Claims for Incomplete Energy Project Deliveries

What Constitutes an Incomplete Energy Project Delivery?

Incomplete energy project delivery refers to situations where a power generation, transmission, or distribution project is not finalized according to the specifications, timeline, or performance expectations outlined in the original contract. This may include partial commissioning of the facility, missing components (such as switchgear or monitoring systems), failure to obtain operating licenses, or an inability to deliver the expected energy capacity. In the context of Turkey’s energy sector—where public-private partnerships (PPPs) and Engineering, Procurement, and Construction (EPC) contracts are prevalent—such incomplete deliveries are not uncommon. For example, a solar power plant may be built with fewer panels than agreed, or a wind farm may lack grid connection infrastructure. Legally, this constitutes a breach of contract under Turkish Code of Obligations No. 6098, triggering a right to claim compensation for any financial or operational damage caused. Particularly where the investor or project beneficiary is deprived of anticipated energy production, income, or incentive eligibility (such as YEKDEM mechanisms), the incomplete delivery results in both direct and consequential losses. The definition also covers cases where the infrastructure exists physically but lacks key authorizations from EMRA (EPDK) or the Ministry of Energy, rendering the project unusable. Therefore, determining incompleteness is not just a matter of physical structure but of functionality, legal operability, and economic viability. Early legal analysis of project delivery clauses and scope-of-work definitions is critical for identifying breaches and formulating claims.

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Key Legal Grounds for Filing Claims

Under Turkish law, the primary legal basis for claims arising from incomplete energy project deliveries lies in the Law of Contracts (Turkish Code of Obligations No. 6098), particularly Articles 112 to 126 which address breach of obligation, delay in performance, and impossibility. If the contractor or developer fails to deliver the energy project in the agreed form, within the agreed timeframe, or to the expected performance level, the counterparty may seek compensation for damnum emergens (actual loss) and lucrum cessans (loss of expected profit). In addition to contractual remedies, public law elements may apply—particularly where state-owned land, licenses, or subsidies are involved. Article 5 of the Public Procurement Contracts Law and relevant provisions in the Renewable Energy Law No. 5346 may be invoked where the breach affects eligibility for feed-in tariffs, capacity rights, or licensing. Furthermore, if incomplete delivery creates risk to public safety (e.g., electrical hazards, grid instability), administrative sanctions may be imposed by EPDK or the Ministry of Energy and Natural Resources. These legal grounds also enable the aggrieved party to claim penalties, rescind the contract, or enforce specific performance, compelling the developer to complete the works at their own cost. In arbitration settings, claims are often framed under FIDIC Red Book or similar standardized contract terms which include detailed provisions on delays, performance bonds, and handover milestones. Hence, both public and private law instruments provide avenues for relief depending on the structure of the agreement and nature of the breach.

Assessing Financial Loss Due to Incomplete Project Delivery

One of the most critical steps in asserting legal claims related to incomplete energy projects is the proper calculation and documentation of financial loss. Under Turkish law, especially pursuant to Articles 112 and 122 of the Turkish Code of Obligations, the claimant is entitled to seek compensation for both actual losses and loss of profits. Actual losses may include expenditures made in reliance on the completion of the project—such as land improvement costs, interconnection fees, and payments made to subcontractors or consultants. More complex, however, is the assessment of lost future revenues resulting from delayed commissioning or incomplete capacity. For instance, in a solar power plant project, if delivery is only 80% complete, and the missing 20% cannot be connected to the grid, the investor may miss out on significant production-based incentives under the Renewable Energy Resources Support Mechanism (YEKDEM). Courts often require independent financial expert reports detailing these missed revenues using reasonable forecasts and industry benchmarks. In some cases, opportunity costs are also factored in—such as the cost of alternative power procurement or failure to meet contractual supply obligations. Furthermore, if incomplete delivery affects the investor’s eligibility for loan disbursements or triggers loan repayment defaults, these damages can also be claimed, provided sufficient causality can be shown. Thus, the legal strategy must be supported by a robust financial dossier that goes beyond basic receipts and contracts, and includes forward-looking impact assessments, discounting methods, and scenario analyses, all to prove the true extent of the loss.

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Contractor and Subcontractor Liability in EPC Structures

Incomplete delivery of energy infrastructure projects often arises from failures across a complex chain of EPC (Engineering, Procurement, and Construction) actors, particularly subcontractors responsible for specific components. In Turkey, most large-scale projects are executed under EPC contracts, where the main contractor assumes turnkey responsibility. However, performance failures often stem from inadequately managed or underperforming subcontractors, such as civil works firms, cable laying crews, or SCADA integrators. Legally, the main contractor bears joint and several liability (müteselsil sorumluluk) for the acts and omissions of subcontractors under Article 116 of the Turkish Code of Obligations and standard FIDIC clauses. This means the project owner or investor may file the entire claim against the EPC contractor, who then has recourse against subcontractors through indemnity clauses. In cases where subcontractor fault is direct and provable—such as failure to install grounding, transformer malfunction, or non-compliant materials—the injured party may also sue the subcontractor directly, especially under tort liability principles. Many disputes arise from scope ambiguities or missing documentation, highlighting the need for crystal-clear subcontractor scopes of work, milestone definitions, and final acceptance procedures. Turkish courts generally scrutinize whether the EPC contractor exercised due diligence in selecting, supervising, and auditing the subcontractors. Thus, well-drafted risk allocation and supervision clauses in EPC agreements are crucial not only for minimizing risk, but also for enhancing the strength of claims when things go wrong.

