Alliance agreements may contain exceptions to the provisions ('carve-outs'). These attempt to provide for the no suit - no litigation concept.
In particular, Participants may agree that the no suit provisions do not extend to third-party claims (which may be dealt with according to specific provisions) or to claims for loss or damage arising from specific events or circumstances, such as:
• a wilful default (basically a deliberate and calculated default);
• a default and termination of the alliance agreement; and
• breaches of provisions identified as fundamental to the alliance arrangement (e.g., insurance and confidentiality provisions).
Importantly, the precise terminology used in the alliance agreement needs to be carefully considered to determine whether it will operate as intended by the parties, and whether its meaning is certain.
A Participant's liability for loss arising in relation to such events may or may not be limited in a number of ways. For example, it may be limited to:
a. the amount that can be recovered under insurances;
b. a pre-agreed dollar amount;
c. the amount of security provided;
d. direct losses only (and not consequential, special or indirect losses); and
e. a combination of the methods above.
On the other hand, it may be agreed that limits do not apply, or that limits will not apply in particular circumstances (e.g. where a Participant has failed to comply with its insurance obligations).
These provisions and their scope and operation need to be clearly understood in the context of effecting relevant insurances for an alliance project, whether or not such insurances are intended to be Owner or Non-Owner Participant controlled.