Italy: Subcontracting In International Construction Projects: Risks And Suggestions (Part I)

Last Updated: 2 March 2016
Article by Giuseppe Broccoli

In mid-big sized construction projects, the subcontract is a crucial part of the entire project. The various issues involved in subcontracting part of the works can determine the success or the failure of a project and/or can massively increase the financial risks and/or losses for either the Employer or the Contractor. The present note is the first of a series of three and will address the main issues and pitfalls which may arise out of the subcontracting of part of the scope of the works and suggests some solutions for the benefit of the parties.

The reasons why a Contractor subcontract part of the works can be various such as that the project is a large one or that a specific part of the scope of works requires specific skills and expertise that the Contractor does not have. There are also cases where it is the Employer which requires that part of the scope of work be carried out by Subcontractors with specific and 'proved' experience.

Generally the issues that arise out of in connection with subcontracting part of the works are those relating to:

  • the extent to which the Contractor is entitled to subcontract part of the works and the selection of the Subcontractor in the case the Employer is involved (Part I);
  • the liabilities of the Subcontractor (towards the Employer or the Contractor) (Part II);
  • the payment of the Subcontractor (Part III).


Generally the contract between Employer and Contractor provides if and to what extent the Contractor is entitled to subcontract part of the works and this will mainly depend on the type of contract. In this respect there are various scenarios and the main contract between the Employer and the Contractor may provide that:

  • the Contractor can freely subcontract part of the works; or
  • the Contractor can subcontract only specific part of the scope of works (for instance the electrical or mechanical part of the works); or
  • the Contractor cannot subcontract certain specific part of the works (for instance those in respect of which the Employer has provided detailed design).

In many jurisdictions, there is no direct legal relation between the Employer and the Subcontractor and the main contract provides usually the conditions upon which the Contractor can appoint a Cubcontractor. In such a case it is always advisable to pay particular attention to the wording and to the right to appoint the Subcontractor. In some cases, for instance, the Contractor might be entitled to subcontract part of the works but only to local companies specifically in countries where the local legislation provides so.

All the above issues should be generally governed by specific clauses contained in the main contract but the Contractor should also take advice on what local legislation and the governing law of the contract provide.


It is clear that the Employer (and certainly the Contractor) may suffer the consequences of a wrong selection of the Subcontractor and this may have an impact on the timing for completion or on the quality of works executed. Despite the fact that the liabilities for any default of the Subcontractor are generally borne only by the Contractor, the Employer may want to take all the necessary steps to minimize any such risk and this is the reason why in mid-big size projects (especially in EPC projects) the Employer might maintain a certain control in the selection process of Subcontractors.

In this respect, the main contract can provide that the Contractor:

  • is entitled to subcontract part of the works provided that it obtains the prior consent of the Employer; or
  • the Contractor can subcontract only to companies included in a list agreed between Employer and Contractor prior to the signature of the main contract; or
  • the Contractor can subcontract to a third party identified or selected directly by the Employer.

Very broadly, FIDIC Red and Yellow Books do not require the Employer consent for suppliers of materials or for Subcontractors already named in the contract (unless otherwise provided in the Particular Conditions) while the consent is required for other proposed Subcontractors (but the consent cannot be unreasonably withheld or delayed).

Under the FIDIC Silver Book the interest of the Employer in the selection process is more limited since the Contractor is granted more autonomy and this is the reason why there are no provisions in respect of Employer's approval in respect of Subcontractor while the Contractor has only the obligation to notify the subcontract (if so provided in the Particular Conditions).

However, all the FIDIC Books provides for the right of the Employer to nominate a Subcontractor under Sub-clause 13 [Variations and Adjustments] which involves the full power of the Employer to instruct the Contractor to appoint a specific Subcontractor balanced however with the right of the Contractor to refuse that specific Subcontractor on the basis of reasonable objections.

It is clear therefore that all such circumstances, the interest of the Employer and of the Contractor may conflict and each of them should find the right way to mitigate their potential risks.

