32.1.1  Indemnity

(a)  Subject to section 32.1.2, the private party will indemnify87 government and its associates in respect of any action, claim, demand, cost, charge, liability, loss, damage and expense (including legal expenses) ("Loss") incurred by government (including any third party claims or liabilities) which may arise out of or as a consequence of:

(i)  the design, construction, operation or maintenance of the facility;

(ii)  the provision or use of or purported reliance on Disclosed Information (including any site assessment report prepared by government-appointed independent consultants);88

(iii)  any acts or omissions of the private party, the sub-contractors and their associates

in relation to, or in consequence of, the project (including the performance or non-performance by the private party of its obligations under the project agreement and their presence on, or access to, the facility and the site);

(iv)  breach or failure to comply with the terms of any Project Contract by the private party or any of its associates; and

(v)  negligence or unlawful acts or omissions or wilful misconduct by the private party and its associates.

(b)  In some jurisdictions, this indemnity may be limited to Loss incurred due to:

(i)  death or personal injury;

(ii)  loss of or damage to property; and

(iii)  third party suits, claims, actions demands, proceedings, penalty, costs, charges, expenses etc.

(c)  Generally government will not cap the private party's liability under the indemnity. However, in some cases, and where it represents value for money, government may cap  or otherwise limit the private party's liability under the indemnity in respect of:

(i)  third party claims (other than death and personal injury claims);

(ii)  damage to government property; and

(iii)  government economic losses,

subject to paragraph (d).

(d)  If it is agreed that government will cap the private party's liability, this cap will not extend to any actions, claims or liabilities arising or brought against the private party by a third party.89

(e)  While there may be a nexus between such caps and the level of required insurances, these should not be expressly or directly linked.

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87  The project agreement will normally provide for appropriate procedures for dealing with claims.

88  See section 4.4.2 of Chapter 4 (Environmental issues and Site Conditions).

89  Commonwealth agencies should ensure that Commonwealth policies such as granting of indemnities, guarantees, warranties and letters of comfort are followed.