Engineering, Procurement, and Construction (EPC) contracts have become a preferred contractual form in Romania for complex infrastructure and energy projects. These arrangements assign full responsibility for design, procurement, construction, and commissioning to a single contractor, ensuring the delivery of a completed, operational facility to the Employer. As turnkey contracts, EPC agreements shift significant risks to the Contractor while offering the Employer certainty in cost, time, and performance. This article examines the specificities of EPC contracts in Romania, focusing on claim management mechanisms, applicable legal frameworks, the types of claims available to both Contractors and Employers, and the dispute resolution methods used in practice.
I. General Aspects regarding EPC Contracts in Romania
1. What Are EPC Contracts?
EPC contracts are comprehensive agreements under which a single contractor undertakes the design, procurement, construction, and commissioning of a project, ultimately delivering it in an operational state to the Employer. Also known as turnkey contracts, they centralise responsibility and risk in the hands of the Contractor, who must meet strict performance requirements within agreed timeframes and budgets. In Romania, EPC contracts have gained popularity due to their ability to integrate all phases of a project under one contractual structure, simplifying project management and minimising the Employer’s administrative involvement.
2. Main Domains of Use in Romania
The adoption of EPC contracts in Romania is particularly visible in the renewable energy sector, where photovoltaic parks and wind farms demand efficiency and fast implementation. They are also extensively used in large-scale infrastructure projects such as the expansion of the Cernavoda Nuclear Power Plant, where the regulatory framework and technical complexity require a unified contractual approach. Furthermore, the growing focus on sustainability has brought EPC contracts into biogas plant projects, including agricultural and waste-to-energy facilities.
3. Types of Contracts Used
In practice, EPC contracts in Romania are often bespoke, tailored to the specific requirements and risk profiles of the parties involved. Many such contracts draw inspiration from the FIDIC Silver Book, particularly in private-sector projects with an international component. Although not originally an EPC model, the Romanian National Contract adopted under Government Decision no. 1/2018 serves as a frequent template for public-sector projects, with modifications made to reflect project-specific needs.
II. Claim Management Mechanism
The claim management process in EPC contracts is generally structured and formalised, drawing on both Romanian civil law and specific contractual provisions.
1. Notice of Claim
Any party intending to pursue a claim must first issue a Notice of Claim. This document briefly outlines the nature of the event giving rise to the claim, its effects, and the contractual or legal basis for it. Under the Romanian Civil Code (RCC), Articles 1858 and 1861 establish the general duty of the Contractor to promptly notify the Employer of circumstances that could jeopardise the execution of works, and the Employer’s right to supervise and issue observations. While these provisions provide a legal framework, EPC contracts often introduce stricter and more detailed notification requirements.
1.1. Time Limits
The contractual time limits for submitting a Notice of Claim usually range between 7 and 30 days from the occurrence or discovery of the event. Under Romanian law, such limits are classified as forfeiture terms, meaning that failure to meet them results in the loss of the right to claim.
1.2. Procedure
The Notice of Claim must be submitted in writing, clearly stating the event, its impact, and the claimant’s intention to seek relief. This step formally initiates the claim process.
2. Detailed Claim
Following the Notice, the claimant must prepare and submit a Detailed Claim, which provides a full description of the event, an analysis of its consequences, and supporting documentation such as logs, correspondence, invoices, or technical reports. This stage allows for a precise quantification of the claim, whether it relates to costs, time, or both.
2.1. Time Limits
Typically, the Detailed Claim must be filed within 28 to 30 days after the Notice of Claim, a timeframe inspired by the FIDIC Silver Book and the Romanian National Contract. The period is intended to balance the need for prompt resolution with the time required to collect evidence and perform assessments.
2.2. Procedure
The claim must be submitted in a written form, accompanied by sufficient documentation to enable evaluation. In many cases, contracts require expert opinions or technical assessments to substantiate the claim.
3. Agreement or Determination of the Claim
In Romanian EPC practice, the Employer usually evaluates the claim, although some contracts influenced by FIDIC or the Romanian National Contract provide for a Supervisor or Employer’s Representative to be involved in this process. Determinations must be made in good faith, as required by Article 14 RCC, and be well-reasoned even in the absence of express contractual provisions.
4. Dispute Resolution
Where agreement cannot be reached, parties are encouraged to resolve disputes amicably. If this is not possible, claims are pursued through arbitration or court litigation, depending on the contract’s dispute resolution clause.
III. Contractor’s Claims
1. Claims for Payment
EPC contracts are most often concluded for a lump-sum price. Under Article 1867 RCC, this price remains fixed regardless of whether the work requires more or less effort than initially anticipated, unless the contract provides otherwise. However, contractors may claim additional payments for variations, delays, or unforeseen events if expressly permitted by the agreement.
1.1. Types of Recoverable Costs
Contractors may seek recovery of direct costs such as labour, materials, and machinery, indirect costs such as extended overheads, and, in limited cases, consequential damages including lost profit or reputational harm.
1.2. Documentation
Robust documentary evidence is essential, including daily site records, purchase orders, communications, and expert assessments. For public contracts, compliance with public finance regulations is mandatory.
2. Claims for Extension of Time (EOT)
Extensions of time may be granted in situations such as delays caused by the Employer, failure to provide timely site access, provision of inaccurate data, or instructions leading to additional work or tests. Delays caused by the Employer’s breaches, such as non-payment, may also justify an EOT.
2.1. Evidence
EOT claims are supported by project schedules, progress reports, site documentation, and records of communications. Comprehensive evidence increases the likelihood of the claim being upheld and strengthens the case in potential dispute resolution proceedings.
IV. Employer’s Claims
1. Monetary Claims
Employers may seek financial remedies for delays, defects, or contractual breaches by the Contractor. Common mechanisms include price reductions and the right to set-off or withhold payments.
2. Extension of the Defects Notification Period (DNP)
The DNP, typically set at one year, may be extended if defects prevent the work from fulfilling its intended function. Extensions are often capped (e.g., at two years) and serve to protect the Employer’s long-term performance interests.
V. Arbitration and Litigation in EPC Contracts in Romania
Arbitration is widely regarded as the preferred forum for EPC disputes in Romania due to its speed, the technical expertise of arbitrators, and the possibility of choosing independent decision-makers. Arbitration awards are immediately enforceable, unlike court judgments, which require completion of first instance and appeal proceedings before enforcement.
Court litigation remains relevant, particularly for public-sector EPC contracts where administrative law issues may arise. The choice of dispute resolution method is a strategic decision often addressed during contract negotiations and plays a central role in claim management.
For additional information or personalised legal assistance in the field of EPC Contracts, we invite you to contact the Sarbu Partners team at office@sarbupartners.ro.