buse Heberer Fromm Rechtsanwälte
Steuerberater PartG mbB
Ghana74
David Ofosu-Dorte, Isabel Boaten and
Ferdinand Adadzi
AB David
India79
Sunil Seth and Vasanth Rajasekaran
Seth Dua Associates
Indonesia86
Mutiara Rengganis and Donny Fadilah
Bahar Partners
Italy92
Giuseppe Abbruzzese and Gabriele
Capecchi
Legance – Avvocati Associati
Japan99
Miho Niunoya
Atsumi Sakai
Lithuania104
Jovitas Elzbergas
Motieka Audzevicˇius
Netherlands110
Leendert C van den Berg, Erik Gierman and
Joost Haest
Severijn Hulshof advocaten
Publisher
Gideon Roberton
gideon.roberton@lbresearch.com
Subscriptions
Sophie Pallier
subscriptions@gettingthedealthrough.com
Business development managers
George Ingledew
george.ingledew@lbresearch.com
Alan Lee
alan.lee@lbresearch.com
Dan White
dan.white@lbresearch.com
Published by
Law Business Research Ltd
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Fax: +44 20 7229 6910
© Law Business Research Ltd 2014
No photocopying: copyright licences do not apply.
First published 2008
8th edition
ISSN 1755-6953
The information provided in this publication is
general and may not apply in a specific situation.
Legal advice should always be sought before
taking any legal action based on the information
provided. This information is not intended to
create, nor does receipt of it constitute, a lawyer–
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provided is accurate as of July 2014, be advised
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3. CONTENTS
2 Getting the Deal Through – Construction 2015
Nigeria115
George Etomi, Efeomo Olotu and Adunola
Akindele
George Etomi Partners
Norway120
Geir Frøholm
Advokatfirmaet Schjødt as
Qatar124
Marcus Boeglin, Matthias Scherer, Ramy
Saleh, Marie-Anne Roberty-Jabbour and
Sam Moss
Lalive in Qatar LLC
Russia131
Vladimir Lipavsky
Ost Legal
Singapore137
Shourav Lahiri
Lahiri LLC
South Africa 144
Tania Siciliano
Fasken Martineau
Sweden150
Jacob Hamilton, Richard Sahlberg and Per
Vestman
Foyen Advokatfirma AB
Switzerland156
Michael E Schneider, Matthias Scherer,
Bernd Ehle and Sam Moss
Lalive
Taiwan162
Helena H C Chen
Pinsent Masons LLP
Turkey168
Ziya Akinci and Cemile Demir Gökyayla
Akinci Law Office
Ukraine175
Timur Bondaryev, Svitlana Teush and
Volodymyr Grabchak
Arzinger
United Arab Emirates 183
Sachin Kerur, William Marshall, Charmaine
Khan and Charlotte Holmes
Pinsent Masons LLP
United Kingdom 189
Stacy Sinclair
Fenwick Elliott LLP
United States 199
Robert S Peckar and Michael S Zicherman
Peckar Abramson, PC

4. Lett Law Firm P/S DENMARK
www.gettingthedealthrough.com 35
Denmark
Henrik Puggaard, Lene Lange and Kristian Skovgård Larsen
Lett Law Firm P/S
1 Foreign pursuit of the local market
If a foreign designer or contractor wanted to set up an operation
to pursue the local market, what are the key concerns they should
consider before taking such a step?
The bureaucratic and legal hurdles faced by foreign contractors or
designers wishing to set up an operation to pursue the local market
are few. Denmark is considered to be among the world’s best loca-
tions for doing business.
The primary concerns facing foreign contractors are more of a
practical nature. These include obtaining sufficient bonding capac-
ity with a qualified surety, finding qualified domestic executives and
labour, locating qualified legal counsel and becoming familiar with
important legal, considerations that affect contractors and establish-
ing relationships with local trade subcontractors.
Depending on the individual situation, a main concern would be
Danish labour law. For instance, foreign contractors must register
employees with workmen’s insurance. Employees must be insured
against industrial accidents and occupational illnesses.
A foreign contractor may conduct business through a joint ven-
ture or company or the contractor may set up a branch in Denmark.
If the contractor wishes to incorporate and register a new firm in
Denmark, it should obtain the Danish bank internet log-in (NemID)
signature, deposit start-up capital at a bank and register the com-
pany with the Danish Business Authority (DBA) Webreg system.
Since the beginning of 2014 the Danish Companies Act has pro-
vided the possibility for establishing a private limited company with
a share capital of only 1 Danish kroner. The liability of the contrac-
tor is limited to the amount of shares subscribed or alternatively the
price of the shares acquired.
