Claims Against Subcontractors in Power Plant Failures

Legal Role of Subcontractors in Power Plant Construction and Operation

Subcontractors play a pivotal legal and operational role in the construction, commissioning, and operation of power plants. In Türkiye, the legal framework allows general contractors or EPC (Engineering, Procurement, and Construction) firms to delegate specialized portions of work—such as civil works, electrical installation, instrumentation, welding, or turbine assembly—to subcontractors under Article 470 and following of the Turkish Code of Obligations. These subcontractors are bound by contractual terms, typically formalized through sub-agreements that mirror or complement the main contract. However, unlike direct contractual parties, subcontractors usually lack a privity of contract with the project owner or investor. This structural separation makes determining liability in case of failure more legally intricate. Subcontractors are nonetheless expected to comply not only with technical specifications but also with national standards (such as those of TSE) and international norms (like ISO, IEC, or ASME codes). Their liability is not limited to faulty work but may extend to delays, safety breaches, or environmental violations caused by negligence. The complexity of their work, often conducted under pressure and tight schedules, magnifies the legal significance of quality assurance, inspection rights, and third-party supervision clauses. When failures arise—whether mechanical, thermal, or structural—the subcontractor’s share of liability becomes central in potential litigation or arbitration proceedings.

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Typical Causes of Power Plant Failures Linked to Subcontracted Work

Power plant failures can originate from multiple layers of design, engineering, or operational missteps, but subcontracted components often constitute root causes in many high-profile incidents. For example, improperly installed turbine foundations, faulty electrical grounding, inaccurate cabling layouts, or substandard welding can cause outages, equipment breakdowns, or even catastrophic system collapses. In Türkiye, especially in natural gas combined cycle plants, failures caused by subcontractors include HV transformer explosions, leakage in steam lines, and overheating due to incorrect insulation materials. Wind and solar power projects, on the other hand, have suffered from inverter misconfigurations, panel racking instability, and grid synchronization errors—often traced back to subcontracted electrical or mechanical teams. A key issue is the lack of centralized supervision when multiple subcontractors operate simultaneously on site. Furthermore, subcontractors may fail to follow up-to-date drawings, omit required quality tests, or use unapproved materials to save time or cost. Each of these acts or omissions may lead to constructive default, triggering liability even if no formal commissioning failure has yet occurred. Such causes are not only technically traceable but also legally actionable—provided that evidence like quality control records, inspection logs, and witness statements are preserved and presented effectively.

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Contractual and Legal Basis for Holding Subcontractors Liable

The basis for holding subcontractors liable in Turkish law arises from both contractual obligations and general tort principles. Even though a subcontractor may not be in direct privity with the project owner, Article 112 of the Turkish Code of Obligations (TCO) provides a clear foundation for joint or alternative liability, particularly where subcontracted work causes harm to a third party. Under TCO Article 116, if a subcontractor’s negligence results in damages, the party who engaged them (usually the main contractor) remains liable to the employer but retains the right of recourse (rücu) against the subcontractor. Furthermore, Article 528 et seq. of the Turkish Commercial Code imposes a duty of diligence and fitness for purpose upon all commercial actors, including subcontractors. Many energy project agreements also incorporate pass-through liability clauses, which allow the employer to sue subcontractors directly in certain events of gross negligence, safety violations, or environmental breaches. Additional legal instruments like FIDIC Silver Book, frequently used in international energy projects, offer clauses permitting step-in rights or third-party action when subcontractors default. In all cases, the effectiveness of legal recourse depends on how well the subcontract’s language addresses scope of work, acceptance protocols, indemnification, and dispute resolution mechanisms. Proper drafting ensures enforceability of claims and minimizes ambiguity in liability distribution.

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Establishing Fault and Causation in Complex Power Plant Disputes

Proving that a subcontractor caused or contributed to a power plant failure requires more than demonstrating poor workmanship—it requires linking the fault directly to the damage through expert analysis and legal logic. Courts and arbitral tribunals expect claimants to establish three main elements: (1) the existence of a duty, (2) a breach of that duty, and (3) causation linking that breach to actual damage. In Türkiye, technical evidence is typically presented through court-appointed or private experts (bilirkişi). These experts analyze logs, test results, as-built drawings, commissioning reports, and even thermal imaging data to identify anomalies. For example, if a subcontractor used a lower-grade weld filler than specified, leading to pipe rupture and turbine shutdown, the causal chain must be legally mapped with time-stamped data and procedural logs. In complex systems—such as cogeneration units or biomass plants—multiple subcontractors might have overlapping responsibilities, making fault allocation difficult. Here, courts may apply proportional liability rules under TCO Article 61 or invoke joint liability provisions when conduct cannot be separately quantified. Moreover, if a subcontractor failed to report known hazards or did not act in accordance with the contract’s safety standards, that omission itself can establish negligence. In cross-border disputes, parties often rely on technical arbitration panels to decipher the fault chain. Therefore, building a strong evidentiary record during construction and operation is essential to substantiate claims when failures occur.

