Comparative Analysis of Risk Allocation and Dispute Resolution in EPC Contracts and Their Impact on Project Efficiency: A Study in Iranian, French, English, and American Law

Ghasemi Hamed, Somayeh; Ghasemi, Mojtaba; Hadadi, Shahrzad

doi:10.48308/eclr.2025.240244.1179

Comparative Analysis of Risk Allocation and Dispute Resolution in EPC Contracts and Their Impact on Project Efficiency: A Study in Iranian, French, English, and American Law

Document Type : Original Article

Authors

Somayeh Ghasemi Hamed ¹

Mojtaba Ghasemi ²

Shahrzad Hadadi ³

¹ Phd Candidate, Department of Public Law, Islamic Azad University: Kish International Branch, Kish, Iran

² Assistant Professor, Faculty of Law, Shahid Beheshti University, Tehran, Iran Corresponding Author Email: mojtaba_ghasemi@sbu.ac.ir

³ Assistant Professor, Faculty of Law, Shahid Beheshti University, Tehran, Iran

https://doi.org/10.48308/eclr.2025.240244.1179

Abstract

EPC (Engineering, Procurement, and Construction) contracts are regarded as a key instrument in the implementation of large-scale industrial and infrastructural projects, as they centralize responsibilities in a single contractor, thereby reducing execution time and improving project coordination. This study, adopting a comparative-analytical approach, examines three main aspects- risk allocation, dispute resolution mechanisms, and remedial measures- within the legal systems of Iran, France, England, and the United States. It further seeks to clarify the relationship between these legal differences and project efficiency. The research employs descriptive, analytical, and comparative methods, drawing upon library resources, contractual instruments (including FIDIC documents), and the review of legal practices and sample project experiences. The findings indicate that clarity in risk allocation, the existence of specialized dispute resolution institutions, and well-defined remedial frameworks are all positively correlated with improved project efficiency. Conversely, the lack of dedicated regulations in Iran leads to ambiguity in risk allocation and prolonged dispute resolution processes, which undermine efficiency. Accordingly, the study proposes the development of localized regulations for EPC contracts, the strengthening of specialized arbitration mechanisms, and the clarification of guarantee systems as key measures to enhance the effectiveness of EPC project implementation.

