The Canadian Institute of Steel Construction (CISC) is the latest industry association to join the growing list that have expressed concerns over the use of reprisal clauses in construction tender.

The CISC issued a release on March 12 indicating that it and its members, “are very disappointed and disagree with the Supreme Court ruling in BC to dismiss the appeal of using government reprisal clauses for construction.”

In December, the Supreme Court of Canada upheld the use of reprisal clauses in the City of Burnaby’s contract terms that would disallow any contractor from bidding on a project if it were engaged or had been engaged in legal action against the city in the past two years.

While that in itself was a blow for the industry, the refusal to strike down the clause has led some to conclude that the use of arbitration, or other dispute-settlement processes in prompt payment legislations, may be perceived as legal action against an owner—and therefore grounds for application for reprisal clauses.

“The use of reprisal clauses by governments needs to stop now,” said CISC president and CEO Ed Whalen. “It is essentially extortion and will lead to higher construction prices for the taxpayer with fewer contractors willing and able to bid government projects. Governments should be demonstrating the best practices in construction and be acting as role models. Blackballing contractors is not fair nor is it right.”

“If existing legislation would be eclipsed by clauses such as this, then the effectiveness of legislation is limited or nullified,” he added. “You cannot punish businesses when they are following the legal process and keep them out for up to 24 months thereafter.”

The Ontario General Contractors Association was among the first groups in the country to raise the question of a connection between adjudication provisions in Ontario’s Construction Act and reprisal clauses. In a letter to other associations across the country, OGCA president Clive Thurston drew a link between adjudication and reprisal clauses.

“The fact that these clauses can be invoked, regardless of any decision by the courts as to the merits of a claim, and to get around the dispute resolution system contained in the new Construction Act—adjudication—clearly shows that this system is designed to intimidate and force those with little power to abandon their valid entitlement and instead, accept their fate.”

It is unclear whether there is a connection between adjudication and reprisal clauses. Legal experts who spoke to Link2Build argued that there remains a great deal of confusion over how even fundamental provisions of the prompt payment regime may be implemented—let alone more complex issues such as this.

Prevailing opinions suggest that a reprisal clause drafted into a contractual agreement cannot take legal precedence over a statutory requirement such as adjudication. Therefore, if a general contractor were to commence adjudication against an owner for failure to make a timely payment, the contractor would be well within its rights to do so.

However, if a general contractor were to bring about and adjudication claim over, for example, a delay claim or a disputed change order, such an action may be considered frivolous and therefore subject to a reprisal clause.