2 Licensing procedures
Must foreign designers and contractors be licensed locally to
work and, if so, what are the consequences of working without a
licence?
Neither Danish nor foreign companies (legal persons) are required
to have a licence to perform construction work in Denmark, how-
ever, it should be noted that some types of work, including crane
driving and asbestos removal, may only be conducted by persons
having an authorisation. Foreign companies performing services
in Denmark are obliged to be registered with the DBA. Under cer-
tain circumstances physical foreign persons are required to have in
place a work permit to perform work as contractors in Denmark.
The specific requirements in connection with living and working in
Denmark depend, first and foremost, on the nationality and qualifi-
cations of the person in question. It is the person’s own responsibility
to obtain a work permit if it is required.
3 Competition
Do local laws provide any advantage to domestic contractors in
competition with foreign contractors?
With the implementation of the Danish Competition Act in 1997,
Danish competition law was aligned with the EU competition rules.
There are no Danish laws that provide any advantage to domestic
contractors, indeed, such conditions would also violate the Treaty
on the Functioning of the European Union (TFEU). Often Danish
projects are tendered using only tender documents in the Danish
language, which will often in practice be perceived as disadvanta-
geous by foreign contractors.
4 Bribery
If a contractor has illegally obtained the award of a contract,
for example by bribery, will the contract be enforceable? Are
bribe-givers and bribe-takers prosecuted and, if so, what are the
penalties they face? Are facilitation payments allowable under
local law?
Together with most of the other Scandinavian countries, Denmark is
one of the least corrupt countries in the world.
Any person who unduly grants, promises or offers some other
person exercising a Danish, foreign or international public office or
function a gift or other privilege in order to induce him or her to do
or fail to do anything in relation to his or her official duties, shall be
liable to a fine or imprisonment for any term not exceeding three
years. Criminal offences also include facilitation payments.
Any person who in his or her capacity as trustee of any prop-
erty of another person accepts, claims or accepts the promise of a
third party, for the benefit of him or herself or of others, a pecuniary
advantage, the receipt of which is concealed from the person whose
interests he or she is protecting, as well as any person who grants,
promises or offers such advantage, shall be liable to a fine or impris-
onment for any term not exceeding one year and six months.
Criminal responsibility can be imposed on legal persons (com-
panies, etc) for bribery conducted by its employees.
If a contractor has illegally obtained the award of a contract, for
example, by bribery, the contract will typically not be enforceable.
5 Political contributions
Is the making of political contributions part of doing business?
If so, are there laws that restrict the ability of contractors or
design professionals to work for public agencies because of their
financial support for political candidates or parties?
Danish law does not restrict the ability of contractors or design pro-
fessionals to work for public agencies because of their financial sup-
port for political candidates or parties, but Danish public authorities
are under a strict obligation to choose their suppliers in compliance
with the principle of objectivity. If a political party has received one
or more grants that exceed 20,000 Danish kroner from the same
© Law Business Research Ltd 2014

5. DENMARK Lett Law Firm P/S
36 Getting the Deal Through – Construction 2015
private benefactor in a calendar year, the benefactor’s name and
address must appear in the political party’s accounts.
The records must also contain information about the total size
of any anonymous contributions and the amount of each anony-
mous contribution of more than 20,000 Danish kroner.
6 Other international legal considerations
Are there any other important legal issues that may present
obstacles to a foreign contractor attempting to do business in
your jurisdiction?
Denmark is generally considered to be among the world’s best loca-
tions for doing business. Setting up a business in Denmark is charac-
terised by the following key factors:
• quick, informal and cost-efficient establishment procedures;
• online registration of new companies means one is ready to do
business within a few hours;
• no resident requirements for management, including members
of the executive board (CEO), board of directors or super-
visory board shareholders and board meetings can be held
electronically;
• no notarial deeds;
• flexible language requirements: registration of corporate docu-
ments of limited liability companies,A/S (Ltd) and ApS (LLC) in
the Swedish or Norwegian language is possible as an alternative
to Danish and some documents may be registered in English;
• dividends can be distributed on an interim basis;
• Danish company law is in conformity with current EU
legislation;
• it is tax efficient to establish your business in Denmark com-
pared to other Nordic countries; and
• Denmark has some of the most flexible hiring and firing rules
in the world, reducing costs of scaling business operations up or
down.
7 Construction contracts
What standard-contract forms are used for construction and
design? Must the language of the contract be the local language?
Are there restrictions on choice of law and the venue for dispute
resolution?