Keywords

EPC Contracts

Civil Projects

Comparative Evaluation

Legal Systems

Project Efficiency

Project Management

Efficiency Principle

References

Books
1. Chappell, D, Building Contract Claims, 5th ed, Wiley-Blackwell, 2011.
2. Ebrahimi, Seyed Nasrollah, & Masoudi, Farzad, EPC Contracts in the Oil and Gas Industry: Governing Principles and Rules with Emphasis on FIDIC Contracts. Tehran: SAMT Publications, 2024. (in Persian)
3. FIDIC, FIDIC Contracts Guide. Geneva: FIDIC, 2000.
4. Conditions of Contract for EPC/Turnkey Projects (Silver Book), 1st ed., Geneva: Fédération Internationale Des Ingénieurs-Conseils. 1999.
5. Kerzner, H. Project Management Metrics, KPIs, and Dashboards. John Wiley & Sons, 2017.
6. Pickvance, K. Delay and Disruption in Construction Contracts, (3rd ed.). Informa Professional. 2005.
7. Sears, S. K., Sears, G. A., Clough, R. H., et al., Construction Project Management, John Wiley & Sons, 2015.
Articles
1. Ahmed, S. M., Azher, S., Castillo, M., & Kappagantula, P. "Construction delays in Florida: An empirical study", International Journal of Project Management, 20(2), 2002, pp 1-44. https://www.academia.edu/47097404/Construction_Delays_in_Florida_An_Empirical_Study
2. Arabi, Seyed Mohammad, & Kermanshahi, Ali. "An inquiry into the ranking of Engineering, Procurement, and Construction (EPS) companies: Explaining achievements and future pathways", Tadbir Journal, No. 251, 2013. (in Persian)
3. Arditi, D., Nayak, S., & Damci, A, "Effect of organizational culture on delay in construction", International Journal of Project Management, 35(2), 2017, 136–147. DOI:1016/j.ijproman.2016.10.018
4. Asadollah-Nejad Ranjbar, Arezoo; Arjmand, Seyed Amir Mohammad; & Hedayvand, Mehdi, "Claims procedures in the FIDIC EPC standard contract and its comparison with the Iranian oil industry model contract", Journal of New Administrative Law Studies, Vol. 1, No. 2, 2021, pp. 229-256. (in Persian) 10.22034/JMEAL.2022.546693.1003
5. Assaf, S. A., & Al-Hejji, S. "Causes of delay in large construction projects", International Journal of Project Management, 24(4), 2006, 349–357. DOI:1016/j.ijproman.2005.11.010
6. Aziz, R. F, "Ranking of delay factors in construction projects after Egyptian revolution", Alexandria Engineering Journal, 52(3), 2013, 387–406. DOI:1016/j.aej.2013.03.002
7. Aziz, R. F., & Abdel-Hakam, A. A. "Exploring delay causes of road construction projects in Egypt", Alexandria Engineering Journal, 55(2), 2016, 1515-1539. https://doi.org/10.1016/j.aej.2016.03.006
8. Bozorgpour, Ali. "Analysis of design–procurement–construction contracts with emphasis on their fundamental characteristics", Quarterly Journal of Social Sciences Studies, Vol. 3, No. 1, Spring, 2017. pp. 123-133. (in Persian) http://uctjournals.com/farsi/index.php/component/content/article?id=145:archive-socials-6
9. Doloi, H., Sawhney, A., Iyer, K. C., & Rentala, S. "Analysing factors affecting delays in Indian construction projects", International Journal of Project Management, 30(4), 2012, 479–489. DOI:1016/j.ijproman.2011.10.004
10. Elawi, G. S. A., Algahtany, M., & Kashiwagi, D, "Owners’ perspective of factors contributing to project delay: Case studies of road and bridge projects in Saudi Arabia", Procedia Engineering, 145, 2016, 1402–1409.
11. Gaur, A. S., Ma, X., & Ding, Z. " Perceived home country supportiveness/unfavorableness and outward foreign direct investment from China" Journal of International Business Studies, 49 (3), 2018. pp: 324-345. DOI:1057/s41267-017-0136-2
12. Gulati, R., & Sytch, M. "Dependence asymmetry and joint dependence in interorganizational relationships", Administrative Science Quarterly, 52(1), 2007, pp 32–69.
13. Hitt, M. A., Ahlstrom, D., et al. "Institutional effects on strategic alliance partner selection in transition economics: China v. Russia", Organization Science, 15(2), 2004, pp 173–185. DOI:1287/orsc.1030.0045
14. Inkpen, A. C., & Beamish, P. W., "Knowledge, bargaining power, and instability of international joint ventures", Academy of Management Review, 22(1), 1997, pp 177–202.
15. Isobe, T., Makino, S., & Montgomery, D. B. "Resource commitment, entry timing and market performance of foreign direct investments in emerging economics: the case of japanese international joint ventures in china", Academy of Management Journal, 43(3), 2000, pp 468-484. https://doi.org/10.2307/1556405
16. Jo, S. H., Lee, E. B., & Pyo, K. Y, "Integrating procurement management into CCPM: A case study on oil and gas projects", Sustainability, 10(6), 2018, pp 1-22.https://doi.org/10.3390/su10061817
17. Johanson, J., & Vahlne, J. E. "The mechanism of internationalization", International Marketing Review, 7(4), 1990, pp. 11–24. https://doi.org/10.1108/02651339010137414
