Legal Framework for EPC and Turnkey Projects
Statutory Compliance Matrix
| Regulatory Domain | Primary Statute | Key Compliance Requirement |
|---|---|---|
| Contractual Validity | Contract Act 1872 | Section 10 (Lawful Consideration) & Section 73 (Damages) |
| Foreign Remittance | Foreign Exchange Regulation Act 1947 | Section 18 (Restriction on payments to non-residents) |
| Taxation (WHT) | Income Tax Act 2023 | Section 89 & 120 (Deduction at source for contractors) |
| Dispute Resolution | Arbitration Act 2001 | Section 12 (Appointment of Arbitrators) |
The FIDIC Silver Book in Bangladesh
In Bangladesh infrastructure (Power, Rail, Bridges), the FIDIC Silver Book (EPC/Turnkey) is the industry standard. Unlike the Red Book, the Silver Book shifts the majority of the risk to the Contractor, making it ideal for Private Finance Initiative (PFI) and Independent Power Producer (IPP) projects. However, Particular Conditions must be drafted to align with Section 28 of the Contract Act 1872 regarding the restraint of legal proceedings.
Key Procedural Requirements
- BIDA Registration: Foreign EPC contractors must register their branch or project office with the Bangladesh Investment Development Authority (BIDA) as per the BIDA Act 2016.
- Taxation: Under Section 120 of the Income Tax Act 2023, the project owner (Employer) is mandated to deduct tax at source (TDS) from payments made to the EPC contractor, typically ranging from 5% to 7.5% depending on the contract value.
- Performance Security: Mandatory under Rule 27 of the Public Procurement Rules 2008, usually set at 10% of the contract price, issued by a scheduled bank in Bangladesh.
Consult Barrister Liton Asaduzzaman Sarkar
For vetting EPC contracts, FIDIC Particular Conditions, or navigating BIDA/Bangladesh Bank approvals.
Schedule Scoping SessionFrequently Asked Questions
Is international arbitration enforceable for EPC disputes in Bangladesh?
Yes. Under Section 45 of the Arbitration Act 2001, Bangladesh courts recognize and enforce foreign arbitral awards, provided the seat is in a country that is a signatory to the New York Convention.
What is the statutory limit for liquidated damages in EPC contracts?
While the Contract Act 1872 (Section 74) allows for reasonable compensation, Bangladesh courts generally uphold liquidated damages capped at 10% of the total contract value, consistent with Public Procurement Rules 2008.
Are EPC contractors exempt from VAT?
Generally, no. Under the Value Added Tax and Supplementary Duty Act 2012, EPC services are taxable, though specific exemptions may apply for government-approved mega-projects under SROs issued by the NBR.
◆ Related Statutory Guides & Practice Insights
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