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Construction Law/Royalties on materials from site

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Question
Dear Ali,

The following issue is for a contract using FIDIC Conditions o MDB 2010.
Sub-clause 1.1.6.7 defines Site.
Sub-clause 7.8 states that Unless otherwise stated in the Specification, the Contractor shall pay all royalties, rents and other payments for (a) natural Materials obtained from outside the Site.

Nothing is stated in the specification regarding Royalties on natural materials obtained from site.  
The Employer is Ministry X. Now Ministry Y says that all natural materials belong to state and any user is required to pay Royalty to them (Ministry Y) as per the law of the country. Their claim is based on sub-clause 1.13 (Compliance with Laws). They have asked the Employer (Ministry X) to deduct certain amount form the invoice of the contractor and send it to them even  for payment of Royalties on  materials obtained from site as well.  Contractor's stand is that he is not required to pay Royalties on materials obtained from Site (Sub-clause 7.8.

Further, whether the governing law specified in the contract prevails over the contract conditions or it comes into force only  when something is not clearly stated in the contract. There could be many laws in a country and if the provisions in those laws are not addressed by modifying the contract conditions in PCC, is the contractor supposed to know about all these laws while preparing and submitting his bid. Thanks in advance for your guidance.

Prasad

Answer
Dear Tanka,

Sorry for late reply due to new year holidays.

Regarding your question to provide more precise answer you need to provide more information if available, such as Particular conditions of Contract, nature of the Project (such as highway) etc.

For any tender preparation in a country, it is the Contractor's obligation to be familiar with the law of the country and rules and regulations. Therefore, if any Ministry required payment of Royalties, it is supposed to be considered at the time of tender. However, if you are providing the material from the Site, according to Sub-Clause 7.8, you are not required to pay depends on other conditions of Contract.

Best Regards

IRVALI  

Construction Law

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ALI IRVALI

Expertise

FIDIC, Arbitration Procedures, Claim Management, Project Management.

Experience

I have experience of working at 6 countries in MENA region (algeria, Libya, Saudi Arabia, Oman, Pakistan)as the Regional Director and General Manager of a construction company. I have experience on various applications of FIDIC and construction law, arbitration procedures, claim management, project management.

Organizations
CEO of TURCON Construction presently. www.turcon.com.pk

Education/Credentials
M.S. Civil Engineer, Various Courses on Project Management, Seminars on FIDIC.

Past/Present Clients
National Highway Authorities of various countries, Water and Power Development Authorities, Karachi Port Trust, etc.

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