Almost all Danish construction and design contracts are entered into
with the General Conditions for the Provision of Work and Supplies
within Building and Engineering (AB 92) contract form, or ABT 93,
which is a similar form used for turnkey projects, as the contrac-
tual basis. AB 92 is an ‘agreed document’ dating back to 1915 and
has been revised a number of times, the latest revision dating back
to 1992. These provisions are generally considered suitable for the
purpose of entering into construction contracts, regardless of the
concerned party’s position as either a contractor or an employer. It is
noteworthy that almost all Danish construction contracts are based
on AB 92 with or without amendments, whether the assignment
concerns major construction works or small, private construction
works. Based on the ‘AB regime’, a technical committee under the
Ministry of Housing prepared the General Provisions for Consulting
Services in 1975 (amended in October 1989 (ABR 89)), which is
commonly used to regulate relations between employers, architects
and engineers.
There are no restrictions on the choice of language of the
contract, although AB 92 presupposes that Danish is the contract
language.
In respect of the applicable law and the venue for dispute resolu-
tion, parties to a contract are free to agree upon the choice of law
that governs their contract and the venue for their dispute. As an
exception, consumers, however, are not bound by arbitration agree-
ments entered into before the dispute has materialised according to
the Danish Act on Arbitration, section 7 and can, as a consequence,
elect the ordinary courts. FIDIC contracts are very rarely seen in
Denmark (except in the wind turbine industry).
8 Payment methods
How are contractors, subcontractors, vendors and workers
typically paid and is there a standard frequency for payments?
Contractors, subcontractors, vendors and workers typically pay
using electronic payments.Today, an ever increasing number of pay-
ments are made using electronic payment instruments, for example,
payment cards and wire transfers. This development is supported
by the expansion of trading via the internet and by mobile phone.
If AB 92 has been agreed upon, section 22, subsection 1 states
that the contractor shall be entitled to receive payment once a month
for work performed upon written request to the employer. Instead
of payment under subsection 1, the parties may agree on payment
being affected in accordance with a payment schedule that follows
the time schedule and stipulates at which times the contract sum or
parts thereof are to be paid.
9 Contractual matrix of international projects
What is the typical contractual matrix for a major project in your
jurisdiction in terms of the contractual relationships among the
various construction project participants?
Construction contracts can be designed in different ways. The most
common contractual structure in Denmark is where the employer
contracts directly with either trade contractors and architects and
engineers or a turn-key contractor. However, the design of the con-
struction contract often varies depending upon the needs or desires
of the owner, the project and the relevant laws. The agreed docu-
ments mentioned in question 7 above are often used to ensure‘back-
to-back’ contract relations between a main contractor or turn-key
contractor and their respective subcontractors and sub-consultants.
It should be mentioned that, on typical Danish projects, the archi-
tect does not have a similar leading role as in the United Kingdom.
However, the architect or engineer acts as the representative of the
employer on site and is authorised to order necessary variations and
modifications to the project. According to Directive 2014/24/EU,
observance by subcontractors of applicable obligations in the
fields of environmental, social and labour law must be ensured
through appropriate actions by the competent national authori-
ties. A committee under the Danish Competition and Consumer
Agency is currently preparing a proposal for a new Danish Act
on Public Procurement in accordance with said Directive. For
the time being, it is still uncertain whether and to what extent
the proposal will include provisions regarding joint liability
between subcontractors and the main contractor and extension
of the transparency obligations, by enabling direct payment to
subcontractors and by enabling or requiring contracting authori-
ties to verify that subcontractors are not in any of the situations
in which exclusion of economic operators would be warranted,
which will be entirely in compliance with Directive 2014/24/EU.
The proposal is expected to be published towards the beginning
of 2015.
10 PPP and PFI
Is there a formal statutory and regulatory framework for PPP and
PFI contracts?
No specific statutory rules apply only on PPP and PFI contracts.
The most important rules influencing said contracts are the EU
Procurement Rules, which apply to public procurement, and which
are strictly adhered to in Denmark. In March 2013, the Danish gov-
ernment launched a set of standard documents for use in the pro-
curement of building projects such as PPPs. The documents include
a script for the procurement process as a ‘competitive dialogue’ and
© Law Business Research Ltd 2014

6. Lett Law Firm P/S DENMARK
www.gettingthedealthrough.com 37
the required contract forms. It should be noted that when prepar-
ing the standard documents, the experience gained with private
PPP players has been used to make the terms balanced. In general,
account has been taken of the private party and the financier’s
legitimate interests and a fair-risk distribution. In other words, the
documents must be considered ‘bankable’ in a Danish context. The
standard contract is dynamic in the sense that it is a framework
agreement specifying what to do in general and how to adjust in
the event of changed conditions during the term of contract. The
standard contract is also based on Danish contract tradition (not
common law) and thus it is, in an international context, very short,
which may give rise to thought among foreign investors. However,
there is no cause for concern and in our opinion, investors can safely
use the Danish model.
