During the course of a project, an event outside the control of either party may occur, preventing the private party from complying with its obligations under the contract. Such an event may be, for example, a cyclone, an earthquake or the outbreak of war.
If such an event occurs, government needs to ensure that there are appropriate arrangements in place to deal with its consequences so that the adverse impact on the project and, more specifically, on the delivery of services, can be minimised.
Force majeure events traditionally fall into two categories. The first refers to events that can be described as an 'act of God' or a 'superior force' 4 . Such events are generally:
• storms, lightning, cyclones, earthquakes, natural disasters and actions of the elements
• tidal waves, floods and droughts
• landslides and mudslides
• nuclear, chemical or biological contamination.
The second category refers to events that can be described as 'political', including:
• civil riots, rebellion, revolution, terrorism, civil commotion, insurrections and military and usurped power
• malicious damage
• acts of a public enemy
• war (declared or undeclared).
However, the definition of a force majeure event for particular projects varies greatly, and may be either narrower or broader than the traditional meaning. The contract should expressly define events that will constitute force majeure events, to limit any catch-all effect, even where the starting point is apparently very broad.
The chance of a force majeure risk eventuating is generally more remote than the chance of most other project risks eventuating. However, the consequences of the force majeure risk, if it eventuates, may be more severe and have a greater impact on the project. Its consequences may go beyond merely having a financial effect on the party bearing the risk and strike at the heart of the project, preventing, or at the very least, significantly affecting the provision of the relevant services.
Government is concerned primarily about any force majeure event that may adversely impact (directly or indirectly) the provision of services.
A force majeure event may impact on the delivery of the contracted services directly or indirectly by impacting on the project asset. For example, the consequences of an 'act of God' force majeure event such as a hurricane, may impact on both the project asset and services - by damaging the project asset and rendering it unsuitable for providing the contracted services. On the other hand, the consequences of a political force majeure event may only impact on service provision because the private party and the public are unable to gain access to the facility, or because access to a network, e.g. electricity, on which the facility or service delivery relies is no longer available.
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4 Force majeure as defined in P. Nygh & P. Butt (eds), Butterworths Australian Legal Dictionary, Butterworths, Melbourne, 1997, p. 498.