Content Headings

Key Issues

Example clauses

Notes and References

Changes in law

Alternative 1

General

Concessionaire shall take all steps necessary to ensure that the Project Operations are performed in accordance with the terms of this Agreement (including, without limitation, Clause [Compliance with applicable law]) following any Change in Law.

Relevant Changes in Law

Subject to Clause [Mitigation/any other project specific matters], on the occurrence of any Relevant Change in Law, the parties shall be entitled to seek adjustments to the Service Payments to compensate for any increase or decrease (as the case may be) in the net cost to Concessionaire of performing the Project Operations. Such adjustments (if any) will be calculated in accordance with (and subject to) Clauses [ref] (inclusive).

Relevant Change in Law means any of the following:

(a)  the occurrence of any Discriminatory Change in Law having an impact on the cost of performance of the Project Operations;

(b)  the occurrence of any Authority Specific Change in Law having an impact on the cost of performance of the Project Operations; or

(c)  the occurrence, after the relevant date, of any Change in Law which requires Concessionaire to carry out works affecting [any completed Phase comprising part of] the Facilities (being any work of alteration, addition, demolition or extension or variation in the quality or function of the Facilities) which are not Maintenance Works or work which Concessionaire would otherwise be required to undertake to comply with its obligations under this Agreement.  For the purposes of this Clause [ref], the relevant date shall be the later to occur of the Completion Date and the Actual Completion Date the [Phase Actual Completion Date for the relevant Phase], save where the [Phase] Actual Completion Date is delayed by a Compensation Event, a Delay Event referred to in Clause [Works Change] or by a Delay Event referred to in Clause [Discriminatory and Authority Specific Changes in Law], in which case the relevant date shall be the later to occur of the [Phase] Completion Date and the date on which [the Phase of] the Works would have been completed in accordance with this Agreement had the relevant Delay Event not occurred,

provided that:

(i)  in the case of a Change in Law referred to in Clauses [above], the impact of such Relevant Change in Law (either singly or in aggregate with any other such Relevant Change in Law in any Contract Year) on the cost of performance of the Project Operations exceeds [amount] (index linked).  To avoid doubt, any such amount of [amount] (index linked) shall always be borne by Concessionaire; 

(ii) such Change in Law was not reasonably foreseeable at the date of this Agreement by an experienced contractor performing operations similar to the relevant Project Operations, on the basis of draft bills published in Government green or white papers or other Government departmental consultation papers, bills, draft statutory instruments or draft instruments or proposals published in the Official Journal of the European Union, in each case published:

1.  prior to the date of this Agreement; and

2.  in substantially the same form or having substantially the same effect as the Relevant Change in Law; and

(iii)  a Change in Law relating to the application for, coming into effect, terms, implementation, repeal, revocation or otherwise of any Planning Permission shall not constitute a Relevant Change in Law.

On the occurrence of a Relevant Change in Law:

(a)  either party may give notice to the other of the occurrence of the Relevant Change in Law;

(b)  the parties shall meet within [number] Business Days of the notice referred to in Clause (a) to consult and seek to agree the effect of the Relevant Change in Law. If the parties, within [number]  Business Days of this meeting, have not agreed the occurrence or the effect of the Relevant Change in Law, either party may refer the question of whether a Relevant Change in Law has occurred or the effect of any Relevant Change in Law for resolution in accordance with Schedule [Dispute Resolution Procedure]; and

(c)  within [number] Business Days of the agreement or determination referred to in Clause (b) above, the Authority's Representative shall issue a Variation Enquiry and the relevant provisions of Schedule [Variation Procedure] shall apply except that:

(i)  Concessionaire may give notice to the Authority's Representative that it objects to such a Variation Enquiry only on the grounds that the implementation of the Variation would not give effect to or comply with the Relevant Change in Law;

(ii)   the Authority shall issue a Variation Confirmation in respect of the Variation in accordance with the relevant provisions of Schedule [Variation Procedure];

(iii)  the provisions of Clause [Consents and Planning Approval] shall apply and, to avoid doubt, the provisions of Schedule [Variation Procedure] shall not apply;

(iv)  the Authority shall not be entitled to withdraw any Variation Enquiry or Variation Confirmation issued in accordance with this Clause;

(v)  Concessionaire shall, without prejudice to its general obligation to comply with the terms of this Agreement:

1.  use all reasonable endeavours to mitigate the adverse effects of any Relevant Change in Law and take all reasonable steps to minimise any increase in costs arising from such Relevant Change in Law; and

2.  use all reasonable endeavours to take advantage of any positive o eneficial effects of any Relevant Change in Law and take all reasonable steps to maximise any reduction in costs arising from such Relevant Change in Law; and

(vi)  any compensation payable, or reduction to the Service Payments, shall be calculated in accordance with Clause [ref] (as appropriate) provided that:

1.  the amount of any compensation payable; or

2.  the amount by which the Services Payment is to be reduced, 

shall not take into account any amounts incurred or to be incurred as a result of Concessionaire's failure to comply with Clause [above].

