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Private Finance Initiative (PFI)/Public Private Partnership
(PPP) projects represent alternative ways of financing and
procuring public sector facilities. The principle behind these
projects is relatively simple. If major capital expenditure is
not to be funded by direct taxation, PFI offers a way
forward by enabling assets to be procured “off-balance sheet” on
behalf of a municipality or national government body through
financial investment by the private sector. The private sector’s
repayment and profit is in turn secured by the operation of the
facility for an agreed period.
Although the idea of public and private sector partnership
originated in the UK, PFI/PPP projects are now undertaken in many
countries, and have been used to provide a wide variety of
facilities, ranging from bridges, tunnels and roads to schools,
hospitals and even defence facilities.
These projects pose a number of legal challenges: to
achieve the quality of the asset/facility constructed, to give
security for the funders providing the finance and to allocate risk
and responsibilities between the participants.
Advising on such projects and dealing with disputes resulting
from them requires genuine expertise. Keating Chambers’ reputation
in this area means that our members are frequently called upon to
give advice and have appeared in landmark cases arising from
PFI/PPP projects in which the law has been developed.
The Dudley Hospitals PFI project led to a £34 million dispute
between main contractor and mechanical and electrical
sub-contractor in Emcor Drake
& Scull v Sir Robert McAlpine [2005] 98 Con LR
1, and the case was argued in the Court of Appeal by a
Keating Chambers team on the issue of the scope of a letter of
intent.
Another leading reported case, Midland
Expressway Ltd v Carillion Construction (No. 2) [2006] CILL
2317, was heard in the Technology and Construction Court
and has created widespread interest and, indeed, concern, amongst
those engaged in PFI projects. The case concerned the
construction of the tie-ins between the M6 and the new M6 toll
road. The Court held that provisions in a building contract
that restricted a contractor's right to interim payments to a
proportion of the employer's entitlement (Equivalent Project
Relief) would be unenforceable as when ‘pay-when-paid’
provisions contrary to the HGCRA 1996. Since such
clauses have been widely used in PFI projects, the implications are
considerable.
While members of Chambers were involved as counsel in
both these high profile cases, advisory and negotiation work
relating to PFI/PPP projects is carried out with the intention of
avoiding recourse to the Courts. Nevertheless, our barristers
use the same powers of analysis and understanding of these forms of
procurement as if litigation might result, so that the parties are
fully advised of their legal position at every stage.
Further InformationFor further information on how our members can assist you, please contact the Senior Clerks,
John Munton and
Nick Child, in the first instance, on +44(0)20 7544 2600. They and their teams of Clerks will be pleased to advise you on the member of Keating Chambers appropriate to your requirements.