Small reactors, big disputes? Managing construction disputes on SMR projects in Southeast Asia

Recent atomic trends in Southeast Asia

With Southeast Asia's energy consumption expected to reach 1589 Mtoe by 2045, the region is increasingly exploring nuclear power projects to meet this demand, while achieving net-zero emissions ambitions. Indonesia, for example, aims to generate 10 gigawatts of nuclear power by 2040, with contracts expected to be awarded in the next five years and its first reactor planned to come online as early as 2030.¹  Vietnam has recently announced similar targets, with plans for its first nuclear power plants, with a combined capacity of 6.4 gigawatts, to come online between 2030-2035.²  Similar plans have been announced across the region. 

Whilst nuclear energy offers significant opportunities for the region, their unique nature (see our earlier article) can present issues and disputes of a nature unlike those on traditional power projects. These must be accounted for to ensure the successful delivery of nuclear power projects.

Potential advantages of deploying SMRs in Southeast Asia

According to the International Atomic Energy Agency (IAEA) definition, small modular reactors (SMRs) are advanced nuclear reactors with a capacity of up to 300 megawatts per module.³  Whilst SMRs are still in their infancy, their size and design may offer several advantages over traditional nuclear reactors (which typically produce more than 1 gigawatt of electricity), making SMRs a potential long-term option for meeting increasing energy demands and net-zero targets in the region.

In particular, SMRs may provide the following advantages: 

• Scalability: Multiple SMRs can be combined to scale energy output. The modules can be interconnected gradually, so reducing upfront financing costs and potentially opening the nuclear energy market to smaller economies in the region.
• Construction and deployment: Theoretically, SMRs may be constructed and brought online more quickly than traditional reactors. This is partly because key elements of SMRs may be prefabricated, and their modular design can allow for more rapid and flexible deployment. 
• Flexibility of the site: Another advantage of SMRs is the flexibility they offer in terms of site location. Their relatively compact size allows them to be sited in more remote or smaller locations, providing energy solutions to regions that may not be suitable for larger nuclear reactors (for example, Singapore which has limited available land).

Notably, SMRs are also not limited to onshore sites. Several Southeast Asian countries, including Malaysia, Vietnam, and Thailand, are exploring both land-based and floating SMRs, whilst Indonesia has already submitted an application to host a floating SMR.⁴

Potential disputes arising from the delivery of SMRs

The development and construction of any nuclear plant will be technically and financially complex, and new projects in Southeast Asia are likely to face various challenges, and potentially disputes, especially given that the region does not have an established history of nuclear power (in contrast to regions such as North Asia, Europe and the US).

In the context of SMRs, the following types of disputes are particularly likely to arise:

• Regulatory compliance: The regulatory framework governing SMRs – and nuclear power plant projects more broadly – is significantly more onerous than that applicable to, for example, conventional thermal power plants which have historically tended to be more prevalent in the region. Nuclear regulations are often based on international standards issued by the IAEA and implemented domestically by national regulatory bodies. The lack of Southeast Asian precedents may make it difficult for project parties to predict local trends. Disputes may therefore arise in relation to the applicable design and safety standards and whether these have been achieved. In the case of floating SMRs to be deployed and operated in international waters, additional licensing and regulatory challenges are likely to arise, requiring alignment between regulators from multiple jurisdictions.  
• Construction delays: The International Energy Agency estimates that nuclear projects which started between 2010 and 2020 are on average three years late, reflecting the challenging nature of these projects.⁵  Delays may result from a range of factors, including delayed regulatory approvals, delays in securing suitable sites, and project delivery delays relating to the implementation of emerging technology and supply chain disruptions. These can lead to disputes over project timelines, cost overruns, and liability. Whilst the construction period for individual SMR modules may theoretically be shorter than traditional nuclear plants, there are certain features of SMR projects, such as the gradual connection of multiple SMR modules, which can present unique interface challenges and potentially extend the overall project schedule. 
• Defects claims: As with most emerging technologies, the use of SMRs poses a greater risk of defects-related claims arising (for example, non-conformities in the works, completion delay due to re-design, or the cost of revising deficient designs during the design development phase) and added complexity in such disputes. Further, the fact that the relevant technology is not yet widely proven (there are no operational SMRs in Southeast Asia at present) may present difficulties in identifying the precise cause of a defect, giving rise to disputes over whether a defect stems from, for example, design, construction, or material selection. Further, since SMRs may be prefabricated and subject to extensive testing and quality assurance before being delivered to site, defects claims could arise in the early-to-mid stages of the project and/or be attributed to works during this phase.
• Contractual disputes: Despite the technical and regulatory complexity of SMR construction, they remain susceptible to many of the same contractual disputes seen in other construction and infrastructure projects. These may include disagreements over the interpretation of contractual obligations, performance standards, and risk allocation among project stake holders – such as contractors, suppliers, operators, or consortium members – depending on the project's contractual structure. 

