The Government has announced updates to the National Fuel Plan (NFP) and provided more details on when and how New Zealand will escalate through the four Phases of the NFP.

Today NZ is at phase 1 meaning that there is no significant disruption to the supply of fuel, and no restrictions on the use of fuel are in place. While the NFP, and moving through the phases, on their own are unlikely to trigger change in law relief under NZS 391X standard form contracts, it is a “wait and see” situation as to whether steps that may be taken by the Government in Phases 3 - 4 of the NFP give rise to entitlement of contractors to claim a variation for a change in law under NZS 391X contracts.

The National Fuel Plan

The NFP guides the Government’s response, in coordination with the fuel sector, to any disruptions to fuel supply resulting from the Iran conflict. The NFP is overseen by the Fuel Security Ministerial Oversight Group.

New Zealand is currently at Phase 1 of the NFP. Phases 3 - 4 of the NFP will include progressively more restrictive measures to prioritise the distribution of fuel to certain critical industries (ie power and water suppliers and hospitals) while fuel supply disruptions continue.

Change in law relief under NZS 391X

Under the NZS 391X contracts, the effect of a change in law (ie a new or amended statute, secondary legislation, instrument or bylaw) is treated as a variation which may allow the Contractor to recover increased costs that it incurs and to be awarded an extension of time to complete the works due to effect the law change.

The NFP is a plan issued by the Director of the National Emergency Management Agency under the Civil Defence Emergency Management Act. The NFP is unlikely to trigger an entitlement to a change in law relief under NZS 391X as it is not a “legal instrument”. So, updates to the NFP or shifts between phases, are by themselves unlikely to give rise to relief to contractors under the change in law provision.

However, if NZ moves into Phases 3 - 4 and restrictions are determined to be necessary, these could be implemented by way of secondary legislation. For example, by Order in Council under the Petroleum Demand Restraint Act 1981 and such restrictions could then give rise to relief for a change in law under NZS 391X contracts.

What would such a Variation cover?

Determining a contractor’s entitlement to a variation is unlikely to be straightforward. The conflict in the Middle East has resulted in an increase in global fuel prices which has undoubtedly increased construction costs in New Zealand and may cause supply chain issues for some materials. It will be for the contractor to establish that any cost increases or delays have resulted specifically from the relevant law change, as opposed to the effects of the conflict on global fuel prices more generally.

Get in touch

If you have any questions about the potential implications of steps taken by the Government that might trigger the ‘change in law’ provisions, or any other questions about the implication of the fuel crisis on your construction contracts or projects, please contact one of our experts.