11 Joint ventures
Are all members of consortia jointly liable for the entire project or
may they allocate liability and responsibility among them?
The liability of the members of a consortium depends on the consor-
tium agreement and the agreement between the consortium and the
contracting party of the consortium.
WhencontractorschoosetooperateasaconsortiuminDenmark,
the consortium is treated as one of the legal types of business entities
in Denmark. These include, for example, a sole proprietor, a part-
nership, a limited partnership or a public limited partnership. Each
type of business entity dictates the liability and responsibility of the
members. Choosing the partnership entails that each member of the
consortium is jointly and severally liable to the owner (or any other
party with claims against the partnership) for the full amount of the
damages claimed. If a consortium member pays more than its allo-
cated share of a claim against the consortium, that member can then
seek indemnification from the other consortium members for either
the full amount in excess or according to the percentage of shares
held by the other members according to the consortium agreement.
12 Tort claims and indemnity
Do local laws permit a contracting party to be indemnified against
all acts, errors and omissions arising from the work of the other
party, even when the first party is negligent?
According to Danish law, and if nothing to the contrary has been
agreed upon, a contracting party is typically only under an obliga-
tion to indemnify the other party against acts, errors and omissions
of his or her work, if and to the extent he or she has either provided
warranty to the other party in respect of the act, error or omission in
question or if he or she has disregarded his or her loyalty obligations
or is liable according to the laws on product liability. However, it
should of course be noted that irrespective of the fact that there may
be no basis for indemnification, a contractor handing over deficient
work is obliged to remedy the defects by either repair or replace-
ment or to pay a proportionate reduction in the purchase price as
compensation.
Generally, an indemnification provision in a construction con-
tract is valid and fully enforceable. Such clauses, when properly
drafted, may require a contracting party to indemnify the other
party not only against the contracting party’s negligent acts, errors
and omissions, but against the other party’s own negligence as well.
Typically, such clauses are based on the knock-for-knock principle,
namely, a mutual provision in construction contracts, where both
parties accept that each party is only responsible for its own losses
regardless of cause, and that each party indemnifies the other for
liabilities arising out of its own losses.
13 Liability to third parties
Where a contractor constructs a building that will be sold or
leased to a third party, does the contractor bear any potential
responsibility to the third party? May the third party pursue a
claim against the contractor despite the lack of contractual
privity?
Typically, in a commercial context, absent privity of contract, a
third-party purchaser or lessee does not have any direct recourse
against a contractor for claims of defective work, delays in the work
and the like. However, there are some circumstances where the con-
tractor still may be liable to the third party.The most obvious exam-
ple is product liability resulting from improperly performed work
that results in personal injuries, death or property damage (exclud-
ing warranty-related claims). In addition hereto, Danish case law
contains few examples of direct third-party liability, such examples
comprising cases where the contractor has been guilty of gross neg-
ligence or where the contractor is acting under professional liability.
14 Insurance
To what extent do available insurance products afford a contractor
coverage for: damage to the property of third parties; injury to
workers or third parties; delay damages; and damages due to
environmental hazards. Does the local law limit contractors’
liability for damages?
There are many different insurance products available to contrac-
tors and subcontractors in Denmark. However, it should be noted
that, except for professional liability insurance, contractual risks are
typically not insured in Denmark, that is, risks related to delivery of
defective work and delays. The insurance will cover most types of
third-party liability exposure for personal injuries, property damage,
environmental damage and in some cases economic losses.The most
common insurance procured by contractors and design profession-
als include:
• all-risk insurance of construction works;
• all-risk insurance of builder’s existing buildings and building
installations;
• general liability insurance;
• pollution liability insurance;
• property insurance; and
• worker’s compensation insurance.
There is no statutory limit on the contractor’s liability to a third
party, but there may be limits on the amount of coverage that an
insurer is willing to provide in respect of a particular risk, such that
the contractor is exposed to personal liability for damages sustained
by a party in excess of the policy limits. The parties are also free to
agree certain limits on the liability.
15 Labour requirements
Are there any laws requiring a minimum amount of local labour to
be employed on a particular construction project?
Danish law does not require a minimum amount of local labour
to be employed on a particular construction project, and, therefore,
contractors are generally free to determine the staffing on all com-
ponents of their projects. For public works projects, however, the
contracting entity will typically require contractors to comply with
social clauses, implying that the contractor should ensure that a cer-
tain amount of the employees used to fulfil the contract should be
from specific groups, for example, apprentices, workers who have
been unemployed for more than a certain number of months during
a certain period and who have difficulties in obtaining employment
with normal pay and working conditions, and those that have lim-
ited capacity for work or the like. According to the TFEU, however,
Danish employers are not allowed to discriminate against foreign
labour from the EU member states on behalf of Danish labour.
