BANGLADESH Trends and Developments Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers
Regulatory approvals and environmental clearances The regulatory landscape is complex, involving a mul- tiplicity of agencies. Disputes frequently arise when necessary permits are delayed or issued with unex- pected conditions. A notable trend involves SOEs proceeding with tenders before securing all critical clearances, transferring the risk to the contractor or investor. By way of example, in the power sector, environmen- tal impact assessments (EIAs) and specific technical clearances (such as height clearances from the Civil Aviation Authority for power plant stacks) are critical. If these are not finalised before contract execution, subsequent regulatory conditions can render the original technical specifications unworkable. Due dili- gence must involve a critical review of the status of all required permits and an independent assessment of the feasibility of obtaining pending approvals. Project conditions and technical feasibility Investors should independently verify the technical assumptions and feasibility studies provided by the government. Unforeseen site conditions, inadequate supporting infrastructure (eg, grid connectivity for power projects), or erroneous assumptions in fea- sibility reports can lead to significant variations and cost overruns. Independent technical due diligence is necessary to validate the project’s viability under the proposed contractual terms. Broadening the definition of “investor” The scope of protection available under international investment law and domestic legislation is broad, extending beyond traditional FDI providers. International contractors as investors International engineering, procurement, and construc- tion (EPC) contractors play a crucial role in Bangla- desh’s development. Under most bilateral invest- ment treaties (BITs) and the domestic Foreign Private Investment (Promotion and Protection) Act 1980, the definition of “investment” typically includes contrac- tual rights, mobilisation of capital, and assumption of risk. Consequently, EPC contractors committing sig- nificant resources to long-term projects often qualify as “investors” entitled to protection against arbitrary state action or expropriation.
Strategic structuring: the role of branch offices A common strategy employed by international con- tractors is the establishment of a branch office in Bangladesh. This structure serves several strategic purposes, as follows. • Tax efficiency – operating through a registered branch allows companies to utilise double taxation avoidance agreements (DTAAs) between Bang- ladesh and their home jurisdiction, thereby opti- mising tax liabilities on profits generated from the project. • Regulatory compliance – a local presence facili- tates compliance with domestic registration and reporting requirements. • Strengthening investor status – establishing a formal presence in the territory consolidates the contractor’s status as an investor, enhancing their ability to claim protections under applicable BITs or domestic investment laws should a dispute esca- The complexity of large-scale projects in Bangladesh invariably gives rise to disputes. Understanding the common flashpoints is crucial for effective contract management and dispute resolution strategies. Delays and EoT late beyond a purely contractual claim. Key dispute areas in major projects Disputes over EoT are ubiquitous. Although land acquisition delays are a primary cause, other factors include regulatory hurdles, force majeure events, and the actions of the employer (SOE). The COVID-19 pandemic introduced new complexities, with debates centering on whether government-ordered lockdowns constitute a force majeure event or a “change in law” entitling the contractor to both time and cost relief under standard contract clauses (eg, FIDIC ( Fédéra- tion Internationale des Ingénieurs-Conseils /Interna- tional Federation of Consulting Engineers) clauses). Variations, additional costs, and changes in law Unforeseen site conditions often necessitate contract variations. Disputes commonly arise over the valuation of these variations and the entitlement to associated costs. Furthermore, changes in the fiscal regime can significantly impact project economics. For instance, the imposition of VAT on payments under PPP agree-
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