Public-private partnerships

Local authority: Termination and distressed project

Acting for Derby City Council and Derbyshire County Council in relation to the termination of the PFI contract which the councils had entered into with an SPV, concerning the design, construction and operation of a waste treatment facility and gasification plant with additional waste management services in Derbyshire.

The SPV failed to reach completion of the waste treatment facility prior to the longstop date as stated in the contract, after which the councils terminated for breach. The SPV sought compensation for a sum in excess of £200 million.

The parties exchanged lengthy (amended) pleadings that dealt with complex technical and factual issues and had also concluded disclosure and the expert joint statement process. The trial was set to commence in June 2024 for 28 days and would have been the first time that this particular form of valuation on termination has been considered by the courts. However, the parties agreed a settlement following a two-day mediation in June 2023.

Local authority: Breach and payment mechanism

Acted for a local authority in a £20m dispute under a street lighting PFI agreement concerning which assets were to be maintained by the SPV. After two adjudications, we advised on the merits of arbitration. The council commenced arbitration in relation to 11 issues. We assembled a large team to prepare the statement of claim, review documents, draft witness evidence, instruct three experts and a forensic accountant, and support leading counsel.

The case carried significant financial and operational implications, especially as many streetlights had never been maintained. The SPV also contended that contractual adjustments amounted to a penalty under the standard form PFI. After a two-day tripartite settlement meeting, we secured a substantial settlement, including repairs, and helped rebuild the council’s commercial relationship with the SPV.

Government department: Handback and expiry

Advising in relation to various contract interpretation queries arising out of its trunk road DBFO contract, including:

• Handback/ expiry processes including:
  • Whether changes to a handback requirement is an alternative proposal under the contract and whether government department can object to it; and
  • What documents/evidence can be used a part of a joint initial inspection and who bears the costs of that initial inspection.
• Whether other asbestos regulations also apply to the DBFO contract.
• Department’s change process (service variations).
• Alternative proposals including those relating to resurfacing and replacement procedures for undertaking surveys on the road.
• Changes in law.
• Delegation of responsibilities to the service provider.
• Additional work.
• Traffic management and maintenance obligations.
• Supporting in the resolution of various contractual disputes.

East London Waste Authority

Advising the authority on the expiry of its long-term integrated waste management PFI contract, including on:

• The SPV’s obligations on expiry with regards to the handback of the project sites and equipment, including project documentation, the removal of waste and assistance with any replacement contractors.
• The impact of the expiry process on the PFI contract including re-drafting of contract terms and the payment mechanism to give certainty to all parties.
• Contractual insurance obligations.
• Qualifying changes in law.

We are also advising the authority on the re-procurement of the services provided under the integrated waste management contract.