© Law Business Research Ltd 2014

7. DENMARK Lett Law Firm P/S
38 Getting the Deal Through – Construction 2015
It should be noted that though contractors are free to determine
the staffing, foreign employees may only obtain and uphold a work
permit if they can prove that their employment is regulated by a
collective agreement, or if this is not the case, that the wages and
conditions of employment are usual in Denmark within the business
area in question.
16 Local labour law
If a contractor directly hires local labour (at any level) for a project,
are there any legal obligations towards the employees that cannot
be terminated upon completion of the employment?
Typically, foreign employees may only obtain and retain a work per-
mit if they can prove that their employment is either regulated by a
collective agreement or that the wages and conditions of employ-
ment are usual in Denmark within the business area in question.
According to Danish employment law, employees who are enti-
tled to a termination notice of more than 30 days accrue a right of
holiday with pay during their employment. If such employment ends
without the accrued holiday being taken in full, the employee is enti-
tled to a holiday allowance. Employees who are entitled to less than
30 days’ termination notice period are entitled to holiday allowance
but not to holiday with pay.
Danish law does not require the employer to have a pension
scheme for their employees, but most employers have one in place.
Danish employer pension schemes are based upon monthly contri-
butions from the employer to a pension company and, therefore,
typically, there is no pension obligation towards the employees upon
completion of the employment.
As a general rule, employees are entitled to severance pay, if the
employer cannot prove that the employee was dismissed for fair
reasons. Moreover, salaried employees and some employee groups
covered by collective agreements are entitled to a seniority-based
severance payment if they are dismissed after having been with the
company for more than a certain amount of years (the Salaried
Employees’ Act allows for such a severance payment when the
employee has been with the company for more than 12 years).
17 Close of operations
If a foreign contractor that has been legally operating decides to
close its operations, what are the legal obstacles to closing up
and leaving?
There are no particular legal obstacles to closing down operations.
However, when a contractor decides to close its operations, there
may be some laws and other considerations that are implicated in
that decision.
The primary statutes affecting such decisions are the ones con-
cerning labour issues. If employees are employed by individual con-
tracts each contract must be taken into consideration before the
company ceases its operations.
If the company is a party to a collective agreement, the company
may have to bargain with the union before closing its operations.
Furthermore, the Mass Dismissal Act contains certain require-
ments that must be fulfilled by the employer in the event of mass
dismissal, defined as dismissal of at least 10 employees in estab-
lishments normally employing more than 20 and fewer than 100
workers; 10 per cent of the employees in establishments normally
employing at least 100 but less than 300 employees; or at least 30
workers in establishments normally employing at least 300 employ-
ees. The requirements following on from the Mass Dismissal Act
include obligations regarding information and negotiation with
the employees (typically employee representatives) with the aim of
reaching an agreement to avoid or reduce the redundancies and miti-
gating the consequences thereof by activities specifically aimed at
redeploying or retraining dismissed employees.
18 Payment rights
How may a contractor secure the right to payment of its costs
and fees from an owner? May the contractor place liens on the
property?
There are several options available to contractors to ensure payment
from owners (the client). The simplest way for the contractor to sat-
isfy itself is to make sure that the owner has made adequate financial
arrangements to fulfil its contractual obligations.
AB 92, section 7 provides that the owner under a private con-
tract must provide a performance bond for the due performance
of his or her pecuniary obligations towards the contractor within
eight days of demand, if the contractor so requires. The bond shall
be provided in the form of an adequate guarantee from a bank or
a savings bank or other adequate types of security. If no agreement
has been made on the payment rights and the AB 92 is not part of
the contract, there will be no obligations on the owner to secure the
payment of contract.
Contractors may only be able to file liens on the improved real
estate, but not on the material to be permanently installed or built in
(Land Registration Act, section 38 and Land Registration Act, sec-
tion 1). In order to file a lien on the property the contractor will have
to obtain a court judgment confirming his or her claim against the
employer. According to the principles of AB 92, section 23 contrac-
tors may also have the right to suspend work in the event payment
is not made within the prescribed time.
19 Contracting with government entities
Can a government agency assert sovereign immunity as a
defence to a contractor’s claim for payment?
Danish government entities cannot assert sovereign immunity as a
defence to a contractor’s claim for payment. Government entities act
as private owners when entering into construction contracts.
20 Statutory payment protection
Where major projects have been interrupted or cancelled, do the
local laws provide any protection for unpaid contractors who have
performed work?
If a project is cancelled or interrupted, a contractor having per-
formed work is entitled to payment of the work performed until
termination, as well as his or her lost profits inter alia related to
unjustifiable termination.