Discriminatory and Authority Specific

In relation to a Relevant Change in Law referred to in Clauses [Discriminatory and Authority Specific], any compensation payable, or reduction to the Service Payments, pursuant to this Clause shall be calculated on the basis that Concessionaire shall be placed in no better or worse position than it would have been in had the Relevant Change in Law not occurred, and any assessment of whether Concessionaire is in a better or worse position shall take account (inter alia) of the provisions of Clauses [Failure to mitigate] and: 

(a)  the extent to which Concessionaire has been (or will be) compensated as a result of any indexation of the Service Payments under this Agreement;

(b)  any decrease in its costs resulting from any Relevant Change in Law;  and

(c)  any amount which Concessionaire will recover under any insurance policy (or would have recovered if it had complied with the requirements of this Agreement or of any policy of insurance required under this Agreement) which amount, to avoid doubt, shall not include the amount of any excess or deductibles or any amount above the maximum insured amount applicable to such insurance policy.

Concessionaire shall not be entitled to any other payment or compensation or, save as expressly provided otherwise in this Agreement, relief in respect of such Relevant Change in Law or associated Variation (or the consequences of either) and the provisions of Clause [Delay Events - Compensation] shall be construed accordingly.

Works after Actual Completion Date

In relation to a Relevant Change in Law referred to in Clause [Works after Actual Completion Date] (a "Relevant Works Change in Law"):

(a)  for which the Allowable Expenses amounts to less than 0.05% of the Capital Cost of the Facilities (a "De Minimis Amount"), Concessionaire shall not be entitled to receive any payment, compensation or, save as expressly provided otherwise in this Agreement, any other relief in respect of such Relevant Works Change in Law, save where in any one Contract Year there shall occur more than two (2) Relevant Works Change in Law which each give rise to a De Minimis Amount, in which case the third and each subsequent such De Minimis Amount resulting from a Relevant Works Change in Law in that Contract Year (each an "Additional De Minimis Amount") shall be taken into account for the purposes of:

(i)   calculating the Cumulative Allowable Expenses; and

(ii)  calculating the Authority's Cost Share of such Additional De Minimis Amounts;  and

(b)  subject to Clause [above], the Concessionaire shall be entitled to receive compensation from the Authority of an amount equal to the Authority's Cost Share in respect of such Relevant Works Change in Law.  Concessionaire shall not be entitled to receive any other payment, compensation or (save as expressly provided otherwise in this Agreement) any other relief in respect of any such Relevant Works Change in Law or associated Variations (or the consequences of either) and the provisions of Clause [Delay Events - Compensation] shall be construed accordingly. Concessionaire has accepted the risk of bearing the financial consequences which are not covered by (or exceed) the Authority's Cost Share and has had the opportunity of assessing the risk when bidding and agreeing the Service Payments.

For the purposes of this Clause:

(a)  "Capital Cost of the Facilities" means [the Authority to include figure by reference to the capital build cost of the Facilities contained in the base case financial model]; 

(b)  "Allowable Expenses" means the costs and expenses to be incurred by Concessionaire as a direct consequence of the Relevant Works Change in Law, which shall be calculated on the basis that Concessionaire shall be placed in no better or worse position than it would have been in had the Relevant Works Change in Law not occurred, taking into account (inter alia) the provisions of Clauses [Failure to mitigate] and: 

(i)  the extent to which Concessionaire has been (or will be) compensated as a result of any indexation of the Service Payments under this Agreement; 

(ii)  any decrease in its costs resulting from such Relevant Works Change in Law; 

(iii)  any amount which Concessionaire will recover under any insurance policy (or would have recovered if it had complied with the requirements of this Agreement or of any policy of insurance under this Agreement) which amount, to avoid doubt, shall not include the amount of any excess or deductibles or any amount above the maximum insured amount applicable to any such insurance policy. 

(c)  For the purpose of calculating Allowable Expenses in Clause [above]: 

(i)  there shall be taken into account in addition to Capital Expenditure all the costs and expenses to be incurred by Concessionaire in performing Project Operations as a consequence of the Relevant Works Change in Law including the additional future capital expenditure, maintenance and lifecycle costs;

(ii)  in taking these costs into account they shall be expressed in nominal terms; and

(iii)  all future costs and expenses shall be discounted at the relevant cash balance deposit rates prevailing at the time Concessionaire makes its application for payment in relation to the Relevant Works Change in Law having regard to the expenditure profile of such costs and expenses.