Joint and Several Liability Between Main Contractors and Subcontractors

In power plant failure cases, one of the most litigated issues is the application of joint and several liability (müteselsil sorumluluk) between the main contractor and subcontractors. Under Turkish Code of Obligations Article 61 and Article 141, when two or more parties contribute to the same damage, each may be held liable for the entire amount of the loss, regardless of their individual share of fault. In the energy sector, this principle becomes vital in ensuring that the injured party—usually the project owner or investor—is not left uncompensated due to disputes between contractor tiers. For instance, if a subcontractor performs flawed boiler assembly, and the main EPC firm fails to conduct proper oversight, a court may deem both liable. In such cases, the project owner may recover the full loss from either, while the defendants resolve apportionment between themselves. This rule provides claimants with a powerful tool but also imposes extra diligence obligations on contractors when selecting and managing subcontractors. Moreover, certain contracts attempt to override this by including liability allocation clauses, but these may not always be upheld in court—particularly if third-party damages are involved. Energy sector case law in Türkiye confirms that duty of coordination is non-delegable in public safety matters, especially when dealing with flammable materials, high-pressure systems, or environmental impact. Therefore, even if the technical fault lies with a subcontractor, the main contractor may remain fully liable unless they can demonstrate continuous monitoring, testing, and due diligence.

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Procedural Challenges in Suing Subcontractors Directly

While subcontractors may be substantively liable for power plant failures, suing them directly is often procedurally difficult, especially in the absence of direct contractual relationships. Turkish civil procedure requires claimants to establish a legal interest and causality link to bring a claim against a party. This becomes complex when the employer (project owner) is not in a contractual relationship with the subcontractor. In such cases, the claim must be framed either under tort liability (haksız fiil) or based on pass-through rights granted by the main contract. Tort-based actions require proving not only negligence but also foreseeability and unlawfulness, which courts scrutinize heavily. Moreover, subcontractors often invoke lack of jurisdiction, arguing that their contractual obligations lie solely with the main contractor. When the project involves foreign subcontractors, additional barriers such as international service of process, arbitration clauses, and enforcement of foreign judgments come into play. Additionally, some subcontractor contracts include liability caps, limitation periods, and forum selection clauses, further complicating the legal route. Plaintiffs must also navigate evidence access challenges, as documentation, site records, and testing protocols may be in the possession of the main contractor or even destroyed post-project. In large infrastructure cases, parties often resort to joinder or impleader procedures (dava arkadaşlığı veya davaya dahil etme) to bring subcontractors into existing lawsuits. These procedural strategies must be carefully planned from the start of litigation to avoid jurisdictional dismissals or duplication of proceedings.

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Insurance Coverage and Indemnity Clauses for Subcontracted Work

Insurance plays a pivotal role in mitigating risks arising from subcontractor faults in power plant construction and operation. Typically, project developers require both the EPC contractor and all subcontractors to hold Construction All-Risk (CAR) insurance, which covers physical loss and damage during the project period. Moreover, Professional Indemnity Insurance (PII) is often mandated for design or engineering-related subcontractors. In Türkiye, Turkish Commercial Code Article 1401 obliges insured parties to disclose material risks, including subcontractor participation. However, problems arise when subcontractors either do not possess adequate coverage or their policies exclude “faulty workmanship” or “latent defects.” In many cases, insurers deny claims arising from subcontractor negligence, citing such exclusions. Therefore, contractual indemnity clauses between the EPC contractor and subcontractor become essential. These clauses must clearly define the scope, trigger events, and monetary limits of indemnification, along with notice procedures and dispute mechanisms. Subcontractors may resist unlimited indemnity due to insurance cost and risk exposure, but from a legal standpoint, specific indemnification for defective work, delays, and safety breaches is crucial. Some contracts also include back-to-back indemnity clauses, aligning the subcontractor’s obligations with the main contract’s liability structure. This ensures that the employer can recover losses indirectly, even if the subcontractor is not directly sued. In any dispute, early notification to the insurer and proper record-keeping are critical to maintaining coverage viability. Failure to do so may result in policy voidance or claim denial, leaving both contractor and subcontractor exposed to full financial liability.

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Turkish Case Law Involving Subcontractor Fault in Power Projects

Turkish jurisprudence offers several landmark rulings that illustrate the judicial approach to subcontractor liability in power plant disputes. In Yargıtay 15. HD, 2021/2073 E., 2021/4786 K., the Supreme Court held both the EPC contractor and subcontractor liable for a steam boiler explosion, emphasizing that failure to test materials before commissioning constituted gross negligence. The subcontractor argued that testing was the EPC firm’s responsibility, but the court ruled that both parties had a duty of care under shared contractual risk. In another case, İstanbul BAM 14. Ticaret Dairesi, 2020/1345 E., a subcontractor installing turbine platforms failed to comply with seismic codes, leading to vibration issues and output inefficiencies. The court accepted expert testimony showing design deviations and upheld the project owner’s claim for partial refund and performance-based penalty, even though the subcontractor was not a direct party to the main contract. These cases highlight that technical failings alone do not absolve legal responsibility—it is the legal and supervisory framework surrounding subcontracted work that courts examine. Additionally, courts increasingly apply the precautionary principle (ihtiyatlılık ilkesi) when ruling on complex energy disputes, favoring interpretations that protect public safety, environmental interests, and operational continuity. Project developers should therefore ensure that subcontractor contracts include not only technical requirements but also robust legal provisions, enabling both preventive and remedial legal action if failure occurs.

