Asbestos in Wind Turbine Brake Pads: Remedies for Principals, EPC Contractors and OEMs

Introduction

Since 31 December 2003, Australia has maintained a total ban on the importation of asbestos. It might therefore seem improbable that asbestos would appear in components of modern wind turbines. Yet, multiple wind farm operators have recently confirmed that brake pads used in internal service lifts (in-tower lifts used for technicians) – supplied by 3S Industry in China – contain asbestos.

While the airborne risk to the public has been reported as low, the discovery raises complex legal questions about liability after practical completion. It brings into focus whether warranties, indemnities and enforcement mechanisms can be relied upon years after commissioning. What remedies may be available under contract or statute? How do these differ across the tiers of the supply chain and what happens when recovery involves overseas suppliers?

This article examines those questions. It explores what legal remedies may exist for principals, EPC contractors and original equipment manufacturers (OEMs) once a project is complete and asbestos is discovered in imported components. It considers how outcomes may turn on the precise wording of contracts, the survival of warranties and the practical challenges of pursuing claims against foreign suppliers. Finally, it looks at cross-cutting risks such as insolvency and insurance gaps and outlines contractual and control measures that may help prevent similar issues in future projects.

Principal/Operator: Remedies that may be available (depending on the contract)

The principal’s recovery options depend heavily on the procurement pathway – whether through a standalone supply agreement, a nominated supplier arrangement or an EPC turnkey contract. Each structure carries different warranty and indemnity implications and the discovery of asbestos could qualify as a latent defect. However, the effect of these clauses may depend on the precise drafting, any limitations of liability and the extent to which they survive completion.

Standalone supply agreement with OEM or supplier

The principal may assert breach of warranty (e.g., non-compliance with Australian law, no hazardous substances) and seek damages and/or indemnity for its losses including testing, removal, shutdown costs and lost profits. If contractual limitations restrict recovery, the principal may explore product liability or negligence claims against the OEM or supplier.

Nominated supplier (tripartite or free issue)

Where the principal used a nominated supplier structure, tripartite arrangements may provide direct warranties and step in or direct recourse rights against the OEM or supplier. The principal may require the EPC contractor to facilitate removal/replacement while pursuing the nominated supplier for indemnity, but success may hinge on whether warranties and indemnities survive completion, are assignable and treat hazardous materials as a defect category. Our recent eBook, Risks in Renewable Energy Subcontracts for Specific Subcontractors, discusses the interface and warranty risks inherent in nominated supplier models and how back-to-back obligations may be structured to preserve long tail rights.

EPC turnkey (full wrap)

Under an EPC contract, the principal may rely on compliance warranties and latent defect provisions to claim against the EPC contractor for supplying (or allowing into the works) a prohibited material or defective product. The EPC contractor’s obligations may include rectification at its cost and an indemnity for related expenses – again subject to exclusions, caps on liability and survival durations. If retention money, bonds or parent company guarantees have expired, the principal’s only realistic recourse may be litigation; otherwise, any remaining security may be called upon to fund remediation.

Insurance

In parallel, the principal may consider notifying insurers under property, public liability or environmental impairment policies, recognising that policy triggers, pollution exclusions and the distinction between occurrence-based and claims made coverage may limit recovery. If coverage responds, the insurer may pursue subrogation rights against the OEM/supplier or EPC contractor. The alignment (or misalignment) between contractual indemnities and insurable risks – highlighted in our eBook – is often pivotal to whether insurance can meaningfully support recovery.

Where the operator is not the original developer

Where the operator is not the original developer, remedies may also depend on the contractual relationship between the operator and the principal at the time of the asset transfer. If the operator acquired the wind farm under a sale agreement, the scope and survival of warranties and indemnities in that transaction may be critical. For example, if the sale contract included an assignment of construction warranties, the operator may have direct recourse against the OEM/supplier or EPC contractor.

Conversely, if those rights were not assigned or were time barred, the operator’s recovery may be limited to claims against the principal or seller under the sale agreement, which itself may contain liability caps or exclusions. The principal may then seek to make corresponding claims against the OEM/supplier or EPC contractor. This creates an additional layer of complexity because the operator’s remedies may hinge not only on the original construction contracts but also on the terms of the asset transfer.

EPC Contractor: Post completion remedies that may exist

Assuming practical completion and handover have occurred, the EPC contractor may look downstream to enforce back-to-back warranties and indemnities against the OEM and if accessible, against the lift/brake supplier.

