Concrete Arguments

Payment hold-ups are run-of-the-mill in the construction business but a situation where a main contractor is denied payment despite being co-investor is rare. Such was the predicament Bouygues Polska found itself in when they got involved in Wola Park. We talk to Jean-Pierre Coudrin, President of Bouygues Polska

You have said that Wola Park's investor had long been in arrears with the payment for the work you did for them. What's the situation now? [the interview took place in the second half of December 2002]

- Our client, Wola Park, still owes us nearly EURO 30 mln for our services, which is why we've requested arbitration from the International Chamber of Commerce in London. As far as our subcontractors are concerned, we have taken all possible measures to fulfil our financial obligations towards them, regardless of whether or not we received payment from Wola Park. We've been cooperating with them [subcontractors] for a long time now and appreciate the tough situation they have found themselves in. As for our employer, their stance has become completely irrational.

As far as you're concerned, the amount due from the investor comes to EURO 30 mln. How much has been paid so far?

- Up to now they have paid EURO 60 mln and taken out EURO 11 mln as a bank guarantee. The EURO 30 mln I'm talking about does not include interest and it needs to be borne in mind that they are already several months behind some of the deadlines.

When did you receive your last payment?

- No invoice has been paid since July.

Why didn't you stop construction?

- We are a huge, international construction company and once we sign a contract we always see it through to the end.

What seems to be most astonishing about this case is the fact that Bouygues has always been referred to as co-shareholder of CERPF, in other words, co-investor of the whole undertaking.

- Four years ago, Bouygues came up with the idea of investing in projects such as Wola Park: that is financing and constructing retail centres in Central Europe. The idea had some other adherents such as Lehman Brothers, Ivanhoe Cambridge and Jones Lang LaSalle, who joined forces under the umbrella name CERPF, and since the idea originally came from Bouygues, we also went in with around 15% of the shares. We are represented on the management board of CERPF but the company is headed by someone from Lehman Brothers.

How does CERPF justify its conduct?

- They claim that the work hadn't been completed for the opening of the centre in mid-September, yet they'd decided to launch it then anyhow and, as far as we're concerned, it's been doing fine. This is why I don't see how they can claim that the building is unfinished. Furthermore, according to the contract we weren't obliged to complete the work until the second half of October. But we had the project ready seven weeks before the deadline. It goes without saying that this required a huge amount of work from us as well as our sub-contractors. And what did we get in return? A refusal of payment. In these circumstances our only hope is for the courts to settle the dispute as soon as possible. I hope for a ruling at the beginning of next year.

What was your rapport with CERPF during the construction period?

- We had barely any contact at all.

How can that be?

- Because we were commissioned by Wola Park and not by CERPF.

In that case, what was your relationship with them?

- I'd like to find the appropriate word. I think our relations could be described as cold. It is beyond our comprehension how a client who signed a contract based on the FIDIC procedures could fail to take it seriously. I think that other companies involved in the investment have also found themselves in a difficult situation. EC Harris, for instance, who are a substitute investor, don't want to sign the 'acceptance of work' certificate, and Lehman Brothers, who head the undertaking, are earning themselves a reputation as a firm which doesn't fulfill its obligations.

Has Wola Park proposed any conditions for settling the conflict?

- No, it hasn't.

Could it be that you are not negotiating towards the resolution of this conflict at all?

- No. Our lawyers are conducting the talks.

You mentioned that you couldn't imagine further cooperation with CERPF.

- Certainly not under such circumstances. We've lost our trust in this business partner.

Is this your personal opinion, or the opinion of Bouygues' management in France?

- I believe that I am expressing the management board's position in France.

Lehman Brothers also operate in your country. Does this mean that you won't cooperate with them there either?

- By saying that we can't cooperate under such circumstances, I'm talking about the way CERPF was established and functions. I feel that this company is run badly. I'm not referring to the shareholders and I have no complaints about Lehman Brothers.

But isn't it so, that if Lehman Brothers head CERPF the responsibility for the whole situation lies with them?

- Possibly only one or two people are responsible for the whole predicament - the person who runs the entire undertaking i.e. the President of CERPF, and the President of Wola Park. After all, our conflict with CERPF didn't arise accidentally. Somebody must have triggered the situation.

In your opinion, what arguments is the investor going to use in arbitration?

- Our job is to construct reliable and durable buildings. Maybe someone could compare two buildings and say that some of their parts differ slightly or have a different design. However, the building stands, it complies with all standards, and it can be easily verified that we have fulfilled all our contractual obligations. I believe that the attack on Bouygues which, I feel, is a form of defence against accusations of payment failure, isn't going to pay off for CERPF in the long run. Concrete is stronger than flawed arguments.