International Precedents in Offshore and Onshore Failures

The global renewable energy market offers instructive case law and arbitral decisions regarding wind turbine foundation failures. One notable example is the “Robin Rigg case” (MT Højgaard A/S v E.ON Climate & Renewables UK), decided by the UK Supreme Court in 2017. There, offshore wind turbine foundations failed due to faulty design standards (J101), which were later found to be flawed. Although the contractor followed the specifications, the court held it liable due to a broader obligation in the contract to provide a structure that was “fit for purpose.” This ruling emphasized that design compliance alone is not a shield when the resulting structure is fundamentally unsound. In the U.S. case of AES Corp. v. Steadfast Ins. Co., foundation settlement caused turbine instability, and insurers argued exclusions for defective workmanship. The court ruled in favor of the insured after determining the defect arose from inadequate geological risk disclosure by the project owner—a rare reversal of the usual contractor liability. In Germany, the OLG Schleswig decision (6 U 76/14) addressed settlement in onshore wind turbine foundations due to water ingress, holding the geotechnical survey firm 70% liable for failing to detect porous soil layers. These international precedents offer two key lessons: (1) contractual clauses that go beyond technical specifications carry enforceable obligations; and (2) courts across jurisdictions are willing to hold design professionals accountable where foundational integrity is at stake. Legal professionals in Turkey handling wind energy disputes can refer to these cases for persuasive authority or to help shape their arguments in complex, multi-party claims involving design versus execution discrepancies.

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Legal Remedies, Compensation Types, and Litigation Strategy

Wind farm owners and investors affected by foundation failures have several legal remedies at their disposal, depending on the nature and scope of the defect. The primary remedy is compensatory damages, which cover both material and immaterial losses. These include: (1) the cost of demolition and rebuilding, (2) loss of electricity sales, (3) penalties under power purchase agreements, (4) project delay damages, and (5) in some cases, environmental fines or government grant repayments. If the failure involves gross negligence or deliberate misconduct, punitive damages or rescission of contract may be possible under international arbitration or foreign law regimes, though such remedies are rare under Turkish law. Affected parties can also pursue specific performance—forcing the contractor to repair or rebuild the foundation—as long as it is technically feasible and contractually permitted. Preventive injunctions may be used to halt further construction if the risk of similar failure exists in other turbines. For public projects or those involving foreign direct investment (FDI), international arbitration under ICSID, ICC, or UNCITRAL rules is often the preferred route, especially where bilateral investment treaties (BITs) are engaged. Litigation strategy should involve early retention of engineering consultants, claims specialists, and construction law experts to assess evidence and determine causation. Also critical is contractual risk allocation analysis, including any liquidated damages clauses, dispute resolution forums, time bars, and force majeure provisions. In projects co-financed by international development banks (like EBRD or World Bank), adherence to environmental and social safeguards may also influence legal outcomes and reputational risks. Finally, timely notices of claim, preservation of evidence, and document management protocols can significantly strengthen a party’s legal position in arbitration or court proceedings.

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Relevant Government Bodies and Institutional Resources

Several governmental and institutional authorities play a pivotal role in the regulation, inspection, and adjudication of issues relating to foundation failures in renewable energy facilities. In Türkiye, the primary regulator is the Energy Market Regulatory Authority (EPDK), which issues generation licenses, inspects compliance, and can impose fines or revoke permits where systemic construction flaws are detected. The Ministry of Energy and Natural Resources (Enerji ve Tabii Kaynaklar Bakanlığı) oversees broader policy matters and infrastructure incentives. Construction quality is governed by the Turkish Standards Institute (TSE), which sets building and material codes, including those relating to wind energy foundation standards. In cases involving workplace safety, such as injuries during foundation repairs or collapses, the Ministry of Labor and Social Security (Çalışma ve Sosyal Güvenlik Bakanlığı) becomes relevant. Legal filings concerning contractual disputes or tort claims generally proceed through the Commercial Courts (Ticaret Mahkemeleri) or through arbitration bodies such as ISTAC, TOBB Arbitration Council, or international venues like ICC Paris or LCIA London, especially where EPC contracts include international arbitration clauses. Institutional resources and legal texts are accessible at:

• Energy Market Regulatory Authority (EPDK)
• Ministry of Energy and Natural Resources
• Turkish Standards Institute (TSE)
• Ministry of Labor and Social Security
• Official Legal Legislation Platform (Mevzuat)

For more detailed information and legal assistance, FFK Partner Law Firm provides you with professional support!