(d)   "Cumulative Allowable Expenses" means the cumulative amount of the Allowable Expenses from time to time (excluding any De Minimis Amount but including any Additional De Minimis Amount); and

(e)  "The Authority's Cost Share" means an amount equal to the percentage share of the relevant Allowable Expenses that are to be borne by the Authority as indicated in Column 3 in the Table below and which is calculated by reference to the ratio that the Cumulative Allowable Expenses at that time bears to the Capital Cost of the Facilities:

Table B

General Change in Law

Either party may give notice to the other of the need for a Variation which is necessary in order to enable Concessionaire to comply with any Change in Law which is not a Relevant Change in Law, in which event:

(a)  the parties shall meet within [number] Business Days to consult in respect of the effect of the Change in Law and any Variation required as a consequence; and

(b)  within  [number] Business Days of the meeting referred to in Clause [above] the Authority's Representative shall, if a Variation is required in order to comply with the Change in Law, issue a Variation Enquiry and the relevant provisions of Schedule [Variation Procedure] shall apply except that:

(i)  Concessionaire may give notice to the Authority's Representative that it objects to such a Variation Enquiry only on the grounds that the implementation of the Variation would not implement the Change in Law;

(ii)  the Authority shall issue a Variation Confirmation in respect of the Variation in accordance with the relevant provisions of Schedule [Variation Procedure];

(iii)  the provisions of Clause [Consents and Planning Approval] shall apply and, to avoid doubt, the provisions of Schedule [Variation Procedure] shall not apply;

(iv)  the Authority shall not be entitled to withdraw any Variation Enquiry or Variation Confirmation issued in accordance with this Clause; and

(v)  Concessionaire shall not be entitled to any payment or other compensation or relief from any performance of its obligations under this Agreement in respect of such Change in Law or associated Variation (or the consequences of either). 

See SOPC Section 13.

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2

Change in Law

Change in Law means the occurrence or coming into force of any of the following, after the date of this Agreement:

a.  the enactment of any new [.] law; 

b.  the repeal, modification or re-enactment of any existing [.]law; 

c.  a change in the interpretation or application of any [.] law by a court of record; 

d.  any change in the rates of any of the Taxes, other than Corporate Tax. 

Provided that Change in Law shall not include;

i.  coming into effect, after the date hereof, of any provision of a statute which is already in place as of the date hereof or 

ii.  any new law or any change in the existing law under the active consideration of or in the contemplation of any government as of the date hereof, which is a matter of public knowledge. 

Effect on Concessionaire

Subject to the Concessionaire/ the Authority taking necessary measures to mitigate the impact or the likely impact of Change in Law on the Project, if as a direct consequence of a Change in Law, any increase/ decrease in capital expenditure/ operating costs/ taxes in any Accounting Year, shall (without duplication) be allocated and shared between the Concessionaire and the Authority as under: 

(c)   Obligations of the Concessionaire 

(a)  Upon occurrence of a Change in Law, the either party may, if it expects any increase / decrease in capital expenditure/ operating costs/ taxes as per provisions of clause [ref], notify the other party and the Independent Engineer, of the following: 

i.  the nature and the impact of Change in Law on the Project. 

With in 15 days of issue of above notification, the Concessionaire shall provide the following information to the Authority and the Independent Engineer.

ii.  in sufficient detail, the estimate of the increase/ decrease in capital expenditure/ operating costs/ taxes likely to be incurred by the Concessionaire on account of the Change in Law; 

iii.  the measures, which the Concessionaire has taken or proposes to take to mitigate the impact of Change in Law, including in particular, minimising the increase in capital expenditure/ operating costs; and

iv.  the relief, if applicable,  sought by the Concessionaire. 

(b)  Upon receipt of the above information upon notice of Change in Law issued by the Concessionaire/ the Authority pursuant to the preceding sub-clause (a), the Authority and the Concessionaire shall along with the Independent Engineer hold discussions and take all such steps as may be necessary including determination/certification by the Independent Engineer and where necessary by the Independent Auditor of the increase/ decrease in capital expenditure/ operating costs/ taxes and to determine the quantum of the increase/ decrease in capital expenditure/ operating costs. 

(c)  The Authority shall, within 30 days from the date of determination of quantum of increase/ decrease in capital expenditure/ operating costs/ taxes , notify the Concessionaire the mode of settlement of variation in capital expenditure/ operating costs/ taxes, which shall be one of the follows: 

i.  by lump-sum reimbursement to the Concessionaire of the increase in capital expenditure/ operating costs/ taxes; or 

ii.  reimbursement of increase in capital expenditure/ operating costs/ taxes to the Concessionaire, in a maximum of four half yearly instalments, subject to payment of interest at AWPR +2% on the amount the payment of which is deferred.

iii.  Resetting of Bid Availability Payment by taking into account the variation in capital expenditure/ operating costs/ taxes.

It is clarified that any decrease in capital expenditure/ operating costs/ taxes due to above Change in Law during the Implementation Period shall be settled through only through resetting of Bid Availability Payment as per provisions of this clause.

Provided that if the Change in Law causes variation in cost of meeting O&M Requirements only, such variation during an Availability Payment Period shall be added to / deducted from Adjusted Availability Payment payable by the Authority to the Concessionaire on the Availability Payment Date in respect of that Availability Payment Period.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.