If AB 92 is a part of the construction contract, each party may,
in most cases, terminate the contract immediately in the event of
bankruptcy of the other party (AB 92, section 42).
Apart from any contractual remedies that may be available to
a contractor for the suspension or cancellation of a project, Danish
law has a number of remedies available to unpaid contractors.
Contractors may possess the powers of detention and the termi-
nation of the contract when owners are adjudicated bankrupt.
21 Force majeure and acts of God
Under local law are contractors excused from performing
contractual obligations owing to events beyond their control?
The keystone in Danish law applicable to construction contracts is
that a contractor is bound to perform its contract, even if doing so
will be more burdensome or less profitable than anticipated. If the
contract provides a required date of performance, that date gener-
ally must be met regardless of whether events occurring during the
performance of the contractor’s obligations are beyond his or her
control. If parties want to protect themselves against hardships due
to circumstances beyond their control, they must incorporate spe-
cific protective provisions into their contract.
If AB 92 is a part of the construction contract,AB 92, section 24,
grants the contractor the right to extension of time limits in the event
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8. Lett Law Firm P/S DENMARK
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of delay of work caused by circumstances for which the contractor
cannot be blamed and which are out of his or her control, for exam-
ple, war, unusual natural events, fire, strikes, lockouts or vandalism.
If no provisions have been made, Danish law provides that
contractors are excused from performing contractual obligations
because of unforeseen occurrences that were unavoidable and
extraordinary and would result in insurmountable delay, expense or
other material breach of the contract.
22 Courts and tribunals
Are there any specialised tribunals that are dedicated to resolving
construction disputes?
If AB 92 is part of the construction contract, AB 92, sections 45
to 47 provide that in the case of disputes between the parties or
in order to establish proof of a matter, a request thereon shall be
submitted to the Building and Construction Arbitration Board in
Copenhagen. This court of arbitration has developed a particular
specialisation in such disputes. The normal arbitral tribunal consists
of a legal judge who will normally be a judge from either one of the
three High Courts or the Supreme Court of Denmark and two tech-
nical judges who will normally be either architects or engineers with
special knowledge and exceptional experience and track records
regarding the subject matter at hand.
If no agreement has been made, the ordinary courts will deal
with the disputed matter regarding dispute resolution.
23 Dispute review boards
Are dispute review boards (DRBs) used? Are their decisions
treated as mandatory, advisory, final or interim?
The parties are free to agree on dispute review boards and to agree
whether their decisions are mandatory, advisory, final or interim.
Dispute review boards, meaning panels of experienced, respected
and impartial reviewers that take in all the facts of a dispute and
make recommendations on the basis of those facts and the boards’
own expertise, are commonly used on large-scale construction pro-
jects and in PPP/PFI projects.
24 Mediation
Has the practice of voluntary participation in professionally
organised mediation gained acceptance and, if so, how prevalent
is the practice and where are the mediators coming from? If not,
why not?
In recent years, mediation has gained increasing acceptance in
Denmark. The Administration of Justice Act, chapter 27 provides
specific rules concerning mediation. However, the majority of con-
struction conflicts will still be a matter for the ordinary courts and
arbitration. Mediation is at the very least suggested by the court in
many disputes.
25 Confidentiality in mediation
Are statements made in mediation confidential?
If no agreement has been made on confidentiality of the process,
the Administration of Justice Act, section 277, subsection 1 provides
that statements made in mediation are confidential. Mediation is a
confidential process, since it encourages parties to be candid with
each other and disclose information that the other party might not
otherwise have found out.
The Administration of Justice Act, section 277, subsection 4
entails an exception to subsection 1. A party may testify in court
about a disclosure made in the mediation.
26 Arbitration of private disputes
What is the prevailing attitude towards arbitration of construction
disputes? Is it preferred over litigation in the local courts?
Arbitration is the most common way of settling disputes in construc-
tion law. Almost all Danish construction and design contracts are
being entered into with the AB 92 contract form as a contractual
basis and AB 92, section 47 provides that in case of disputes between
the parties, a request thereon shall be submitted to the Construction
Arbitration Board in Copenhagen. There is a prevailing attitude
towards arbitration of construction disputes instead of litigation at
local courts. The Danish Arbitration Act 2005 adjusts matters con-
cerning the arbitration courts.
27 Governing law and arbitration providers
If a foreign contractor wanted to pursue work and insisted by
contract upon international arbitration as the dispute resolution
mechanism, which of the customary international arbitration
providers is preferred and why?
