The Impact of 'Midland Expressway v Carillion Construction (No 2)' on 'Equivalent Project Relief' in PFI Transactions

Hamish Lal

November 2006

A talk based on a paper given to the Society of Construction Law in Manchester on 4th April 2006.

In PFI projects, the Project Company is usually so thinly capitalised that it is important to protect its capital and cashflow. One aspect of this is to ensure that subcontractors' rights and obligations are fully 'back-to-back' with those of the Project Company. Two legal devices are often used: an 'Equivalent Project elief' clause, which attempts to guarantee that a subcontractor has the same rights and obligations as the Project Company; and a 'right to refer' clause, which attempts to delay action by the subcontractor against the Project Company until the equivalent legal situation between the Project Company and the public authority has been resolved. Hamish Lal analyses Midland Expressway v Carillion Construction (No 2), where the TCC had to grapple with examples of both these clauses, holding that the 'right to refer' clause was incompatible with a subcontractor's statutory right to start an adjudication. He also considers the way forward for PFI subcontracts in the light of the setback represented by this judgment.

Introduction - Othodox PFI structures - Midland Expressway : facts and issues - Impact of the 'right to refer' clause - The judge's findings - The significance of the judge's views - Potential solutions - A forward glance ...

The author: Hamish Lal is a Partner with Dundas & Wilson, solicitors, in London.

Text 10 pages

PDF file size: 144k