Construction Law Quarterly

Welcome to the first issue of Construction Law Quarterly for 2025. We are pleased to continue our commitment to providing insightful analysis of key developments in construction law, as well as those legal matters impacting all stakeholders within the construction industry.In this edition, we feature three articles that explore pressing and relevant issues currently shaping the construction sector.Our first paper, authored by Ruth M.D. Byrne KC, Peter Hood, and Catherine Munro, examines the landmark case of UK Supreme Court decision in R (Finch) v Surrey County Council and others. This ruling mandates that environmental impact assessments for fossil-fuel projects must include the assessment of downstream or scope 3 emissions, such as those resulting from the combustion of extracted oil. The authors provide a thorough analysis of the judgment, its implications for future projects, and the broader impact on environmental law both within the UK and internationally. This paper is essential reading for those involved in planning and environmental compliance, as it clarifies the legal obligations for environmental impact assessments in the UK, with potential international implications for environmental law.The second paper, by David Nitek and Noe Minamikata, delves into recent building and fire safety cases that illustrate the practical application of the Building Safety Act 2022 and related regulations. Highlighting key cases such as Willmott Dixon Construction Limited v Prater & Others, and Secretary of State for Levelling Up, Housing and Communities v Grey GR Limited Partnership, the authors provide valuable insights into the procedural and substantive aspects of building liability orders, remediation orders, and remediation contribution orders. This paper is particularly relevant for both legal practitioners and consultants in the construction sector, offering guidance on navigating the evolving landscape of building safety legislation.Our third and final paper, authored by Anne-Marie Friel and Michael Watson, explores the imperative of integrating climate and sustainability considerations into construction contracts. As regulatory commitments, funding requirements, and planning consents increasingly demand sustainability measures, this paper outlines the contractual frameworks and standard forms that can facilitate these objectives. The authors discuss the role of sustainability reporting, due diligence, and the innovative use of clauses such as the NEC's Option X29 and the Chancery Lane Project 's climate-aligned clauses, reflecting a growing trend towards legally binding sustainability objectives in the construction industry. This paper is a must-read for contractors and project developers aiming to align their practices with sustainability goals and regulatory expectations.As always, we welcome submissions of short articles or legal updates for future issues. Please contact the Commissioning Editor at rrivers@emerald.com.The content and the opinions expressed have been provided for information purposes only. It should not be relied on as a substitute for specific legal advice on any particular topic.In a highly anticipated judgment, a 3:2 majority of the UK Supreme Court ruled in R (Finch) v Surrey County Council and others1 that environmental impact assessments (EIAs) for fossil-fuel projects must include the assessment of the “downstream” or “scope 3” emissions which arise when the oil is eventually refined and burned by end users causing greenhouse gas emissions.The decision considered the correct interpretation of the Town and Country Planning (Environmental Impact Assessment) Regulations 2017, which apply the European Environmental Impact Assessment Directive (together, the “EIA Regime”). The EIA Regime requires the assessment of development projects where there are likely to be significant environmental effects.In 2019, Surrey County Council granted planning permission to a developer to expand an onshore oil project by drilling four new wells. This would enable the extraction of oil over a 20-year period. The EIA for the project evaluated the environmental impacts of “the direct releases of greenhouse gases from with the well site boundary resulting from the site’s construction, production, decommissioning and subsequent restoration over the lifetime of the proposed development”. It did not, however, examine the environmental impact of the downstream greenhouse gas emissions that would arise from the combustion of the fuel following refinement of the crude oil extracted from the site.Sarah Finch, a local resident representing Weald Action Group, applied for judicial review of the Council’s decision, arguing that the environmental statement should have included these downstream emissions.In determining whether the local planning authority should have required an assessment of the scope 3 emissions when considering the application for oil extraction for commercial production, the Supreme Court reversed the judgments of the High Court and the Court of Appeal.The Supreme Court emphasized that these emissions were “plainly” an effect of the project, and a foreseeable and inevitable consequence of the oil extraction. Both the majority and minority found that the question of whether something is an effect of a project is a question of law – not, as the Court of Appeal found, a question of judgment for the decision maker. They unanimously agreed that the Court of Appeal’s approach allowed for too much uncertainty and inconsistency; it should not be the case that different decision makers could make different decisions on the same facts on an issue such as the relationship between the extraction of fossil fuels and the emissions associated with their end use.One of the issues which the Supreme Court considered was the appropriate legal test for answering the question of what are or are not the “effects of a project”.Lord Leggatt considered three possibilities: (1) the “but-for” test, that is would event Y have occurred but for the occurrence of event X; (2) the intervening act test, that is whether there has been an intervening act and whether this is an ordinary event; and (3) the necessary and sufficient condition test, that is the occurrence of event X is both a necessary and sufficient condition for the occurrence of Y.The majority determined that, on the facts in Finch, all three of these tests would be satisfied. However, they did not definitively rule on which was the correct test in the context of the EIA Regime, which leaves us waiting for further judicial clarification on the extent to