This is interesting in that it adds to a growing line of projects in which seemingly settled commercial assumptions are reopened after projects are already well underway.
Contract disputes have emerged with respect to the Nhon-Hanoi Station metro line, related to rolling stock, signalling and other equipment systems, it was reported Wednesday.
The Hanoi Urban Railway Management Board (HURMB) said there were disagreements over costs, schedules and responsibilities, though noted work is continuing on the project.
The Hanoi Department of Construction warned the prolonged disputes could affect completion of the line by 2027 and increase total project costs, requesting the HURMB submit a detailed report on the issues by June 12.
This adds to an increasing number of cases where commercial expectations investors believed were settled are later challenged, reassessed or reinterpreted.
Probably the most talked about in recent years has been Electricity Vietnam (EVN) looking to reduce feed-in tariffs (FiT) for some renewable energy projects, arguing they did not satisfy all legal requirements needed to qualify for preferential FiT rates.
Developers, however, have been arguing that the projects had already been recognised as having achieved commercial operation and that the eligibility criteria are being reinterpreted retrospectively.
Similarly, the Airports Corporation of Vietnam (ACV) is involved in a dispute with a contractor on the Long Thanh International Airport project over the currency used for certain payments. The contractor is arguing that the contract provides for payment in US dollars, while ACV contends some locally sourced equipment should be paid for in Vietnamese dong.
Moreover, ACV wants to convert US dollar amounts to Vietnamese dong at a rate of VND 23,650 to the dollar, the rate at the time the contract was signed. The contractor, however, is pushing for a conversion rate of VND 26,000, closer to what the exchange rate is now.
Then there is Singapore real estate developer, Keppel, which earlier this year entered into arbitration with its local partners over land-use fees on a Ho Chi Minh City project. The project had already paid what it believed to be its land-use fee obligations in 2017; however, last year, local authorities reassessed the project, requesting an additional VND 6.9 trillion (US$330 million).
Of course, this may signal a process gap, whereby key details are not clear in contracts, though note that many of these disagreements are with large, international developers with broad experience in major project development.
Regardless, it does seem that a common theme is emerging whereby developers increasingly find themselves revisiting commercial assumptions after they have already made significant investments. This can have long-term repercussions, too, likely increasing risk premiums on future major projects.