Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Annex 4: Concession Contract Guide
• Any material breach by the Concessionaire of any its obligations under the
Agreement;
Termination by concessionaire for authority’s default
The Authority will need to appreciate that the Agreement will impose obligations
on it and the Concessionaire will rely upon the performance by the Authority of
those obligations. Common breaches by Authorities have included failure to
make concession support payments, failure to release assets when contracted to
do so and the like. Further, where either or both receivables are to be adjusted for
inflation and funding is expressed in currency other than that of the host country
and receivables are to be adjusted for currency fluctuations then any interventions
by the Authority to prevent this from happening will have a serious adverse
affect. Therefore, the Agreement should also list the events that should constitute
‘Authority Default, on a basis similar to that relating to the Concessionaire. The
list may include the following:
• Expropriation, compulsory acquisition, or nationalization by the Authority of
the Concessionaire or the rights of the Concessionaire under the Agreement;
• Removal of a consent required for the Concessionaire to perform under the
Agreement ;and
• Any material breach by the Authority of any of its obligations under the
Agreement, after notice from the Concessionaire, giving reasonable details of
the breach and demanding remedy thereof.
Termination for non default
The Agreement should provide for termination in the event of prolonged Force
Majeure or where the parties are unable to reach an agreement on the occurrence
of an event of Political Force Majeure. (As indicated earlier, in some jurisdictions,
courts may, through legislation, impose a solution on the parties.
Termination procedure
The party seeking termination should serve Notice of Intent to Terminate and set
out the grounds on which it seeks to terminate. If grounds are based on an event
of default that can be remedied, then the defaulting party should be given an opportunity
to do so, or to put forward a program to do so. Specific time periods for
each step should be set out in the Agreement.
Following the delivery of a Notice of Intent to Terminate, if the default has not
been remedied or a program for remedy agreed upon, then the Non Defaulting
Party that served the notice should be permitted to serve a Termination Notice
Effectiveness of a termination notice
The Agreement should state the minimum time period between service of the
Termination Notice and the Date of Termination.
Other remedies
The exercise of the right of a Non Defaulting Party to terminate the Agreement
should not preclude that Party from exercising other remedies provided under
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