Sisal Annual Report 2011 - Permira

On February 18, 2011, AAMS sent the concessionaires a “notice of breachof service level agreement”. The notice described the sequence of events todate, and stated that the penalty, calculated according to the terms of thecurrent agreement, the parameters identified by the Technical Commissionand the information contained in the AAMS and Sogei databases, amountedto EUR 46,399,750.00 for the period July 15, 2005 to March 12, 2008,as far as the subsidiary is concerned. However, by applying the other principlesof reasonableness and proportionality required by the Regional AdministrativeTribunal and the Council of State and contained in the last riderto the concession agreement, on the basis of which the penalty for eachyear cannot exceed 11% of the average real remuneration received by theconcessionaire, calculating this remuneration on the basis of certain criteriawhich, however, are open to question, and applying the said percentage tothe result obtained, the disputed penalty amounts to EUR 8,995,332.98.As regards this notice, which did not mention the imposition of a penalty,but only the alleged breach of contract with a reference to the possibleconsequences thereof, the concessionaires filed a defence, objecting to thecontents of the AAMS notice in terms of both substance and form. In particular,the defence stated that there were no delays in the responses of thegateway system and even if there had been any, the blame could not belaid on the concessionaires; during the period in question, the criteria forrecording and calculating penalties had not yet been established by AAMS;the Council of State failed to consider the points raised in the judgmentsissued following the said appeals by the concessionaires; and with specificreference to Sisal Slot, amounts which had nothing whatsoever to do withits actual remuneration as a concessionaire were included in the averagereal remunerationAfter the year end, in a document dated January 27, 2012, AAMS servedthe said penalty, quantifying it at EUR 8,995,332.98 and rejecting all thedetailed defence pleas filed by Sisal Slot S.p.A.; similar measures have apparentlyalso been taken against all the other concessionaires, and the totalamount of the penalties imposed is believed to amount to approximatelyEUR 70 million.Sisal Slot has appealed to the Regional Administrative Tribunal against thisclaim by AAMS, asking firstly for AAMS’ claim to be suspended and, in themain suit, for a ruling that the alleged deficiencies do not exist and that thegranting agency’s calculations are incorrect.In particular, the application of the percentage of 11%, which establishesthe maximum ceiling on the penalties, to the entire turnover of Sisal Slotand not just the part relating to income obtained as concessionaire (theremaining part relating to the activity of manager) seems unacceptable andcontrary to the opinions submitted to AAMS by the Council of State andthe Technical Commission; if the calculations were performed correctly, theamount of the penalty would be halved on this ground alone.29 DIRECTORS’ REPORT ON operations