The U.S. press occasionally reports on an important piece of world news. One such piece is the rise of China as an economic power and the forecast that China will become the world’s largest economy in the not too distant future. The current Premier of the State Council of the People’s Republic of China, Li Keqiang, has even suggested that China stands ready to step into the role of the world’s leading economic power.
With this as a backdrop, I was asked to participate in a series of lectures at the University of Peking focusing on contracting methods for the Belt and Road Initiative, initially called the “One Belt-One Road” (OBOR) project. The project envisions construction of a transportation network generally following the route of the old Silk Road, the main trading route between East and West in the 13th and 14th centuries – think Marco Polo. The Silk Road, which crossed continents and extended thousands of miles, included both sea and land routes, as generally depicted below.
The OBOR project, when constructed, will replace the old routes with modern means of transportation facilitating the transport of all types of goods and commodities, e.g., oil and gas transmission lines, railroads, highways, seaports, airports, etc. The project will touch more than 68 countries, will be built by thousands of contractors on both public and private bases, and will utilize Public-Private Partnerships, Design-Bid-Build and Design-Bid contracting methodologies. Though in its nascent stages, substantial work on the project has already been completed, including four seaports in Sri Lanka and numerous railroad lines.
It is difficult to get precise information on the project. For example, although Chinese banks have provided most of the financing to date, I left Beijing without a clear picture of what entities will actually own the various components of the project. It is clear, however, that the Chinese government will exercise significant control. When completed, the OBOR project will be one of the largest, if not the largest, infrastructure projects in history, controlling by some estimates as much as 29% of the World’s GDP. The massive scope of the project takes some time to digest – it is proceeding at the rate of approximately one trillion US dollars per year.
The group in which I participated is known as the International Construction Law Association (ICLA) and includes only one or two lawyers from each participating country. Part of the group’s focus in China was the development of new contract forms and improvement of existing contract forms for use across the entire project. The group will also review and comment on the Rules to be implemented by a separate Disputes Resolution Center, which is being established for the sole purpose of addressing disputes on the OBOR project. I anticipate that a summary of the group’s discussions will be available at some time in the future.
I appreciate that all of this is somewhat nebulous, but our law firm intends to continue its involvement. We will endeavor to provide updates in this publication; however, if you would like more information on the OBOR project as it becomes available, please let us know.