The fate of the rebus sic stantibus clause

Nature abhors a vacuum. From the point of view of classical physics – true. First there was Euro 2012, and then there was asphalt, steel, COVID-19, war. Adding to this periodic – to put it mildly – “turbulence” in prices, caused by the lack of systemic planning in awarding public contracts by the largest “employers” on the market, it is difficult to say whether the construction market is more often stable or more often unstable.

Only a dozen years have passed since Euro 2012, several shocks in the construction market later, Polish courts have considered and continue to consider cases regarding the indexation of remuneration in construction contracts. Although the problem of price instability in the construction services market has been recognized in several judgments of common courts, it is difficult to clearly state what circumstances should be considered “extraordinary” and “unforeseeable” and what loss is “gross”.

In response to market needs, the new Public Procurement Law introduced the obligation to include indexation clauses in construction contracts. The dynamics of changes in the content of art. 439 PZP also gives food for thought – while initially such an obligation applied to construction contracts concluded for a period longer than 12 months, from November 2022 this period has been shortened to 6 months. This seems to illustrate well the rapidly changing conditions in which construction contracts are implemented.

Almost simultaneously, public contracting entities increased the limits on contractual indexation. Starting from the most common version of the model construction contract, which provides for +/- 1% indexation in old contracts, we currently have a contractual indexation of +/- 10-15% of the contractual remuneration.

2024 was not an easy year for the construction industry – market participants are hopeful for the next year and a larger volume of public tenders. At the same time, there is also concern among contractors whether the accumulation of tenders will again lead to sudden price increases.

However, the question is – how much space do public contracting entities still have to further increase the contractual indexation threshold? How will contractors show significant losses in the face of the current, potentially even more favorable, indexation clauses?

Given the current contractual indexation thresholds and the dynamic past 12 years in the construction sector, it will be increasingly difficult for construction companies to pursue indexation claims based on the rebus sic stantibus clause. How big must the loss be at 15% contractual indexation for it to become significant? Will subsequent, drastic price increases on the construction market continue to be considered unpredictable?

In the current jurisprudence “vacuum”, a new trend is becoming visible. When formulating and resolving indexation claims, the “extraordinary” rebus sic stantibus clause may play an increasingly smaller role in the coming years. I base this view on current market observation and the already noticeable change in the practice of companies from the construction sector – building indexation claims based on classic, “ordinary” solutions.