There have been a number of ICC arbitration sittings in Denmark. It
is, however, a fact that in major construction projects in recent years,
such as Storebælt and the Copenhagen Metro project, the parties
did, in fact, agree upon an AB 92 arbitration clause instead of ICC
arbitration and, even though the foreign elements in these contracts
were considerable, the foreign parties accepted the AB 92 arbitration
mostly in the Danish language.
If the AB 92 is not part of the construction contract and thus
the Danish Arbitration Court for Building and Construction has
not been agreed as an arbitration court, the ICC will be the most
favoured provider for resolutions for international construction con-
tract disputes.
28 Dispute resolution with government entities
May government agencies participate in private arbitration and be
bound by the arbitrators’ award?
Government entities may participate in private arbitration and
be bound by the arbitrators’ award, including being subject to
enforcement.
29 Arbitral award
Is there any basis upon which an arbitral award issued by a
foreign or international tribunal may be rejected by your local
courts?
The New York Convention requires courts of the contracting states
to enforce both arbitration agreements and arbitration awards.
Denmark is a signatory to the NewYork Convention,which has been
incorporated into the notice of the Recognition and Enforcement of
Foreign Arbitral Awards, (the Danish Arbitration Act, section 10).
Denmark is obligated to honour and enforce foreign arbitration
awards to the same degree, and in the same way, as other signatory
states.
However, if the arbitration award does not meet the standards
set forth in article V of New York Convention, for example, lack of
capacity to arbitrate and lack of notice to a party, a Danish court
will not enforce the arbitration ward issued by a foreign tribunal
upon a party’s assertion.
30 Limitation periods
Are there any statutory limitation periods within which lawsuits
must be commenced for construction work or design services
and are there any statutory preconditions for commencing or
maintaining such proceedings?
No specific limitation period applies to construction disputes. The
applicable limitation period depends on various factors, such as the
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9. DENMARK Lett Law Firm P/S
40 Getting the Deal Through – Construction 2015
nature of the legal claim and the party being sued. On 1 January
2008 a new Danish Limitations Act entered into force. According
to this Act, the standard limitation period is three years from the
due date of the claim. The creditor’s unawareness of the debt or the
debtor may postpone the date at which time begins to run, however,
the limitation period cannot exceed a maximum of 10 years from
the date due, regardless of unawareness on the part of the creditor.
The Act is mandatory in the sense that it cannot be derogated from
to the disadvantage of the debtor, whether the debtor is a trader or a
consumer. If the creditor is a consumer, the Act also cannot be dero-
gated from to the disadvantage of the creditor. However, this rule
only applies to agreements made or in force after 1 January 2008.
The fact that the Act is mandatory may be relevant to the legal effect
of the limitation rules in standard terms and conditions such as AB
92, section 36 that provides a limitation period of five years from the
handing over of the work. If the creditor is a consumer, the AB 92,
section 36, will in some cases be considered unenforceable.
31 International environmental law
Is your jurisdiction party to the Stockholm Declaration of 1972?
What are the local laws that provide for preservation of the
environment and wildlife while advancing infrastructure and
building projects?
The Stockholm Declaration was adopted by the UN General
Assembly on 15 December 1972, and Denmark is a signatory to the
Declaration.
ImportantDanishenvironmentallawsincludetheEnvironmental
Protection Act, the Marine Environmental Protection Act and the
Planning Act.
The municipal councils are responsible for comprehensive
land-use regulation at municipal and local levels with legally bind-
ing guidelines for property owners. The regional councils prepare a
strategic plan for spatial development in each region. The Minister
for the Environment is responsible for upholding national interests
through national planning. The municipalities have a monopoly
with regard to planning and zoning. The decision-making process
can take time, and people affected by the decision often hold the
right to appeal.
32 Local environmental responsibility
What duties and liability do local laws impose on developers and
contractors for the creation of environmental hazards or violation
of local environmental laws and regulations?
Denmark has a long tradition of environmental protection.There are
several environmental laws affecting construction projects. Breach
of an environmental law can give rise to both criminal liability and
liability under civil and public law. Civil liability is liability in rela-
tion to third parties. Public-law liability is the liability entailed by the
power of Danish authorities to order, for example, an investigation
and remediation of contamination.
In Denmark the ‘polluter pays’ principle operates to impose
liability for contamination solely on the polluter and not, for exam-
ple, on a landowner, etc. That interpretation of the ‘polluter pays’
principle means that the operator of the activities that causes the
contamination will be the responsible party. The responsible parties
under the Nature Protection Regulation are the owner and the user
of the land.
However, a developer or contractor who is not operating the
activity that caused the contamination or owning or using the land
under the Nature Protection Regulation may be liable under civil
law to the third parties raising a claim, provided the environmental
hazard was caused by fault or negligence to be determined based on
the conduct generally considered to be responsible at the time of the
damage and provided a loss can be proven.