Where the EPC contractor gave the principal compliance and hazardous materials warranties, it may seek recovery from the OEM or supplier for breach of warranty, including the principal’s losses and the EPC contractor’s own costs of testing and removal. The viability of that recovery may rest on whether the OEM’s or supplier’s warranty regime survives completion, the extent of any liability caps and whether hazardous materials are expressly captured as defects. In the absence of sufficient contractual rights, the EPC contractor may pursue product liability or negligence claims against the OEM or supplier. The EPC contractor may also consider whether insurance responds, in much the same way as described above for the principal.

OEM (Turbine Supplier): Recovery from original overseas supplier in China

For the OEM whose lift assemblies included brake pads sourced from 3S Industry or similar suppliers, the key question is upstream recovery. The OEM may rely on the purchase agreement and its supplier quality and compliance commitments to claim breach (e.g., “asbestos free”, compliance with importing country laws, adherence to banned substances lists). It may seek recovery from the supplier for the principal’s and the EPC contractor’s losses as well as its own costs of testing and removal. However, the likelihood of meaningful recovery will depend on several hurdles:

• Governing law and jurisdiction. If the purchase contract is governed by Chinese law with disputes heard in Chinese courts or CIETAC arbitration, the OEM may have to prosecute in China. Even if the contract provides for offshore law and jurisdiction, enforcing a foreign judgment in China may be challenging without a reciprocal arrangement. By contrast, arbitral awards may be more readily enforceable under the New York Convention (to which China is a party).
• Proof of breach and causation. The OEM may need robust materials testing (from accredited labs) and chain of custody evidence to show the pads contained asbestos at the relevant point when delivered.
• Supplier solvency and asset location. Recovery may be constrained if the supplier is thinly capitalised or assets are situated in jurisdictions where enforcement can be difficult. Even if liability is established, collection may require locating attachable assets, pursuing bank accounts and navigating China’s enforcement system. Parallel reputational and regulatory pressures on suppliers may support settlement leverage but is not guaranteed.
• Contractual caps, exclusions and time bars. Supplier agreements often include liability caps, exclusions of consequential loss and short claim notice periods. The OEM’s ability to recover full costs may be curtailed unless hazardous materials are carved out from caps or categorised as wilful misconduct/fraud.

Cross cutting considerations: Foreign procurement risk, security/insurance and insolvency

Because asbestos remains legal in some jurisdictions and the Australian Border Force operates a risk based compliance model, at risk components may enter despite a total domestic ban. This divergence in standards means contractual diligence and testing obligations may be more critical than reliance on border controls alone.

Post completion, if retention money, bonds or parent company guarantees have expired, insurance may be the only non-litigious lever – subject to exclusions and alignment with indemnity clauses. Conversely, if counterparties (EPC contractor, OEM or the supplier) have dissolved or become insolvent, claims may be practically uncollectable, placing greater emphasis on long tail security negotiated at contract formation rather than after defects emerge. Our eBook discusses these long tail risks across subcontractors and the misalignment commonly seen between indemnity scopes and available insurance.

Future proofing: Mechanisms that may protect principals and contractors

To strengthen long tail protection for health and safety defects, parties may adopt the following mechanisms at the outset:

• Parent company guarantees and latent defect bonds that survive for 10–20 years and expressly cover hazardous materials and regulatory breaches, with clear assignability and step in rights if the EPC contractor or OEM ceases to exist.
• Tripartite warranties with explicit survival clauses from nominated suppliers, so the principal may enforce directly against the OEM or supplier if the EPC contractor is out of the frame.
• Hazardous materials clauses requiring zero asbestos compliance supported by accredited laboratory certification, audit/access rights and indemnity triggers upon detection.
• Insurance alignment so that indemnities reflect insurable risks. Extended reporting and discovery periods and additional insured endorsements may improve the chance of cover responding to late emerging defects.
• Supplier QA and arbitration design: Tiered factory audits, batch traceability and arbitration seats/venues that may maximise enforceability against overseas suppliers, recognising the realities of cross border judgment enforcement.

Conclusion

On completed wind projects, asbestos discoveries in lift brake pads present legal questions more than scheduling ones. Principals, EPC contractors and OEMs may have meaningful remedies, but only to the extent their contracts and insurance policies have been drafted to preserve long tail rights and to navigate the realities of overseas enforcement. The incident is a tangible reminder that hazardous materials verification, robust warranty survival and enforceable recourse remain important to renewable energy projects.

The asbestos issue also underscores the need for proactive risk management at contract formation. Key measures include drafting warranties and indemnities that expressly cover hazardous materials and survive for extended periods, securing long-tail protections such as parent company guarantees and latent defect bonds and aligning insurance coverage with contractual obligations. Incorporating rigorous supplier audits, accredited testing and enforceable dispute resolution mechanisms can significantly reduce exposure. Ultimately, prevention through robust contractual and quality assurance frameworks is far more effective than relying on post-completion remedies.

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.