Offshore wind dispute could change marine construction contracts forever

Mark de la Haye, Senior Associate at Clyde & Co Mark de la Haye, Senior Associate at Clyde & Co
Industry Database

In early August, the UK Supreme Court published its judgment in the long-running MT Højgaard v E.ON dispute regarding the failed grouted connections on the foundations at the Robin Rigg offshore wind farm. The Supreme Court overturned the Court of Appeal, and held in favour of E.ON.

This appeal arose from the fact that the foundation structures of two offshore wind farms at Robin Rigg in the Solway Firth, UK which were designed and installed by MT Højgaard A/S failed shortly after completion of the project. The dispute concerned who bears the remedial costs of €26.25m.

In May 2006, the appellants, two companies in the E.ON group (“E.ON”), sent tender documents to various parties including MT Højgaard A/S, who in due course became the successful bidders. The tender documents included E.ON’s “Technical Requirements”. The Technical Requirements laid out minimum requirements that were to be taken into account by the contractor. Amongst other things, the Technical Requirements called for the foundations to be in accordance with a document known as J101.

J101 was a reference to an international standard for the design of offshore wind turbines published by an independent classification and certification agency. J101 provides for certain mathematical formulae to calculate aspects of the foundation structures. One such formula included “δ”, which was given a specific value. Only later, a review showed that the value given for δ was wrong by a factor of about ten. This error meant that the strength of the foundation structures had been substantially over-estimated.

Mark de la Haye, Senior Associate at Clyde & Co, comments: "This judgment will come as a shock to many.  The Supreme Court determined that the contractor, MT Højgaard, was under an obligation to ensure that the offshore wind farm foundations would have a minimum lifetime of 20 years."

"This effectively placed on the contractor the consequences of an error in the international standard to which they were working."

"The implications of this judgment include the fact that, in the absence of clear wording to the contrary, contractors may unwittingly be obliged to ensure that their work goes above and beyond current international design standards."

"This decision will not simply blow over.  It has ramifications beyond the offshore industry.  Going forwards, contractors should be aware of this decision and the increased risk that it potentially entails."

"This decision could significantly affect the terms of future contracts, the risk assessment of existing contracts, as well as insurance and finance arrangements in the offshore wind farm sector."

By Jake Frith

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