In many PPP Contracts, a prolonged Force Majeure event (typically in excess of six to twelve consecutive months) will trigger a right for either Party to terminate the PPP Contract if it is unlikely that circumstances will return to normal and the Parties cannot agree a solution within the specified period.
As mentioned in Section 1.2.2, where no financial compensation is payable to the Private Partner during the subsistence of a Force Majeure event, the termination right tends to arise sooner - typically when the Force Majeure event has subsisted for 180 days (six months) or more. See Section 1.4, Sample Drafting 1, Clause (8) and Section 1.5, Sample Drafting 1A, Clause (5).
Some jurisdictions may distinguish between types of Force Majeure event in determining rights to terminate. For example, under the Infra Australia PPP Guidelines the Contracting Authority may terminate at any time following the occurrence of an "Uninsurable Force Majeure" event (for which it is insurer of last resort). See Section 1.3.4.
| EMERGING AND DEVELOPED MARKET DIFFERENCES If the Private Partner has the ability to terminate the PPP Contract on the basis of a prolonged Force Majeure event, the Contracting Authority may want to include an option to require the PPP Contract to continue, provided that the Private Partner is adequately compensated. Under the Infra Australia PPP Guidelines and the UK PF2 Guidance, for example, the Contracting Authority has the right to prevent termination by the Private Partner after the end of the specified period by paying the Private Partner as if the service was being fully provided (subject to applicable mitigation obligations). This approach is more likely to be encountered in a more established PPP market. See Section 1.5, Sample Drafting 1A, Clause (7). |