International construction projects typically involve several parties and contracts. This includes several subcontracts.

It is not uncommon and may – due to the current market situation – be expected that main- or turnkey contractors will be unable to pay their subcontractors or even go bankrupt.

While this is definitely disruptive to any project, undertaking projects in many jurisdictions may hold an increased risk in this regard. That risk is that the employer may be liable to pay the subcontractor directly. If you are used to operating in a jurisdiction where this is not an option, you may not be aware of or have taken this risk into account.

Conversely, local counsels being used to this rule, do not necessarily call attention to this risk. Thus, it is up to the general counsel of the entity building abroad to actively seek advice on this issue and often assess how to mitigate this risk.

Studies show that around 50 % of civil law countries and 50 % of common law countries allow direct claims by the subcontractor against the employer. The study can be found here.