which these tests will apply to other developments.The obligation to conduct an EIA is a procedural one, designed to ensure that the public is armed with full knowledge of a project’s environmental cost so that the environmental impact of a project is exposed to public debate and is considered in the decision making process. The judgment in Finch clarifies that, in the context of an oil and gas project, this information must include the scope 3 emissions associated with the end use of the fossil fuels. However, the process remains outcome agnostic; the legislation does not prevent the competent authority from giving development consent for projects which will cause significant harm to the environment, and nothing in Finch changes this.So, one, obvious practical implication is that applicants for planning permission must calculate and publish the scope 3 emissions associated with any new oil and gas project in the UK. However, given the moratorium on new licences for oil and gas exploration set out in the Labour Manifesto, the practical implications of this in the UK context may prove to be short-lived.The Supreme Court dismissed concerns about the decision’s implications for other projects with substantial greenhouse gas impacts, such as steel production, finding that the EIA Regime does not require that attempts be made to measure or assess putative effects which are incapable of assessment. While crude oil’s end use is foreseeable and falls within the scope of the EIA, this may not be the case for other materials, such as steel. The effects of the manufacturing of steel, for instance, depends on innumerable decisions made “downstream” about how the steel is used and how products made from the steel are used. It would, therefore, be impossible to assess such scope 3 emissions at the time of the decision whether to grant development consent for the construction and operation of the steel factory.The Supreme Court’s judgment may have consequences beyond the UK. Firstly, it is likely to be cited as persuasive authority in other cases before EU courts involving the EIA regime. At an international level, the International Tribunal on the Law of the Sea has recently published an advisory opinion confirming that the obligation under the UN Convention on the Law of the Sea to produce environmental impact assessments extends to the cumulative risk or effects of pollution of the marine environment from anthropogenic greenhouse gas emissions. The judgment in Finch may be cited in support of a broad interpretation of this obligation such as to encompass scope 3 greenhouse gas emissions. Given that UNCLOS has 164 State Parties, this could have a major impact on environmental impact assessments for new oil and gas projects around the globe.There have been several building/fire safety cases in 2024, which have provided important guidance on the practical application of the key legislative changes that were introduced by the Building Safety Act 2022 (BSA 2022) and related regulations. Although the Technology and Construction Court (TCC) has historically been the court which has led the direction in which construction legislation is applied in practise, notable cases have also emerged from the First-Tier Tribunal (Property Chamber) (FTT). The following cases are of particular importance:In Willmott Dixon Construction Limited v Prater & Others,2 the TCC provided helpful procedural guidance relating to applications for BLOs under s.130 BSA 2022. The TCC confirmed, among other things, that the BSA 2022 does not require a party against whom a BLO is sought to be made a party to the main claim or to participate in those proceedings. However, if a BLO application was contemplated, it would generally be sensible and efficient for the entity against whom the BLO was going to be sought to be made a party to the litigation and for that application to be heard together with the main claim. This case is also interesting because it relates to an application for a BLO by a defendant against companies associated with other defendants, demonstrating that, depending on the circumstances, a BLO is a remedy potentially available to both claimants and defendants.For more information on BLOs generally, please see our Legal Terms Explained article which was originally published in Construction Law.3In Secretary of State for Levelling Up, Housing and Communities v Grey GR Limited Partnership,4 the FTT granted a RO under s.123 BSA 2022, requiring the respondent landlord to remedy relevant defects in a residential tower block. While not the first RO to be issued by the FTT, this marked the first case in which the government, as an “interested person”, successfully obtained a RO against a private landlord.The case also clarified that the FTT has a discretion as to whether to make a RO, but that it would likely make one where it was satisfied that the qualifying conditions under s.123 were met and relevant defects existed (albeit subject to the facts of each case).For more information, please see our blog post on the case.5Triathlon Homes LLP v Stratford Village Development Partnership and Others6 was the first case in which the FTT granted applications for RCOs under s.124 BSA 2022.Among other things, the judgment contains the following key points: The judgment also sheds light on the FTT's likely approach in determining whether it is “just and equitable” to issue a RCO. In this regard, the FTT emphasised the policy of the BSA 2022. Namely, that primary responsibility for the cost of remediation should fall on the original developer, being at the top of the “hierarchy or cascade of liability in relation to a relevant defect”, and that others who have liability to contribute may pass on the costs they incur to the developer. Significant weight was therefore placed on the fact that those against whom the RCOs were being sought in this case were the original developer and its associated company.While other RCO applications will likely be assessed on their individual facts, the FTT's approach to the “just and equitable” test is significant given the limited authority on RCOs and will be relevant to similar RCO applications against head landlords and/or original developers.In early 2024, URS was granted permission by the Supreme Court to appeal the Court of Appeal's decision in URS Corporation Limited v BDW Trading Limited.7 The appeal is due to be heard in early December 2024.The appeal concerns how liability should be allocated in circumstances where, as a result of allegedly negligent work undertaken by a consultant, a developer carries out remedial work on