The Private Partner and its Lenders will review Force Majeure provisions in detail and will want to ensure that the Force Majeure provisions in the Project Agreements mirror those under the PPP Contract (both in terms of definition and consequences). The Project Agreements should provide the sub-contractors with no greater protection against the risk of Force Majeure than the Private Partner enjoys under the PPP Contract (so that there is "equivalent project relief"). This is to ensure that the Private Partner does not find itself in a position where it is obliged to give a sub-contractor Force Majeure relief to which it is not itself entitled under the PPP Contract.
Similarly, when the PPP Contract sets out conditions precedent to the Private Partner's entitlement to any Force Majeure protection (e.g. notice requirements and the obligation to supply supporting information), these conditions need to be reflected in the Project Agreements. While this is primarily an issue for the Private Partner and its Lenders, it is in the Contracting Authority's interests to ensure requirements for this flow down are in place to ensure there is no negative impact on the PPP Contract. See also Section 2.1.4, Material Adverse Government Action and Section 3.1.4, Change in Law.
While following the Force Majeure approach in internationally recognized forms of construction contract17 may be appropriate for some PPP Contracts, the starting point for a Contracting Authority should always be to consider what the appropriate risk allocation position is for its PPP Contract and for this position to then flow down into (as opposed to up from) the Project Agreements. This may well result in a different approach to construction industry standard forms and mean that the construction sub-contract will be a form of contract that reflects the approach in the PPP Contract and is therefore specific to the relevant project. This is usually the right approach in PPP Projects where financing is on a limited recourse basis and the SPV needs to transfer the risks assumed under the PPP Contract to its subcontractors under the Project Agreements resulting in a construction contract and operation and maintenance agreement that are "back-to-back" with the PPP Contract. Such flow down structures are likely to be critical to the bankability of the PPP Project.
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17 For example, the forms of construction contract produced by FIDIC (The International Federation of Consulting Engineers).