The typical grounds for termination are:
• expiry of the PPP contract term;
• default by the PPP Company;
• default by the Authority;
• a voluntary decision by the Authority; and
• termination in the event of prolonged force majeure.
The PPP contract should describe in detail the circumstances that allow a party to terminate the contract, in particular where the other party has defaulted on its obligations. For it to lead to termination, a breach of contract has to be fundamental in nature and should (where possible) be subject to "cure periods". For example, the Authority would normally be entitled to terminate the PPP contract in the event of insolvency or bankruptcy of the PPP Company or of a serious deficiency in the service provision (e.g. where health or safety is jeopardised) that is not promptly remedied. A detailed list of all the breaches that entitle termination should be set out in the PPP contract.
Particular attention should be given to the issue of "persistent breaches" (i.e. the accumulation of a number of breaches, each of which would not in itself be enough to trigger termination but all of which together constitute fundamental non-performance). The criterion for assessing the existence of a persistent breach should be as objective as possible. This can be achieved by reference to the accumulation of penalties, deductions, performance points or warning notices over a specified period of time. Beyond a certain threshold, the Authority should have the right to terminate the PPP contract.
The typical example of default by the Authority is the non-payment of the sums owed to the PPP Company (e.g. the service fee). This includes cases where the Authority has not adequately adjusted the PPP Company's remuneration in accordance with the terms of the PPP contract.