On reflection: Agree to inspect to stay out of court

WORLDWIDE: Negotiations between wind-turbine seller and buyer tend to focus on who takes the blame when something goes wrong. They should concentrate on avoiding anything going wrong in the first place by agreeing an escalating inspection regime.

pic: Glowimages-artbox/alamy
pic: Glowimages-artbox/alamy

In commercial litigation, neither of the parties involved makes any profit in court or from arbitration proceedings. These proceedings are limited to mitigate losses and damages. This is especially true for litigation in connection with defects of wind turbines already in operation.

You might expect that measures to avoid turbine defects would be considered by the parties involved right from the beginning in contract negotiations. Unfortunately, this does not appear to be the case. Negotiations tend to focus on discussions about the consequences of the potential for defects, rather than how to avoid such defects in the first place.

This is remarkable, because existing technologies provide for sophisticated inspection methods and instruments that enable the seller and purchaser to avoid most defects to wind turbines and their components. Qualified inspections during manufacturing of rotor blades can avoid air inclusions, dry glass fibre, geometrical misalignment and air bubbles. The inspections can also avoid failures that include bonding of a shear web, girder quality and trailing edges. Infrared thermography can detect surface defects, cracks and porosity even after commissioning. Ultrasonic testing can detect wave propagation in glass fibre and carbon fibre. On-site application of this detection method allows the investigation of the internal condition of the laminate. Even gearbox and drivetrain components can be tested by video endoscope inspections. The list goes on.

Yet, negotiations to agree a scope of inspections prior to commissioning are commonly neglected. This includes checks of defined documentation and certificates; random inspections of key components during the manufacturing process; and supervision before, during and after installation, which takes into account the final takeover inspection by an expert in this field appointed by the seller and purchaser. It is not mandatory that all inspection methods have to be executed.

Start with data

Turbine owners and sellers should agree on an escalating approach, starting with a review of the operational data and service reports. It would also be worth carrying out a visual inspection of the turbines, or at least the main components. This lets both parties to decide whether to investigate deeper if uncertainties occur. This allows each party to limit the costs of pre-commission defect detection, while almost all internal failure types are detectable.

It is pertinent that the parties agree on the inspection process at the earliest possible stage of the project. This creates a general understanding that an escalating inspection process shall be administered. This process should be clearly explained in the purchase contract, and include as much detail as possible, define the steps of procedure, and identify the expert service provider, the instruments and the technology to be applied for inspection purposes. This should all be in addition to, not instead of, the proceeding in case defects are detected and need to be rectified.

This will take time during negotiations but it is worthwhile because it reduces costs - for both parties - in the long run as the parties can remain in control of dealing with the defects, and do not transfer control over to the court. This is particularly relevant in cross-border transactions where several jurisdictions are involved.

The added bonus is that the findings of such escalating inspection processes can facilitate the identification of maintenance intervals and repair needs.

Oliver Forster and Laura Tainsh chair the Renewables and CleanTech Business Initiative of Globalaw, an international network of law firms

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