Poland to sue Chinese A2 contractor
21 September 2011
The financial repercussions of Chinese state-owned contractor COVEC's terminated contract to build the A2 highway in Poland began to surface in September after Poland's roads authority GDDiKA said it would file lawsuits seeking a total of PLN845.6 million (€193 million) in compensation.
GDDiKA said it would also suspend payment of the last of COVEC's invoices for the uncompleted project, which amount to PLN80.6 million (€18.3 million).
COVEC, a subsidiary of state-controlled China Railway Engineering Group, won the A2 road building contract in controversial circumstances in 2009, entering a bid that was just 45% of GDDKiA's target price.
It claimed it could achieve these savings through a combination of cheaper labour, equipment and materials sourced in China, and through using Chinese state funds as mobilisation capital. European contractors and their trade bodies protested this represented unfair competition and was in any case unrealistically cheap.
But in May 2011, COVEC stopped paying its subcontractors and aborted the construction of sections A and C of the A2 covering a 50km stretch from Łódź to Warsaw. GDDiKA said the Chinese contractor demanded an additional PLN1 billion (€227 million) for the continuation of works.
In the face of strikes from subcontractors and what it called COVEC's "unreasonable" demands which were "contrary to the law", GDDiKA renounced its A2 contracts with COVEC on 13 June.
However, the contractor claimed through Chinese state-owned media that it walked away from the project due to financial losses. It has since said these losses could be as high as €280 million.
Compensation
GDDiKA has said it intends to sue COVEC over the debacle. It is preparing one lawsuit over the payment of PLN140 million (€32 million) in contractual penalties, together with compensation relating to the non-completion of the motorway of around PLN600 million (€136 million).
The authority said it would simultaneously file a second lawsuit against COVEC seeking PLN105.6 million (€24 million) to reimburse the unpaid subcontractors.
Meanwhile, GDDiKA has re-awarded the two contracts for construction of sections A and C of the A2, which COVEC had been previously working on, to European contracting consortiums.
Section A, a 29.9 km stretch has been awarded to a consortium comprising Vinci's road building arm Eurovia and Polish contractor Warbud, in which Vinci owns a controlling stake. Section C has been awarded to a consortium led by DSS, COVEC's original main sub-contractor, working with Boegl & Krysl, which is part-owned by German contractor Max Boegl.