Practical steps to avoid or de-escalate disputes

As with any construction project, the successful delivery of SMR projects will largely depend on the prompt and – if possible – amicable resolution of disputes. To do so, parties involved in SMR projects should consider adopting proactive dispute avoidance and de-escalation strategies such as the following:

• Collaborative contracting: As SMR projects are largely untested in Southeast Asia, a greater co-operative working relationship between the project owner, contractors and consultants may support the successful delivery of such projects, as opposed to the adoption of traditional procurement frameworks (see our previous articles on this framework here and here). Early warning mechanisms and no-fault provisions could also allow parties to resolve design and construction deficiencies at the early stages of the project with minimal impact on completion timelines.
• Realistic financial budgeting: Given the high degree of development and construction risk, care will need to be taken in adopting a realistic approach to financial modelling and budgeting, with the understanding that SMR projects may be ill-suited to a fixed price lump sum pricing model. Alternative forms of pricing may need to be adopted to avoid placing an inappropriate level of financial risk on contractors.
• Clear contractual agreements: It goes without saying that the rights, obligations and liabilities of parties to any construction contracts should be properly defined. Contracts should be clearly drafted in sufficient detail, in particular to address the cost and time impacts of emerging SMR technology and broader project delivery elements such as delays by authorities, so minimising the risk of any misunderstandings and providing a sound basis for resolving disputes.  Care will need to be taken to ensure appropriate risk allocation, and that technical requirements are carefully scrutinised. 
• Quality control: Care will also need to be given to implementing stringent quality control measures within construction contracts to reduce the risk of defects and ensure that the works meet the required standards. This will be particularly important within markets where there is a limited pool of local civil contractors with experience of working to the more stringent requirements necessary for nuclear power projects.
• Regular communication: Project stakeholders, including the relevant regulatory bodies, will need to engage in regular, open dialogue from the outset to identify and address potential issues early and prevent disputes from escalating. National regulators will need to seek support from the IAEA and other international regulators with sufficient experience of overseeing the development of nuclear projects to ensure that projects are not unduly held up due to 'decision paralysis' at the regulatory level. 
• Claims management procedures: Compliance with formal claims management procedures should facilitate the early detection, notification, mitigation, and resolution of potential issues. Consideration should also be given to the use of a standing dispute avoidance board to help parties resolve issues at an early stage and avoid projects being adversely impacted by outstanding claims. 

Nuclear power projects are inherently high-risk projects, typically involving higher levels of technical, financial, regulatory and political complexities compared to more traditional power projects. However, Southeast Asia's plans to build out nuclear power as part of its net-zero emissions strategy present many opportunities for local and international developers, consultants and contractors alike. Effective dispute avoidance, de-escalation and resolution strategies will be key to realising the full potential of nuclear power in the region. 

For more information, please contact Daniel Waldek. 

1. https://www.straitstimes.com/asia/se-asia/indonesia-plans-10-gw-nuclear-power-in-major-renewable-energy-push-presidential-aide-says 

2. https://www.reuters.com/business/energy/vietnam-says-boost-power-capacity-136-bln-plan-2025-04-17/ 

3. https://www.iaea.org/topics/small-modular-reactors 

4. https://www.channelnewsasia.com/commentary/singapore-nuclear-energy-small-reactor-smr-safety-floating-4997551 

5. IEA Global Electricity Report 2024 Available: https://iea.blob.core.windows.net/assets/18f3ed24-4b26-4c83-a3d2-8a1be51c8cc8/Electricity2024-Analysisandforecastto2026.pdf (accessed on 4 June 2025)