6.2.3 Agreements

Some of the significant

The French and English government, following the treaty between them, granted the concession for Eurotunnel to operate the channel tunnel. The original term was for 55 years, but this extended to 65 years. This effectively means that Eurotunnel has the right to operate the tunnel until 2052 following which it had to hand back the tunnel in good working order.

The treaty also set up the IGC and the Safety Authority to monitor Eurotunnel's compliance with the concession agreement and play a regulatory role in the reviewing Eurotunnel's operations.

(b) Construction

The construction agreement between Eurotunnel and Transmanache is a design and build contract in which Transmanache was engaged to conduct most of the engineering work, not just in digging the tunnel but in setting up the physical side of the operations.

The relationship between Eurotunnel and Transmanache appeared to undergo enormous transformation over time. Initially, Transmanache was one of the original shareholders of Eurotunnel. It quickly lost control of Eurotunnel with the second tranche of equity, Equity 2, which involved private placement of some £206 million shares (as opposed to the initial £47 million).

The strain of the protracted construction project is evident when, in 1992, Transmanache claimed for addition construction cost of £1.5 billion. This claim was referred to a dispute panel set up under the construction contract, and settled in April 1994.

Railways usage agreement is the project's only committed source of income. Under the agreement, Eurotunnel is required to make half of the tunnel capacity available to the British, French and Belgian railways for their Eurostar and fright trains. In return, the railways pay a fixed charge and tolls based on volume of traffic passing through the tunnel, and a contribution to Eurotunnel's operating costs. There is a minimum charge level, which effectively guarantees a minimum cash flow for Eurotunnel for the first 12 years of its operation.