Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Annex 4: Concession Contract Guide
However the Agreement should specify that ‘Force Majeure’ should not extend to
events that arise directly or indirectly as a result of any default or act of the Concessionaire,
any of its contractors or their sub-contractors.
It is not unusual for the Concessionaire to bear the financial effects of delays
caused by Force Majeure Events, so the Authority would not compensate for the
occurrence of such delays. If a Force Majeure Event occurs prior to the date for
completion of the New Upgrades then any long-stop termination date will be put
back by a period equal to the relevant delay caused by the Force Majeure Event.
In most cases, the relief given will be limited to relief from termination and the
payment of compensation to the Authority for delay, where this is provided for in
the Agreement.
Typically, there should be no extension to the Term owing to a Force Majeure
Event. However, consequences to the Concessionaire are that it must bear all
losses that arise without recourse to others, except and to the extent that it can
recover under insurance, which may increase the losses because the Concessionaire’s
insurance premia are likely to rise in subsequent years.
The Agreement should provide that when a Force Majeure Event has occurred
and the Authority has been informed, the parties should consult to discuss relevant
issues, such as the likely duration of the Force Majeure Event and actions to
be taken to mitigate the effects.
In some jurisdictions, courts can intervene and change contract provisions to adjust
the economic equilibrium, or because the Concessionaire is meeting a public
service obligation, to realign Concessionaire position with what it would have
been without the event. Thus, in those jurisdictions where the Agreement seeks to
allocate risk in the occurrence of a Force Majeure Event, the courts might override
Agreement provisions.
Political force majeure events
Political Force Majeure provisions aim to protect the Concessionaire from the
occurrence of the event on the basis that the event is out of Concessionaire control,
and if the event exceeds a specified period, to afford the parties an opportunity
to terminate either or both the Term and the Agreement. Political Force Majeure
Events may include:
• War, civil war, armed conflict, or terrorism; or
• Nuclear, chemical or biological contamination, unless the source or cause of
contamination is [the result of actions of the Contractor]; or
• Pressure waves caused by devices travelling at supersonic speeds.
Relief for Political Force Majeure Events would normally apply only to the extent
that the Concessionaire or the Authority is unable to comply with all or a material
part of its obligations under the Agreement and the parties cannot agree within a
specified number of months how to restart the scheme in full.
The Authority should not be automatically obliged to pay the Concessionaire any
sums simply to service Concessionaire loan obligations in whole or in part. The
parties should recognize that the Concessionaire is likely to require some finan-
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