The responsibility to act in the event of environmental hazard
or the risk of environmental hazard can be taken voluntarily or
can be ordered by the municipality or any governmental authority.
Violation on environmental laws or local regulations can, depend-
ing on the severity of the violation of law and which law has been
violated, result in bans, fines or a criminal penalty.
33 International treaties
Is your jurisdiction a signatory to any investment agreements for
the protection of investments of a foreign entity in construction
and infrastructure projects? If so, how does your model
agreement define ‘investment’?
There is no specific statutory or regulatory scheme with regard to
the protection of foreign investments directly related to construction
projects.
Denmark is a signatory of the 1965 Convention on the
Settlement of Investment Disputes between States and Nationals of
Other States (the Washington Convention). Following this, a signifi-
cant number of investment agreements have been signed.
34 Tax treaties
Has your jurisdiction entered into double taxation treaties
pursuant to which a contractor is prevented from being taxed in
various jurisdictions?
If contractors are liable to pay full tax in Denmark, contractors
will, in principle, be taxed on all income, regardless of whether it
was earned in this country or elsewhere. The global income con-
cept entails that foreign income will not be given special treatment
The Danish Government published a report in October 2012 in which
the first 13 Danish PPP projects were thoroughly evaluated. The
conclusion of the report was that all projects were handed over on or
before the agreed timetable, that PPPs have significantly added value
as regards the innovation of the projects, that the public budgets
were not exceeded, and that the quality of the building works was
very high. Investors, represented by large Danish pension funds, have
shown an increased interest in Danish PPP projects in recent years.
In particular, it is often mentioned that large infrastructure projects
will be well suited for PPP projects with private financing. Up to now
we have had one large PPP infrastructure project, namely a motorway
in southern Denmark close to the German border. The motorway
project was characterised by the private financing being limited to
the two-year-long construction phase, as the Danish Road Directorate
paid the entire capital sum and is the owner of the assets during
the period of operation, but in such a manner that the owner’s risks
under the contract to a substantial degree are placed with the private
party, which is true to the PPP spirit. This adaptation of the PPP model
was, however, primarily caused by the fact that, at the time, it was not
possible – or was very expensive – to borrow money over such a long
period of time due to the international financial crisis. In recent years,
‘long’ financing has become possible again. The most recent trends in
the Danish PPP arena come from the health sector, where there is an
incipient interest in including provision of care services as part of the
overall solution, which is assigned to the private party for a number of
years. As an example, this could apply to the construction of housing
for the elderly, where care of the residents is an important part of
the aggregate services to be provided by the private party. This would
allow the private party to integrate good care into a constructional and
operational context. The Danish hospital service is also growing and
developing (eg, into larger units), and in some of these projects there
are plans to use costly medical equipment as part of the structural
solution when new state-of-the-art hospital buildings are to be
constructed as PPPs.
Update and trends
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10. Lett Law Firm P/S DENMARK
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but will be treated in accordance with Danish tax rules even if the
income has already been taxed in another country.
In order to avoid such double taxation, Denmark has engaged
in agreements with a considerable number of countries that specify
who has the right of taxation and in which areas. In addition to this,
Danish tax law lays down rules about tax reductions. These rules
may be applied in cases where no double taxation agreement exists
or where it is more favourable to apply these rules rather than the
rules of the double taxation agreement.
35 Currency controls
Are there currency controls that make it difficult or impossible to
change operating funds or profits from one currency to another?
There are no currency controls that make it difficult to change oper-
ating funds or profits from one currency to another. As a member of
the EU, Denmark respects the freedom of movement of capital stipu-
lated in theTFEU.In contrast to many other EU member states using
the euro, Denmark has kept its own currency, the Danish kroner.
36 Removal of profits and investment
Are there any controls or laws that restrict removal of profits and
investments from your jurisdiction?
There are generally no restrictions on the removal of profits and
investments from Denmark. Articles 63 to 66 of the TFEU, supple-
mented by articles 75 and 215 of the TFEU for sanctions, provide
the legal basis for the free movement of capital in the EU.
However, the Money Laundering Act provides some restrictions
on the removal of money and other assets. The purpose of this law
is to halt money laundering and the funding of terrorist groups and
activities. In general, with full disclosure of reporting, as required
by the relevant financial institutions and governmental entities, and
payment of taxes, the overseas transfer of profits earned on a con-
struction project would not present a problem.
Henrik Puggaard hpu@lett.dk
Lene Lange len@lett.dk
Kristian Skovgård Larsen ksl@lett.dk
Rådhusgården Tel: +45 33 34 00 00
Vester Allé 4 Fax: +45 33 34 00 01
8000 Aarhus C www.lett.dk
Denmark
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