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Role of Force Majeure and Pandemic Delays

A common defense raised by contractors in incomplete project delivery claims involves force majeure—unforeseeable events that prevent the performance of contractual obligations. In the context of energy projects in Türkiye, especially following the global COVID-19 pandemic, many developers have cited global supply chain disruptions, shipping delays, and lockdowns as justifications for incomplete work. Turkish law recognizes force majeure both through general principles of law and specific clauses in EPC contracts. Article 136 of the Turkish Code of Obligations provides relief where performance becomes impossible through no fault of the obligor. However, mere difficulty or increased cost does not qualify; the event must be both unforeseeable and unavoidable. Courts examine whether the contractor took adequate mitigation steps, such as sourcing from alternative suppliers or applying for deadline extensions in due time. In the pandemic context, courts have acknowledged the legitimacy of certain delays but still require proof that these events directly prevented completion, especially where significant portions of the project were already completed. Importantly, if a contract has explicit force majeure clauses, courts give primacy to these over general law. For example, a clause that specifies delays beyond 90 days as grounds for termination or liquidated damages will be enforced as long as it’s not contrary to public order. Therefore, force majeure defenses are viable but must be backed by evidence, timely notification, and reasonable mitigation efforts. Otherwise, the contractor remains liable for late or incomplete delivery.

Remedies Under Turkish Civil and Commercial Law

When an energy project is not delivered as agreed, Turkish legal framework offers multiple remedies rooted in both civil and commercial law doctrines. Firstly, Article 112 of the Turkish Code of Obligations (Law No. 6098) grants the right to claim compensation for non-performance, while Article 125 allows the aggrieved party to either rescind the contract or demand specific performance. In practice, courts often require the claimant to choose between rescission and enforcement—but allow interim relief in urgent situations (e.g., asset freezing or project handover suspension). Where the project falls under commercial jurisdiction—such as energy generation for resale—the Turkish Commercial Code (TCC) supplements remedies with provisions related to good faith in commercial conduct, duty to inform, and loss minimization. Furthermore, if the incomplete delivery disrupts third-party energy sale contracts, the claimant may also pursue claims under contractual chain liability, seeking damages for breach of dependent obligations. If there is clear intent or gross negligence—such as deliberate delay to trigger cost escalations or benefit from shifting market prices—penal clauses and interest payments become applicable. Additionally, temporary injunctions and provisional seizure (ihtiyati haciz) are available to protect the claimant’s interests pending trial. In cross-border EPC projects or those involving foreign investors, international arbitration clauses often apply, which recognize Turkish substantive law but allow procedural flexibility. Overall, Turkish legal infrastructure provides strong tools for holding project developers accountable, especially when the contract and execution documents are well-prepared and supported by evidence.

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Regulatory Oversight and Licensing Risks

Incomplete project deliveries often intersect with Turkey’s energy licensing and oversight regimes, which are tightly regulated by the Energy Market Regulatory Authority (EPDK). Every generation or transmission project must undergo strict scrutiny in terms of pre-licensing, production licensing, technical approvals, and commissioning notifications. When a project is delivered incompletely, even in a physical sense, it may lack key operational licenses, causing legal and financial blockages. For instance, a wind project with only 70% of turbines erected may not receive EPDK’s commissioning approval, thus remaining ineligible for YEKDEM (Renewable Energy Support Mechanism) tariffs. Similarly, an incomplete gas plant may fail to pass grid synchronization tests, and hence be denied entry into the market operation platform. In such cases, the licensing authority may suspend, terminate, or require reapplication, which can reset incentive eligibility windows or trigger regulatory penalties. According to EPDK’s guidelines and Electricity Market Licensing Regulation, license holders are obligated to inform the Authority about project progress, and incomplete delivery without approved extensions may be interpreted as license abuse or non-compliance, leading to fines or revocation. Therefore, claimants facing incomplete project delivery must also account for the regulatory implications, including missed incentive rights, non-refundable guarantees, and reputational harm. Engaging with EPDK early, submitting formal complaints, and requesting project audits or extensions are strategic moves that not only reinforce legal claims but may also unlock remedial actions at the administrative level.

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Insurance Coverage for Partial Project Failures

Insurance plays a crucial role in the energy sector, particularly for large infrastructure projects involving high capital exposure. In the case of incomplete project deliveries, Construction All Risks (CAR) or Erection All Risks (EAR) policies are typically in force, offering protection against physical damage, third-party claims, and delayed start-up. However, incomplete delivery due to contractor default, logistical failures, or administrative non-compliance may fall outside the scope of standard coverage, especially where there is no physical damage but rather contractual underperformance. Still, claimants may pursue recovery under Advance Loss of Profit (ALOP) or Delay in Start-Up (DSU) clauses—provided that the delay or non-completion results from an insured event. Additionally, Professional Indemnity (PI) insurance may be applicable if the failure arises from design errors, consultant negligence, or supervision lapses. Turkish insurance law, particularly under the Insurance Law No. 5684 and regulated by the Insurance and Private Pension Regulation and Supervision Agency (SEDDK), allows for dispute resolution via the Insurance Arbitration Commission (Sigorta Tahkim Komisyonu). This body enables quicker, cost-effective resolution of insurance claims without the need for full litigation. Therefore, claimants should always assess whether insurance coverage exists not only for construction defects but also for non-completion, and carefully review policy exclusions, notification deadlines, and proof of loss requirements. A strong insurance claim can often complement contractual damages claims and significantly enhance recovery in incomplete project cases.

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