properties it no longer owns and in respect of defects for which it cannot be held liable due to the expiry of the applicable limitation periods. Importantly, the Supreme Court is expected to provide important clarifications regarding the scope and application of s.135 BSA 2022 (specifically the application of the retrospective 30-year limitation period for claims under the Defective Premises Act 1972 (DPA 1972)), s.1 (1)(a) DPA 1972, and s.1 Civil Liability (Contribution) Act 1978.For more information regarding the Court of Appeal judgment, please see our blog post.8Contractors and project developers must work to mitigate environmental impacts in support of sustainability ambitions as we head into 2025 to actively deliver a reduction in the net-zero emissions arising from construction.While some contractors and projects are already integrating sustainability requirements into contracting models, increasingly, the three drivers – regulatory commitments, funding requirements and planning consents – are establishing this as a baseline for a ‘licence to do business’. Those not yet required by regulation to embed sustainability into their operations and projects may still face requirements from funders and investors, as well as sustainability obligations to gain planning consent. In fact, it is common to see requirements on companies under all three limbs and this will accelerate during 2025.In the UK, the Taskforce for Climate-related Financial Disclosures (TCFD) rules already apply to many contractors. Non-etheless, it is likely that sustainability reporting requirements will increase significantly in the next few years.The new Labour government has committed to implement the recommendations of the International Sustainability Standards Board (ISSB)9 which require general sustainability disclosures and specific climate-related ones. The timing for ISSB implementation is as yet uncertain but it is not possible to sit back and wait. This is in part because businesses and business partners in a supply chain are likely to be subject to EU rules on sustainability reporting; specifically the EU Corporate Sustainability Reporting Directive (CSRD)10 which came into effect on 1 January. These rules have extraterritorial effect, impacting businesses who contract with in-scope companies.Reporting rules are also now supplemented by sustainability due diligence requirements in the form of the EU Corporate Sustainability Due Diligence Directive (CSDDD)11 among others which require large companies to assess their supply chain partners for sustainability risks, requiring significant information sharing.As a compliance issue, companies in scope of these sustainability regulations are pressuring business partners to disclose information or take action to meet their obligations.Many banks and asset managers have made commitments to abate their ‘financed emissions’ and all aspects of any projects which receive the benefit of that financing – which would include projects which borrowers participate in – will form a part of those emissions. These sustainable and transition finance frameworks will inform where, how and to what extent funders deploy their capital and investment and at what price. The relative competitive advantage of a project, and indeed a contractor’s participation in the project, will depend on an ability to demonstrate contributions to targets and framework requirements.Contractors and projects will need to provide information to banks and asset managers and collect data evidence.Even in the absence of regulatory and funding requirements, it is increasingly likely that the planning consent under which a project has been permitted will include rigid conditions to meet overall carbon budgets, or to deliver biodiversity net gain or other environmental impact or improvements.All of these forces driving change coincide to require contractors and developers to deliver projects in a new way, underpinned by extensive data collection and reporting.With the challenges of climate change and sustainability obligations, construction contracts are playing a pivotal role in creating a framework to accelerate decarbonisation of infrastructure and the uptake of nature-positive solutions, as well as ensuring that companies can introduce legally binding sustainable objectives into their business practise and projects.There are examples of sustainability provisions in standard form construction contracts, as well as pro bono initiatives which advocate for sustainable contracting.The International Federation of Consulting Engineers (FIDIC) red, yellow and silver books include an obligation on the contractor to take all necessary measures to protect the environment during the course of the works, comply with any environmental impact statement, and ensure emissions and other pollutants do not exceed those stated in the specification or prescribed by law.The Joint Contracts Tribunal (JCT) Design and Build contract 2016 contains a supplemental provision intended to encourage contractors to suggest “economically viable amendments” to the works, which “may result in an improvement in environmental performance”.The Association of Consultant Architects (ACA) Framework Alliance contract includes requirements related to sustainability that can be set out in a “project brief” together with a definition of “sustainability” which includes references to waste management as well as training workers in sustainable practices.Additionally, the New Engineering Contract (NEC) developed secondary Option X29 in order to incentivise parties to reduce the impact of works on climate change. Option X29 implements two tools: Of all the standard form approaches Option X29 goes furthest in terms of both encouraging a proactive and collaborative approach to achieving sustainability outcomes and envisaging financial incentivisation being linked to those outcomes. Even when other forms are being used, there is a lot that can be learned through the Option X29 approach that could be adapted for use on other, non-NEC contracts.The Chancery Lane Project (TCLP) have drafted a number of climate-aligned clauses that can be utilised and adapted to suit business and project requirements, and available for no charge, for users everywhere. For example, ‘Tristan’s clause’ intends to add an incentive to use Construction a The clauses can also be and together with other contract parties to a construction contract have not to these of clauses, the drivers are increasingly requiring their as part of the conditions to the trend to and these requirements will increase in article was first published in