How to finance PFI projects in the credit crisis
Few in the UK – or Europe for that matter – will have escaped news of a shrinking construction sector as public sector cuts across the continent look set to drastically reduce funding for public infrastructure projects. Reuters only last month was reporting a forecast 4% decrease in construction output in 2010 (see http://uk.reuters.com/article/idUKLDE6662B020100708)
In the UK, the head of the National Audit Office (the body scrutinising public spending on behalf of Parliament) has called for a project-by-project review of future private finance initiative contracts, with stricter criteria being employed than in the last two years, to establish the most appropriate funding methods. The “Pr [...]
Hitch “Inn” Time?
Whilst interest in the recent UK judgment in the case of City Inn v Shepherd Construction may be confined to these shores, it is sufficiently important in the UK construction arena to warrant a mention on this Blog. The level of interest generated by this case initially may seem disproportionate to the complexity of issues and the amounts of money at stake. But ever since the option to adjudicate became compulsory for all UK based “construction contracts” in 1996 (Under the Housing Grants, Construction & Regeneration Act – see opsi), there has been a distinct lack of relevant construction UK case law on matters such as causation and delay – as parties choose the quicker, cheap [...]
Liquidated Damages in PPP Transactions
One of the most interesting aspects of working in different jurisdictions is seeing how different regions approach the same issues in different ways – both legally and commercially. An example of this in the context of PPP transactions, is the differing approach taken in the UK and the Middle East in respect the inclusion of delay liquidated damages regimes in Project Agreements.
Liquidated Damages in UK PPP transactions
In the UK, the general presumption is that a Project Company will not be liable for delay liquidated damages in the event that the service availability date (or “commercial operation date”) is not achieved by the relevant target service availability date (or “s [...]
Making Demands on Advance Payment Guarantees and Performance Bonds – the “fraud exception”
- By Karen Gough,
for 39 Essex Street Chambers
The general principle is that subject only to the “fraud exception” claims for payment under Advance Payment Guarantees (“APGs”) and Performance Guarantees or Bonds (“PGs”) should be met on demand. The Courts have not been kind to those resisting payment, even when the claims are doubtful, potentially dishonest and/or clearly overstated.
The case of R.D. Harbottle (Mercantile) Limited v National Westminster Bank Limited and Others [1977] 1 WLR 752 concerned guarantees by sellers, confirmed by banks, in favour of buyers. The amount secured was payable on the buyers’ demand. The sellers had provided cross indemnities in very wide terms to the banks, enabling the banks [...]