18. Joslin, R., & Müller, R. "The relationship between project governance and project success", International Journal of Project Management, 34(4), 2016, pp 613–626. https://doi.org/10.1016/j.ijproman.2016.01.008
19. Kabirfar, K., & Mojtahedi, M. "The impact of engineering, procurement and construction (EPC) phases on project performance". Buildings, 9(1), 15, 2019. 3390/buildings9010015
20. Kale, P., & Singh, H. (2009). "Managing strategic alliances: what do we know now, and where do we go from here", Academy of Management Perspectives, 23(3), 2009, pp 45–62. DOI:1108/sd.2010.05626bad.004
21. Khanzadi, Mostafa, & Afandizadeh, Shahriar. "Estimation of delays in road construction projects caused by weather conditions using fuzzy–probabilistic analysis", Transportation Research Journal, Vol. 8, No. 4., 2011. (in Persian) https://civilica.com/doc/326899
22. Koka, B. R., & Prescott, J. E. "Strategic alliances as social capital: A multidimensional view", Strategic Management Journal, 23(9), 2002, pp 795–816. DOI:1002/amj.252
23. Kotabe, M., Jiang, C. X., & Murray, J. Y. "Managerial ties, knowledge acquisition, and new product market performance", Journal of World Business, 46(2), 2011, pp 166–176. DOI:1016/j.jwb.2010.05.005
24. Li, J., Xin, K. R., et al, "Building effective international joint venture leadership teams in China", Journal of World Business, 34(1), 1999, pp 52–68. https://doi.org/10.1016/S1090-9516(99)00007-3
25. Luo, Y, "Are joint venture partners more opportunistic in a more volatile environment", Strategic Management Journal, 28(1), 2007, pp 39-60. https://www.jstor.org/stable/20142420
26. Malhotra, D., & Lumineau, F. "Trust and collaboration in the aftermath of conflict", Academy of Management Journal, 2011, pp 981-998. DOI:5465/amj.2009.0683
27. Martens, M. L., & Carvalho, M. M. "Key sustainability factors in project management context", International Journal of Project Management, 35(6), 2017, pp 1084–1102. https://doi.org/10.1016/j.ijproman.2016.04.004
28. Masoudi, Farzad; Ebrahimi, Nasrollah; Mandegar, Mostafa; & Zanjbar, Masoudreza. "Public legal principles of engineering, procurement, and construction contracts in Iran’s oil and gas industry", Culmination of Law Journal, Year 11, No. 1, 2020, pp 150-177. (in Persian) 22034/thdad.2020.242064
29. Morgan, R. M., & Hunt, S. D. "The commitment–trust theory of relationship marketing", Journal of Marketing, 58(3), 1994, pp 20–38. https://eli.johogo.com/Class/Morgan.pdf
30. Norouzi, Mohammad. "Performance of contractual obligations in EPC (Engineering, Procurement and Construction) contracts", Judgment Quarterly, No. 80, 2014, pp. 121-143. (in Persian)
https://www.ghazavat.org/article_153527.html
1. Parkhe, A. "Strategic alliance structuring", Academy of Management Journal, 36(4), 1993, pp 794- 829. https://doi.org/10.5465/256759
2. Reuer, J. J., & Arino, A, "Strategic alliance contracts", Strategic Management Journal, 28, 2007, pp 313-330. https://doi.org/10.1002/smj.581
3. Rezaeizadeh, Mohammad Javad; Abdi, Sadegh; & Barkhi, Nasim. "Analysis of contractual risks in the general conditions of EPC contracts of the Ministry of Oil and the international FIDIC model", Administrative Law Quarterly, Year 7, No. 22, 2020, pp 125-147. (in Persian) https://qjal.smtc.ac.ir/article-1-586-fa.html
4. Ruqaishi, M., & Bashir, H. A. "Causes of delay in construction projects in the oil and gas industry in GCC countries", Journal of Management in Engineering, 31(3), 2015. DOI:1061/(ASCE)ME.1943-5479.0000248
42. Sadeghi, Mohsen, & Goudarzi, Habib. "The Survey of Engineering–Procurement and Construction Contracts; With View to Their Position in Iranian Law", Private Law Studies Quarterly, No. 2, 2008, pp. 173–189. (in Persian) 20.1001.1.25885618.1387.38.2.9.8
1. Salimi, Shideh Shida; Hajian, Mohammadmehdi; & Oloumi Yazdi, Hamidreza. "Study of Legal-Contractual Risks Distribution in EPC Turnkey Documents of the Oil Industry, 5490 Journal and FIDIC, Energy Law Studies Quarterly, Vol. 9, No. 1, 2023, pp. 119-142. (in Persian) 22059/jrels.2023.303545.369
2. Sambasivan, M., & Soon, Y. W. "Causes and effects of delays in Malaysian construction industry", International Journal of Project Management, 25(5), 2007, pp 517–526. https://doi.org/10.1016/j.ijproman.2006.11.007
3. Taheri, Yashar. "An approach to the legal nature of engineering, procurement, and construction contracts with reference to FIDIC documents and Iranian law", Journal of Interdisciplinary Legal Research, Vol. 3, No. 4, 2023, pp 7-28.
4. Yeo, K. T., & Ning, J. H. "Integrating supply chain and critical chain concepts in EPC projects", International Journal of Project Management, 20(4), 2002, pp 253–262. https://doi.org/10.1016/S0263-7863(01)00021-7
Thesis
1. Heidari, Mohammad Reza, EPC Contracts from Economic Law Perspective, L.L.M Thesis, Shahid Beheshti University, 2012. (in Persian