Suggestion for the Employer

The Employer will usually seek to exclude expressly any responsibility in the selection process by inserting a specific wording so that:

"the engagement of any of the listed Subcontractor will not imply any direct relation between the Employer and the Subcontractor and will not diminish in any manner the liability of the Contractor for any failure of the Subcontractor to perform its obligations"

As mentioned above, Sub-clause 4.4 of the FIDIC Silver Book provides that "The Contractor shall be responsible for the acts or defaults of any Subcontractors, his agents or employees, as if they were the acts or defaults of the Contractor."

As said before, this will apply also on the case the Subcontractor has been selected by the Employer so the Contractor should pay specific attention in such a case.

Suggestion for the Contractor

On the other hand, the Contractor needs to consider carefully the skills, expertise and track records of the Subcontractor especially in the case the Subcontractor has been nominated by the Employer. Therefore the Contractor will need to ensure to have a full 'power' over the Subcontractor and may need to consider to have a provision in the main contract so that:

"the Contractor shall reserve the right to replace at any time the Subcontractor in case of failure by the latter to properly and timely perform its obligations under the Subcontract".

Sub-clause 4.5 of the FIDIC Silver Book provides that, upon certain conditions, the Contractor has the right to object to Subcontractor nominated by the Employer:

"The Contractor shall not be under any obligation to employ a nominated Subcontractor against whom the Contractor raises reasonable objection [...] with supporting particulars."

Some indications of the reasons why the Contractor may reject to appoint a nominated Subcontractor are listed under Sub-clause 5.2 of the Red Book but it is always preferable to specify in the Particular Conditions or in ad hoc contracts what rights the Contractor have in such respect.

In the case where the main contract does not provide for a list of potential Subcontractor but instead that the Contractor will have the right to subcontract part of the works the risk of disputes increases. Usually the appointment of a Subcontractor will be subject to approval from the Employer or, instead, the Employer shall have the right to object to the appointment of a certain Subcontractor. In such situations, it is advisable to provide in the contract a specific procedure for the appointment of the Subcontractor pursuant to which the Contractor will send a notice of appointment to the Employer who will have in turn a limited period of time to raise reasonable and grounded objections.

It is obvious that the interest of both parties is to have any such dispute resolved at the earliest convenience and this because either the Employer or the Contractor will at the end suffer the financial consequence of any delay in appointing the Subcontractor. It is therefore advisable that the main contract provides for a procedure on how to solve quickly and efficiently any potential dispute in that connection.

Suggestion for the Employer

The Employer will be interested in having details of the proposed Subcontractor so that it will have the concrete opportunity to evaluate the proposed Subcontractor in terms of technical capabilities and financial standing as well as its track record. The Employer will usually also provide a list of requirements that the Subcontractor need to fulfil for its appointment.

The Employer's need is to have the appointment of a Subcontractor in a way that the works will not be delayed/disrupted. In case of dispute, the Employer may consider inserting in the contract a provision such as that

"in case of objections in respect of the appointment of the designated Subcontractor, the Contractor shall propose a new Subcontractor within X days and, if the Employer shall have no objections in respect of the new proposed Subcontractor the latter shall be appointed. Any dispute in respect of the reasonableness of the Employer's objections shall be submitted to the [dispute resolution method] only after the Subcontractor has been appointed".

An additional clause shall deal with which party shall bear the costs arising out of the dispute resolution body decision in respect of the abjections raised by the Employer.

Suggestion for the Contractor

The Contractor on the other hand will be interested in obtaining an immediate settlement of the objections raised by the Employer on a certain Subcontractor and this mainly because the Contractor will incur additional time and expenses in finding a proposing a new Subcontractor.

The Contractor may therefore be interested in providing in the main contract that:

"any objection raised by the Employer in respect of the appointment of the Subcontractor will immediately be referred to the [dispute resolution body] and no Subcontractor will be appointed until the dispute is resolved".


The subcontract is a fundamental part of any major international contract. Specific attention should be given in the case the subcontract is selected or can be selected by the Employer as well as to any local legislation which requires the appointment of local Subcontractor.

The parties should include also a detailed procedure for the selection and appointment of Subcontractor bearing in mind that in many jurisdictions there is no direct legal relation between the Employer and the Subcontractor and therefore that any underperformance from the Subcontractor is borne by the Contractor only.

Part II of this note will address the liabilities of the Subcontractor (towards the Employer or the Contractor) while Part III will discuss about the payment of the subcontractor (Part III).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions