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CONCESSION AGREEMENT WORKBOOK OF ISSUES AND EXAMPLE CLAUSES

This workbook sets out the typical clauses in a concession agreement, together with issues and notes. These are organised in the usual order of the concession agreements, the content headings are set out in the first column. The key issues in the second column are adapted from the guidelines, A Legal Perspective of Public Private Partnerships, which was drafted as part of the same project. The example clauses provided in the third column of this workbook have been compiled by inserting relevant examples from concession agreements provided to or found by us. Where there are a number of different ways of dealing with an issue, alternatives are provided. Alternatives are not provided when the differences are not significant or mainly stylistic (for example in the case of boilerplate clauses). The example clauses are illustrative only. These example clauses are also not appropriate for use in all circumstances, nor are these examples perfect in a sense that the drafting can be improved upon. In any case, the clauses need to be changed to ensure that the style of drafting and the definitions used are consistent throughout the agreement, and that they comply with and are appropriate for the local (and the applicable) laws of the jurisdiction. The last column contains the cross reference to the source documents. We have retained and indexed copies of these agreements (as well as other agreements and documents). The references to the agreements are provided in the notes and references section, with the indexed reference. The reader is encouraged to go to the actual agreement to see the clause in context. No references are provided where the clauses are drafted by us, or where the clauses are so standard as to appear in almost identical form in most agreements. In addition, references to SOPC refers to references to the guidelines by the Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5, containing a discussion of the issue. Other notes on the example clauses are: 1. Variables, alternatives and commentaries are placed in square brackets. 2. Minimum changes have been made to the clauses, in using these clauses alterations are necessary to ensure that they are appropriate for the context. In particular, definitions need to be consistent throughout. 3. Throughout this worksheet, the Authority means the public contracting party, and the Concessionaire means the private contracting party. Apart from these, the definitions have not been amended from the source agreement and they appear with the first letter capitalised. As the clauses come from different sources, different definitions may be used with the same meaning, and the defined term may not have a consistent meaning throughout. 4. The clauses are not numbered except for sub-clauses which are numbered (a) (b) (c). Cross references are therefore left blank unless they are references to sub-clauses within the same clause. Where appropriate a brief description of the clause to be cross-referenced is inserted in square brackets.

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES

NOTES AND REFERENCES Depending on the format adopted, this may be at the end of the documents on the signing page rather than at the beginning. Only parties to the Concession Agreement are capable of suing for rights and obligations under it. Care should be taken to ensure that all necessary parties are included.

INTRODUCTION Date

THIS AGREEMENT is made on the [date] of [month] [year]

Parties

Who is the public sector party? This needs to be a legal entity. A government department may or may not be a legal entity. Look at the local laws (including any legislation to adopt PPP), and at the local conventions. Who is the private sector party? If it is a special purpose vehicle (SPV), are there any guarantees or undertakings by the shareholders (or the sponsors) of the SPV? If so, the shareholders of the SPV may need to be parties (Often the sponsors undertakings are contained in a separate agreement).

(1) [Name of 1 party] of [Address of 1 party] (the Authority); and (2) [Name of 2
nd

st

st

party] of [Address of 2

nd

party] (the Concessionaire)

Background (or Preamble)

This sets background agreement.

out of

the the

WHEREAS: A. The Authority wishes to [describe the project]. B. The Concessionaire [is the successful bidder/has been chosen] to finance, design and construct [the infrastructure facility].

This Background section is not legally binding in many jurisdictions. This Background is intended only to provide

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES C. [The Project has been approved by [Minister responsible] or [treasury]]. D. The parties agree to undertake the project on the terms and conditions provided.

NOTES AND REFERENCES information, not to import legal rights and obligations. Therefore, care should be taken to ensure that any information in the background that contains rights or obligations or information that needs to be relied upon are actually reflected in the operative part of the Concession Agreement. This marks beginning of operative part. the the

OPERATIVE PROVISION

IT IS AGREED:

Definitions and Interpretation Definitions

Alternative 1: In this agreement, unless the context otherwise requires: [Defined word] means [definition]; [Defined word] means [definition]; and [Defined word] means [definition]. Alternative 2: In this agreement, capitalised terms shall be defined according to the provisions of Schedule [definitions schedule]:

The definitions need to be consistent throughout the Concession Agreement. To avoid beginning the agreement with pages and pages of definitions, Alternative 2 can be used. The definitions schedule is usually inserted as the first or the last schedule. The examples given here are fairly standard. Needs to be reviewed for appropriateness,

Interpretation

In this agreement, except where the context otherwise requires: (a) the masculine includes the feminine and vice versa;

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES (b) the singular includes the plural and vice versa; (c) a reference in this agreement to any clause, sub-clause, paragraph, [schedule] or [annex] is, except where it is expressly stated to the contrary, a reference to a clause, sub-clause, paragraph, [schedule] or [annex] of this agreement; (d) any reference to this contract or to any other document shall include any permitted variation, amendment or supplement to such document; (e) any reference to any enactment, order, regulation or other similar instrument shall be construed as a reference to the enactment, order, regulation or instrument as amended, replaced, consolidated or reenacted; (f) a reference to a person includes firms, partnerships and corporations and their successor and permitted assignees or transferees; and (g) heading are for convenience of reference only.

NOTES AND REFERENCES and some added. can be

Example adapted from Office of Government Commerce, UK, Standardisatio of PFI Contracts General, index reference C1, folder 5.

Preliminary matters (pre or at financial close) Conditions Precedent/ Delivery of Documents

Is it appropriate to have conditions precedent to the effectiveness of the agreement? A number of things may need to happen before a concession agreement can come into effect, for example necessary regulatory approvals or signing of other project agreements or documents. Nevertheless, a conditions precedent is relatively unusual for in a concession agreement. It is often for the signing and the financial close to be simultaneous. All the things that need to

Alternative 1 On or prior to the execution of this agreement: (a) the Concessionaire shall deliver to the Authority the documents referred to in Part 1 of Schedule [schedule number] [Schedule to list Completion Documents to be provided by the Concessionaire] (unless the requirement to deliver any such document is waived by the Authority by written notice to the Concessionaire); and (b) the Concessionaire shall deliver to the Authority the documents referred to in Part 1 of Schedule [schedule number] [Schedule to list Completion Documents to be provided by the Concessionaire] (unless the requirement to deliver any such document is waived by the Concessionaire by written notice to the Authority). Alternative 2 The Concessionaire shall at its cost, expenses and risk make such financing arrangement as would be necessary to finance the cost of the Project and to meet Project Requirements and other obligations under

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project

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CONTENT HEADINGS

KEY ISSUES happen before or at the effectiveness of the agreement can happen before signing of the agreement (and therefore need not be included as things to be done in the agreement). The concession agreement is usually the subject of a condition precedent of other project agreements (for example a conditions precedent before the drawdown of a loan).

EXAMPLE CLAUSES this Agreement, in a timely manner. The Concessionaire shall achieve Financial Close on or before the Commencement Date and within 15 days thereof submit to the Authority one set each of the Equity Documents and the Financing Documents.

NOTES AND REFERENCES (note confidential), index reference A2, folder 1.

Grant of Concession

Alternative 1: In consideration of the Concessionaires obligations contained in this agreement and relying on the Concessionaire Warranties, the Authority appoints the Concessionaire to provide the Services in accordance with the terms of this Agreement and the Concessionaire hereby accepts such appointment upon the terms and conditions of this Agreement. Alternative 2: Subject to and in accordance with the terms and conditions set forth in this agreement, the Authority hereby grants and authorises the Concessionaire to investigate, study, design, engineer, procure, finance, construct, operate and maintain the [Project/Project Facility] and to exercise and/or enjoy the rights, powers, benefits, privileges, authorizations and entitlements set forth in this Agreement.

Alternative 1 adapted from draft concession agreement for MAN in Ireland, index reference A7, folder 2.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1. See SOPC Section 2.

Concession Period Commencement

Some alternative commencement dates are: (a) on the date of the agreement;

Alternative 1: The concession period shall commence [on the date of this agreement/ on the date all the Conditions Precedents are satisfied or waived in accordance with clause [CP clause].

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CONTENT HEADINGS

KEY ISSUES (b) on the date the conditions precedent are satisfied; and (c) on a specified date in the future. Is it appropriate to have a staggered commencement date? (see for example Alternative 2), so that some obligations come into effect on the date of the agreement and others at some milestone in the project (for example on Completion of the construction of the facility) The concession period means the length of time the private sector is able to operate the infrastructure facility. Although the concession period is often specified in terms of time, a more unusual alternative is to calculate the concession period on the basis of a fixed return on investment of the project company (that is, for the period of time necessary for the private sector to achieve a specified financial return). On expiry of the concession, it is usually appropriate to Alternative 2:

EXAMPLE CLAUSES

NOTES AND REFERENCES

The Term of this agreement shall commence: (a) for clauses [specify clauses, eg pertaining to warranties, design and construction etc] on the date of this agreement; and (b) for the remaining clauses of this agreement, on the [Service Commencement Date]. Alternative 3: The Concession hereby granted is for a period of [concession period] years including a construction period of [construction period] years commencing from [the Commencement Date/ the date of this agreement/ specify date] and ending with on [the Expiry Date/ the []th anniversary of commencement/ specify date] (Concession Period). However, in the event of [Termination], the Concession Period shall mean and be limited to the period commencing from the Commencement Date and ending on the Termination Date. Alternative 3 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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CONTENT HEADINGS

KEY ISSUES terminate rights and obligations rather than terminate the concession agreement entirely. For example, after the infrastructure is transferred to the government, the project company may still be liable for warranties in relation to the design and construction of the infrastructure. The appropriate length of a concession period would depend on a number of factors: The cost of constructing the facility. If the cost of constructing the facility is large, then a long concession period is needed in order for the private sector to repay its loans and make the return on its investments. The cost of the process for selecting the private sector. If the process of selecting a private selector (usually a tendering process) is lengthy and expensive, it may not be efficient to put the concession up for tender regularly. The benefits of

EXAMPLE CLAUSES

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES competition. Usually (though not always) a concession confers an exclusive right to operate in a certain market. The extent to which the private sectors monopolistic power is curtailed by regulations may also be limited, because heavy regulations would limit the extent of private sectors interest in the project. A shorter concession term (assuming this allows for recovery of costs for the private company) in this case would provide for greater competitiveness because the government can put the infrastructure facility for auction to other interested private operators in the market. This is sometimes called competition to a market, as opposed to competition in a market.

EXAMPLE CLAUSES

NOTES AND REFERENCES

Expiry

It is often appropriate to provide that some obligations survive following the termination of the concession agreement, for example, confidentiality provisions. To ensure this, the parties may provide

Alternative 1: The Concessionaires right and obligation to carry out the Project Operations shall terminate automatically on expiry of the Project Term unless and to the extent previously terminated in accordance with this agreement.

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Alternative 2 adapted from Office of

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CONTENT HEADINGS

KEY ISSUES specifically that certain clauses will survive the termination of the agreement. The alternative is to provide that expiry affects only certain clauses (as in Alternative 2). Alternative 2:

EXAMPLE CLAUSES

NOTES AND REFERENCES Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

The [Service Period] will commence on the [Service Commencement Date] and terminate the earlier of: (a) (b) the Expiry Date; and the Termination Date.

General Undertakings Authoritys undertakings

The government should not assume that a PPP means that all the risks and responsibilities of operating the project transfers to the project company. The government may offer the project company incentives to invest, construct and operate infrastructure services. Some of the typical incentives are: Tax incentives. This may include exemption from corporate tax for a period (tax holidays), exemption or concession from other indirect taxes, exemptions from import duties on equipment, raw materials and components of construction, operation and maintenance of the project. Contribution of and assets. land The

Alternative 1: The Authority undertakes to the Concessionaire that it shall: (a) subject to the provisions of this Agreement, comply with all Laws, [Regulations] and [Consents] applicable to it which relate to the Project Operations; (b) not willfully impede the Concessionaire in the performance of its obligations under this Agreement (having regard always to the interactive nature of the activities of the Authority and of the Concessionaire and to the Authoritys use of the Facilities to provide the Services and any other operations or activities carried out by the Authority or at the Site for the purposes contemplated by this Agreement or any other of the Authoritys statutory functions); (c) inform the Concessionaire as soon as reasonably practicable if at any time it becomes unable to meet any of its financial obligations and in such case inform, and keep the Concessionaire informed, of any course of action to remedy the situation recommended or required by [the Secretary of State] or other competent authority; (d) to the extent permitted by Law, supply the Concessionaire within 60 Business Days of their publication, a copy of the Authoritys Annual Report and Accounts; and (e) comply with the provisions of the Retained Staff Agreement, its employment policies and the terms and conditions of the contract of employment of the relevant Retained Staff Member provided that: to avoid doubt: (i) nothing in this clause shall in any way fetter the discretion of the Authority in fulfilling its statutory functions; and

See SOPC Section 3.2. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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CONTENT HEADINGS

KEY ISSUES government commonly provides the land on which the project is conducted. Usually, the right to the land including all easements over adjoining property and facilities such as roads, water suppliers and energy transmissions as needed to conduct the project is conferred until the end of the concession period. Occasionally, such rights is conferred until the end of the construction phase, following which the infrastructure assets are transferred to the government and the project company then leases the infrastructure assets from the government until the end of the concession period. Some concession agreements provide for the project company to reimburse the government for the land over the life of the project. Network and logistical support. The infrastructure facility under the concession agreement may be part of a larger network, for

EXAMPLE CLAUSES (ii) if there is a conflict arising between the terms of this Agreement and the terms of the Retained Staff Agreement, the terms of the Retained Staff Agreement shall prevail. Alternative 2: The Authority may, notwithstanding anything to the contrary contained in this Agreement, require a change in the scope of the Project ("Change of Scope"), provided that such change does not involve variation in capital expenditure exceeding. The Change of Scope may be required by the Authority by an order (the "Change of Scope Order") issued in accordance with the procedure set forth in Clause [change of scope procedure, see below]. The Authority may, at any time during the Implementation Period but at least 90 days prior to the Scheduled Project Completion Date, require Change of Scope by a written notice (the "Change of Scope Notice") to the Concessionaire, through the Independent Engineer. The Concessionaire shall, within 15 days of receipt of Change of Scope Notice, provide to the Independent Engineer such information as is necessary and reasonable together with preliminary documentation and details including calculations where necessary, in support of the following: (a) the impact which the Change of Scope is likely to have on the Construction Requirements and/or the O&M Requirements. (b) variation in capital expenditure, operating cost and taxes to be incurred by Concessionaire for implementing the Change of Scope. (c) the estimated additional time (number of days) that the Concessionaire would require to achieve COD consequent to Change of Scope. The Concessionaire shall upon review by the Independent Engineer of the information, documentation and the details submitted by it pursuant to preceding sub-clause (b), forward to the Authority the statement of variation in capital expenditure, operating cost and taxes and the other

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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CONTENT HEADINGS

KEY ISSUES example, roads, telecommunications and electricity. The government may need to construct, or arrange for the construction of, associated infrastructure facilities and the logistics involved with connecting the infrastructure facilities together. Supply of labour and materials. The government may be responsible for ensuring the availability of labour in the local workforce. The government may ensure that building materials and inputs needed for the construction and operation of the project facilities are available. This is particularly important if monopoly suppliers (usually state owned enterprises) dominate the supply of the building materials and inputs. The project company may request that the government guarantees the availability of sufficient supply at a reasonable price. Remittance of income from the project.

EXAMPLE CLAUSES details in sub-clause (b) as determined in consultation with and duly certified by the Independent Engineer. The Authority may, within a period of 15 (fifteen) days from the date of receipt of such statement, issue the Change of Scope Order. Provided, if for any reason the Authority chooses not to issue the Change of Scope Order, it shall reimburse to the Concessionaire the cost/expenses certified by the Independent Engineer as having been incurred by the Concessionaire in preparing and submitting the drawings, documents, estimates and other information in compliance with the Change of Scope Notice. Simultaneously with the issue of the Change of Scope Order, the Authority shall notify the Concessionaire the mode of settlement of variation in capital expenditure/ operating costs/ taxes which shall be one of the following modes: (a) by lump-sum reimbursement to the Concessionaire of the increase in capital expenditure/ operating costs/ taxes; or (b) reimbursement of increase in capital expenditure/ operating costs/ taxes to the Concessionaire, in a maximum of four equal half yearly instalments, subject to payment of interest at [AWPR +2%] on the amount the payment of which is deferred; or (c) resetting of Bid Availability Payment by taking into account the variation in capital expenditure/ operating costs/ taxes. It is clarified that any decrease in capital expenditure/ operating costs/ taxes due to above Change in Scope during Construction Period shall be settled only through resetting of Bid Availability Payment as per provisions of this clause. Provided that if the Change of Scope causes variation in cost of meeting O&M Requirements only, such variation during an Availability Payment Period shall be added to / deducted from Adjusted Availability Payment payable by the Authority to the Concessionaire on the Availability Payment Date in respect of that Availability Payment Period.

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES Foreign currency restrictions may prevent the conversion of local currencies into a foreign currency, or the remittance of income from the project abroad. Where this is the case, and the project sponsors and lenders are overseas entities, then the private sector may require that the government provide assurances that the project company can convert and remit currency out of the country without undue restrictions. Guarantees and standby financing. While the government sometimes provide guarantees and stand-by financing for infrastructure projects, any requests for these guarantees should be carefully considered. The sponsors and/or the contractors, and not the government, should provide guarantees of events that are their responsibilities, for example, completion guarantee. A common form of guarantee is an off-take agreement in which the government is

EXAMPLE CLAUSES The Change of Scope Order shall be effective from the date the mode of reimbursement is notified to the Concessionaire in terms of the preceding clause The Authority shall, within 30 days from the date of receipt of a Certificate from the Independent Engineer certifying that the Concessionaire has completed the works in accordance with the Change of Scope Order, settle the Concessionaires account in accordance with provisions of this Clause.

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES a purchaser, if there is a specified minimum purchase, then this in effect is a guarantee of minimum revenue to the project company (usually subject to the project company having the capacity to provide a minimum level of the infrastructure services). Non-competition. The project company may require an assurance from the government that competing infrastructure facilities will not be constructed. While a certain degree of assurance is reasonable given the private companys investment in the project, the government should be careful not to create monopolies at the cost of consumers. A compromise might be to ensure no competing infrastructure facilities unless certain revenue targets are met. This would not impede unduly on the development of a countrys infrastructure assets.

EXAMPLE CLAUSES

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES

NOTES AND REFERENCES Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Concessionaires undertakings

Alternative 1 Subject to, and in accordance with, the provisions of this Agreement, the Concessionaire shall have the right and the obligation to perform its duties under this Agreement at its own cost and risk without recourse to the Authority except as otherwise expressly provided in this Agreement. The Concessionaire shall at its own cost be solely responsible for procuring that the Project Operations are at all times performed: (a) in so far as not in conflict with an express obligation of the Concessionaire under this Agreement, where in relation to a matter there is no express obligation or standard imposed on the Concessionaire under this Agreement, in accordance with Good Industry Practice; (b) in a manner consistent with the Quality Plans; (c) in a manner that is not likely to be injurious to health or to cause damage to property; (d) in a manner consistent with the Authority discharging its statutory duties and other functions undertaken by it as the same maybe notified to the Concessionaire from time to time; (e) in compliance with all Laws and Consents (including without limitation the giving of notices and the obtaining of any such Consents) and so as not to prejudice the renewal of such Consents; and (f) except to the extent expressly stated to the contrary in the Authoritys Construction Requirements or the Service Level Specifications, in compliance with all applicable [Regulatory] Requirements. Alternative 2 The Concessionaire shall at its own cost and expense: (a) investigate, study, design, construct, operate and maintain the Project/Project Facility in accordance with the Project Requirements; (b) obtain all Applicable Permits in conformity with the Applicable Laws and be in compliance thereof at all times during the Concession Period; (c) procure and maintain in full force and effect, as necessary,

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES appropriate proprietary rights, licenses, agreements and permissions for materials, methods, processes and systems used in or incorporated into the Project; (d) ensure and procure that each Project Agreement contains provisions that would entitle the Authority or a nominee of the Authority to step into the same at the Authoritys discretion, in place and substitution of the Concessionaire, pursuant to the provisions of this Agreement or the Substitution Agreement; (e) provide all necessary assistance to the Independent Engineer as it may reasonably require for the performance of its duties and services; (f) appoint, supervise, monitor and control as necessary, the activities of Contractors under the respective Project Agreements; (g) make efforts to maintain harmony and good industrial relations among the personnel employed in connection with the performance of its obligations under this Agreement; (h) make its own arrangements for construction materials and observe and fulfill the environmental and other requirements under the Applicable Laws and Applicable Permits; (i) be responsible for quality, soundness, durability, safety and the overall Project Requirements notwithstanding the appointment by it of Contractor(s) to implement and/or operate and maintain the Project/Project Facility; (j) ensure that the Project Site remains free from all encroachments and take all steps necessary to remove encroachments, if any; (k) make payments to the Police Department or any Government Authority, if required, for provision of such services as are not provided in the normal course or are available only on payment; (l) afford access to the Project Site to the authorised representatives of the Authority the Independent Engineer and any Government Authority having jurisdiction over the Project, including those concerned with safety, security or environmental protection to inspect the Project and to investigate any matter within their authority and upon reasonable notice, the Concessionaire shall provide to such persons assistance reasonably required to carry out their respective

NOTES AND REFERENCES

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EXAMPLE CLAUSES duties and functions; and (m) obtain at its costs and charges special or temporary rights of way required by it in connection with access to the Project Site. The Concessionaire shall also obtain at its cost such other facilities as may be required by it for the purposes of the Project and the performance of its obligations under this Agreement. Alternative 3 The Concessionaire shall ensure on a continuting basis (a) the Service is continuously available; (b) it can maintain the design intention of the assets to achieve their full working life; and (c) the assets are handed back to the Authority on the Expiry Date in a condition complying with the requirements of Clause [Reference].

NOTES AND REFERENCES

Alternative 3 adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

Co-operation

Each party agrees to co-operate, at its own expense, with the other party in the fulfillment of the purposes and intent of this Agreement. This obligation to co-operate shall include without limitation the obligation to present and take reasonable steps to pursue any claims for indemnity under the insurance envisaged by Clause [insurance] against the relevant insurers before any claim made against the Concessionaire in respect of the Authoritys liabilities to the Retained Staff Member under any indemnity of this Agreement. To avoid doubt, neither party shall be under any obligation to perform any of the others obligations under this Agreement. This clause will need to be drafted as appropriate to provide for any other activities of the project company. Where a SPV has been incorporated to receive the benefits of the concession and to operate the project, a clause as provided in the The Concessionaire shall not engage in any business or activity other than the business or related to, and conducted for, the purpose of the Project Operations. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

No Other Business

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CONTENT HEADINGS

KEY ISSUES example is appropriate. usually

EXAMPLE CLAUSES

NOTES AND REFERENCES

Warranties Warranties of the Concessionaire

The Concessionaire represents and warrants to the Authority that: (a) it is duly organised, validly existing and in good standing under the laws of [jurisdiction]; (b) it is a special purpose company set up solely for the purpose of implementing and operating the Project/Project Facility in accordance with the terms of this Agreement and that it will not during the subsistence of this Agreement undertake any other project or business activity unrelated to the Project; (c) it has full power and authority to execute, deliver and perform its obligations under this Agreement and to carry out the transactions contemplated hereby; (d) it has taken all necessary corporate and other action under Applicable Laws and its constitutional documents to authorize the execution, delivery and performance of this Agreement; (e) it has the financial standing and capacity to undertake the Project; (f) this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with the terms hereof; (g) it is subject to civil and commercial laws of [jurisdiction] with respect to this Agreement and it hereby expressly and irrevocably waives any immunity in any jurisdiction in respect thereof; (h) the execution, delivery and performance of this Agreement will not conflict with, result in the breach of, constitute a default under or accelerate performance required by any of the terms of the Concessionaire's constitutional documents or of any member of the Consortium or any Applicable Laws or any covenant, agreement, understanding, decree or order to which it is a party or by which it or any of its properties or assets are bound or affected; (i) there are no actions, suits, proceedings or investigations pending or to the Concessionaire's knowledge threatened against it at law or in equity before any court or before any other judicial, quasi judicial or other authority, the outcome of which may constitute Concessionaire Event of Default or which individually or in the aggregate may result in Material Adverse Effect; (j) it has no knowledge of any violation or default with respect to any order, writ, injunction or any decree of any court or any legally binding

See SOPC Section 6.1, 6.2, 6.4 and 6.5. Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES order of any Government Authority which may result in Material Adverse Effect; it has complied with all Applicable Laws and has not been subject to any fines, penalties, injunctive relief or any other civil or criminal liabilities which in the aggregate have or may have Material Adverse Effect; subject to receipt by the Concessionaire from the Authority of the Termination Payment and any other amount due under any of the provisions of this Agreement, in the manner and to the extent provided for under the applicable provisions of this Agreement all rights and interests of the Concessionaire in and to the Project / Project Facility shall pass to and vest in the Authority on the Termination Date free and clear of all Encumbrances without any further act or deed on the part of the Concessionaire or the Authority; no representation or warranty by the Concessionaire contained herein or in any other document furnished by it to the Authority or to any Government Authority in relation to Applicable Permits contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make such representation or warranty not misleading; and no bribe or illegal gratification has been paid or will be paid in cash or kind by or on behalf of the Concessionaire to any Person to procure the Concession.

NOTES AND REFERENCES

(k)

(l)

(m)

(n)

Warranties of the Authority

The Authority represents and warrants to the Concessionaire that: (a) The Authority has full power and authority to grant the Concession; (b) The Authority has taken all necessary action to authorise the execution, delivery and performance of this Agreement; (c) This Agreement constitutes the Authority's legal, valid and binding obligation enforceable against it in accordance with the terms hereof. (d) There are no suits or other legal proceedings pending or threatened against the Authority in respect of the Project Site or the Project, which has a Material Adverse Effect.

See SOPC Section 6.3. Also see warranties in relation to properties (below). Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2,

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KEY ISSUES

EXAMPLE CLAUSES

NOTES AND REFERENCES folder 1.

Indemnities Concessionaire indemnities to the Authority

Concessionaire should manage the risks covered by the indemnity (and the fact that there is no carve out for causation) by putting appropriate insurance cover in place (which it is required by law to do), which contains satisfactory non-vitiation provisions. Deliberate acts or omissions do not include acts or omissions which are within the contemplation of the parties or provided for in this Agreement. The carve out from the indemnity for the Authority acts and omissions does not include physical damage caused by Concessionaire as a result of "negligent" acts or omissions of the Authority as Concessionaire should insure against that risk. The Authority should not act as insurers of last resort in those circumstances.

Alternative 1 The Concessionaire shall indemnify and keep the Authority indemnified at all times from and against all Direct Losses sustained by the Authority in consequence of: (a) any claim for, or in respect of, the death and/or personal injury of any employee of, or person engaged by, the Concessionaire or any [Concessionaires Shareholder] notwithstanding any act or omission of the Authority or any [Authority Party]; (b) any claim for, or in respect of, the death and/or personal injury of any third party (other than a person [clause reference to persons specifically indemnified by the Authority below] arising out of, or in the course of, the Project Operations, save to the extent caused (or contributed to) by any Unreasonable Act by the Authority or any [Authority Party], breach of any express provision of this Agreement by the Authority or any [Authority Party] or any deliberate act or omission of the Authority or any [Authority Party]; (c) any physical loss or damage of to [Authority Assets] arising by reason of any act or omission of the Concessionaire or any [Concessionaires Shareholders], save to the extent that such loss or damage arises out of the breach of any express provision of this Agreement by the Authority or any [Authority Party] or any deliberate act or omission of the Authority or any [Authority Party]; and (d) any loss of or damage to property or assets of any third party arising by reason of any act or omission of the Concessionaire or any [Concessionaires Shareholders], save to the extent that such loss or damage arises out of the breach of any express provision of this Agreement by the Authority or any [Authority Party] or any deliberate act or omission of the Authority or any [Authority Party]. Alternative 2 The Concessionaire shall indemnify, defend and hold the Authority harmless against any and all proceedings, actions and third party claims arising out of a breach by Concessionaire of any of its obligations under this Agreement except to the extent that any such claim has arisen due to

Mirrors the indemnity given by the Authority in relation to its employees. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2,

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EXAMPLE CLAUSES breach by the Authority of any of its obligations under this Agreement or a Force Majeure Event which is a Political Event. Without limiting the generality of this clause, the Concessionaire shall fully indemnify, save harmless and defend the Authority including its officers servants, agents and subsidiaries from and against any and all loss and damages arising out of or with respect to failure of the Concessionaire (a) to comply with Applicable Laws and Applicable Permits, (b) to make payments of Taxes relating to the Concessionaire's Contractors, suppliers and representatives income or other taxes required to be paid by the Concessionaire without reimbursement hereunder, or (c) to pay amounts due as a result of materials or services furnished to the Concessionaire or any of its Contractors which are payable by the Concessionaire or any of its Contractors. Without limiting the generality of the provisions of this clause, the Concessionaire shall fully indemnify, save harmless and defend the Authority from and against any and all damages which the Authority may hereafter suffer, or pay by reason of any demands, claims, suits or proceedings arising out of claims of infringement of any domestic or foreign patent rights, copyrights or other intellectual property, proprietary or confidentiality rights with respect to any materials, information, design or process used by the Concessionaire or by the Concessionaire's Contractors in performing the Concessionaires obligations or in any way incorporated in or related to the Project. If in any such suit, claim or proceedings, a temporary restraint order or preliminary injunction is granted, the Concessionaire shall make every reasonable effort, by giving a satisfactory bond or otherwise, to secure the suspension of the injunction or restraint order. If, in any such suit claim or proceedings, the Project, or any part thereof or comprised therein is held to constitute an infringement and its use is permanently injuncted, the Concessionaire shall promptly make every reasonable effort to secure for the Authority a license, at no cost to the Authority , authorising continued use of the infringing work. If the Concessionaire is unable to secure such license within a reasonable time, the Concessionaire shall, at its own expense and without impairing the specifications and standards, either replace the affected work, or part, or process thereof with non-infringing work or parts or process, or modify the same so that it becomes non-infringing.

NOTES AND REFERENCES folder 1.

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EXAMPLE CLAUSES

NOTES AND REFERENCES Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1. The Authority liability for the Authority or the Authority Party acts or omissions (or limits on Concessionaire liability to the extent that the relevant category of acts or omissions were caused by the Authority or an Authority Party) does not extend to acts and omissions of patients and visitors. Concessionaire should price, and run its business, on the basis that patients and visitors will use the Facilities. These provisions should be reviewed on a project specific basis if the risk profile is unusual due to the nature of particular categories of users (such as mental health patients) although this should not be used as a reason to reduce the level of risk transfer in

The Authoritys indemnities to the Concessionaire

The Authority will, indemnify, defend and hold harmless the Concessionaire against any and all proceedings, actions, third party claims for loss, damage and expense of whatever kind and nature arising out of breach by the Authority, its officers, servants and agents of any obligations of the Authority under this Agreement except to the extent that any such claim has arisen due to breach by the Concessionaire of any of its obligations under this Agreement.

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EXAMPLE CLAUSES

NOTES AND REFERENCES the design of the facilities. Concessionaire's design and choice of materials, etc. should reflect the intended use and occupation of the building. The Authoritys indemnities relating to physical damage in paragraphs (c) and (d) do not cover physical damage caused by negligent acts or omissions. Concessionaire should insure against that risk. The Authority should not act as an insurer of last resort in those circumstances.

Defence of Claims

The Indemnified Party shall have the right, but not the obligation, to contest, defend and litigate any claim, action, suit or proceeding by any third party alleged or asserted against such party in respect of, resulting from, related to or arising out of any matter for which it is entitled to be indemnified hereunder and their reasonable costs and expenses shall be indemnified by the Indemnifying Party. If the Indemnifying Party acknowledges in writing its obligation to indemnify the person indemnified in respect of loss to the full extent provided by this clause, the Indemnifying Party shall be entitled, at its option, to assume and control the defence of such claim, action, suit or other proceedings, liabilities, payments and obligations at its expense and through counsel of its choice provided it gives prompt notice of its intention to do so to the Indemnified Party and reimburses the Indemnified Party for the

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES reasonable cost and expenses incurred by the Indemnified Party prior to the assumption by the Indemnifying Party of such defence. The Indemnifying Party shall not be entitled to settle or compromise any claim, action, suit or proceeding without the prior written consent of the Indemnified Party unless the Indemnifying Party provides such security to the Indemnified Party as shall be reasonably required by the Indemnified Party to secure, the loss to be indemnified hereunder to the extent so compromised or settled. If the Indemnifying Party has exercised its rights under clause [above], the Indemnified Party shall not be entitled to settle or compromise any claim, action, suit or proceeding without the prior written consent of the indemnifying Party (which consent shall not be unreasonably withheld or delayed). If the Indemnifying Party exercises its rights under clause [above], then the Indemnified Party shall nevertheless have the right to employ its own counsel and such counsel may participate in such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, when and as incurred, unless: (a) the employment of counsel by such party has been authorised in writing by the Indemnifying Party; or (b) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of the defence of such action; or (c) the Indemnifying Party shall not in fact have employed independent counsel reasonably satisfactory to the Indemnified Party to assume the defence of such action and shall have been so notified by the Indemnified Party; or (d) the Indemnified Party shall have reasonably concluded and specifically notified the Indemnifying Party either: (i) that there may be specific defences available to it which are

NOTES AND REFERENCES

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EXAMPLE CLAUSES different from or additional to those available to the Indemnifying Party; or (ii) that such claim, action, suit or proceeding involves or could have a material adverse effect upon it beyond the scope of this Agreement, Provided that if sub-clauses (b), (c) or (d) shall be applicable, counsel for the Indemnified Party shall have the right to direct the defence of such claim, action, suit or proceeding on behalf of the Indemnified Party and the reasonable fees and disbursements of such counsel shall constitute legal or other expenses hereunder.

NOTES AND REFERENCES

Issues in relation to the site Grant of property (often land)

The right to occupy and use the property may be granted by: (a) a transfer of ownership interest; (b) a lease; or (c) a licence alternative 1). (see

Alternative 1 Access during Construction From the date of issue of the Certificate of Commencement until the Actual Completion Date or (if earlier) the Termination Date, the Authority grants a licence to Concessionaire and the Concessionaire Parties to: (a) exercise the Ancillary Rights; and (b) enter upon the Site, in each case solely for the purposes of implementing the Works and carrying out Concessionaire's Pre-Completion Commissioning. Access following Construction After the occurrence of the Actual Completion Date the Authority grants licence to Concessionaire and Concessionaire Parties to enter upon the Facilities solely for the purposes of: (a) the carrying out of Project Operations (other than those Project Operations which Concessionaire is licensed to carry out pursuant to Clause [Ref]); and

See SOPC Section 31. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

The choice will depend on what is appropriate for the particular project (given the project time, site and nature of the Concessionaires interest), what the laws of the country in which the project is conducted and the Authoritys policy or usual practice.

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EXAMPLE CLAUSES (b) the remedying of Defects and the carrying out of Snagging Matters, such licence to terminate on the Expiry Date or Termination Date. (if earlier) the

NOTES AND REFERENCES

The Licences shall not operate or be deemed to operate as a demise of the Facilities or the Site or any part of the Facilities or the Site and Concessionaire shall not have or be entitled to exclusive possession or any estate right title or interest in the Site or the Facilities but shall occupy the Site as a licensee only. The Licences are personal to Concessionaire and the Concessionaire Parties and are granted only in so far as such rights are capable of being granted by the Authority whether as a result of any restriction in the Title Deeds or otherwise. Concessionaire shall procure that: (a) all Project Operations carried out at the Site by or on behalf of Concessionaire (whether before, during or after the completion of the Works) shall be carried out in a manner which does not breach any provisions of the Title Deeds; and (b) there shall be no action, or omission to act, which shall give rise to a right for any person to obtain title to the Site or any part of it. Alternative 2 The Authority shall handover to the Concessionaire physical possession of the Project Site free from Encumbrance together with the necessary rights of way/way leaves for the purpose of implementing the Project in accordance with the Project Site Delivery Schedule. Upon the Project Site or any part thereof being handed over pursuant to the preceding sub-clause (a), the Concessionaire shall, subject to the provisions of clause [ref], have the right to enter upon, occupy and use the Project Site or part thereof delivered to it by the Authority and to make at its costs, charges and expenses such investigation, development and Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES improvements in the Project Site as may be necessary or appropriate to implement the Project and to provide Project Facility in accordance with the provisions of this Agreement.

NOTES AND REFERENCES

Rights, Title and Use of the property

The Concessionaire shall have the right to the use of the Project Site in accordance with the provisions of this Agreement and for this purpose it may regulate the entry and use of the same by third parties. The Concessionaire shall not part with or create any Encumbrance on the whole or any part of the Project Site save and except as set forth and permitted under this Agreement. The Concessionaire shall not without the prior written consent or approval of the Authority use the Project Site for any purpose other than for the purpose of the Project/the Project Facility and purposes incidental or necessary thereto. The Concessionaire shall allow access to and use of the Project Site/ Project Facility for laying/installing telegraph lines, electric lines or for such other public purposes as the Authority may specify. Provided that such access or use shall not result in a Material Adverse Effect and that the Authority shall, in the event of any physical damage to the Project Site/Project Facility on account thereof, ensure that the Project Site/Project Facility is promptly restored at its cost and expenses. Provided further, that to the extent such access and use allowed by the Concessionaire affects the performance of any of its obligations hereunder, the Concessionaire shall not be deemed or construed to be in breach of its obligations nor shall it incur/suffer any liability on account thereof.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Warranties in relation to property

The extent of warranties in relation to land on which the project is to be conducted is a matter of negotiation by the parties. Alternative 1 is a

Alternative 1 The condition of the Site shall be the sole responsibility of Concessionaire. Accordingly (without prejudice to any other obligation of Concessionaire under this Agreement), Concessionaire shall be deemed

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index

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KEY ISSUES standard form drafted from the point of view of the Authority, and is unlikely to be accepted in its entirety by the Concessionaire. If there is to be a transfer of land back to the Authority at the end of the concession period, warranties given at the time on the condition of the land (and any facilities or infrastructure built on the land) would be needed at the time of the transfer back to the Authority. to have:

EXAMPLE CLAUSES

NOTES AND REFERENCES reference A1 Folder 1.

(a) carried out a Ground Physical and Geophysical Investigation and to have inspected and examined the Site and its surroundings and (where applicable) any existing structures or works on, over or under the Site; (b) satisfied itself as to the nature of the Site Conditions, the ground and the subsoil, the form and nature of the Site, the loadbearing and other relevant properties of the Site, the risk of injury or damage to property affecting the Site, the nature of the materials (whether natural or otherwise) to be excavated and the nature of the design, work and materials necessary for the execution of the Works; (c) satisfied itself as to the adequacy of the rights of access to and through the Site and any accommodation it may require for the purposes of fulfilling its obligations under this Agreement (such as additional land or buildings outside the Site); (d) satisfied itself as to the possibility of interference by persons of any description whatsoever (other than the Authority), with access to or use of, or rights in respect of, the Site, with particular regard to the owners of any land adjacent to the Site; and (e) satisfied itself as to the precautions, times and methods of working necessary to prevent any nuisance or interference, whether public or private, being caused to any third parties. To avoid doubt, Concessionaire accepts full responsibility for all matters referred to in Clause [Ref] and[, subject to Clause [Warranties],] the Concessionaire shall: (a) not be entitled to make any claim against the Authority of any nature whatsoever save, if applicable, as expressly provided in Clause [Delay Events]), on any grounds including (without limitation) the fact that incorrect or insufficient information on any matter relating to the Site was given to it by any person, whether or not an Authority Party; and

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EXAMPLE CLAUSES (b) be responsible for, and hold the Authority harmless from, cleaning up and otherwise dealing with any Contamination at the Site so that it shall at all times comply with its obligations under this Agreement including (without limitation) complying with, at its own cost, any applicable Laws and any Consents, orders, notices or directions of any regulatory body (whether made against the Authority or Concessionaire). To the extent that unforeseen ground conditions and/or Contamination exist in any parts of the Site which are under existing buildings as at Financial Close and which it is not practical for Concessionaire to investigate or survey, Concessionaire shall not be responsible for them, unless they were discovered by the Ground Physical and Geophysical Investigation and accordingly identified in Schedule [Construction Matters] or unless they should reasonably have been discoverable if the Ground Physical and Geophysical Investigation had been properly carried out. If Concessionaire is not responsible for such ground conditions and/or Contamination under this clause then the Authority shall be so responsible. The areas to which this clause applies are as follows: [to provide] Where pursuant to Clause [above] the Authority is responsible for any of the matters referred to then the following provisions shall apply: (a) where any such matter arises during the Construction Phase it shall be deemed to be a Compensation Event for the purposes of this Agreement and any work which is required or instructed to be done in consequence of it shall be deemed to be a Qualifying Variation; (b) where any such matter arises during the Operational Term it shall, for the avoidance of doubt, be deemed to be an Excusing Cause for the purposes of Clause [reference]; (c) further where any such matter arises during the Operational Term and any work or change to the Services is required or instructed to be done in consequence of it, it shall be deemed to be a Qualifying Variation; and (d) where any such matter is Contamination (whether during the

NOTES AND REFERENCES

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EXAMPLE CLAUSES Construction Phase or the Operational Term) the Authority shall further hold Concessionaire harmless from cleaning up and otherwise dealing with the Contamination and shall indemnify Concessionaire in respect of all Direct Losses incurred by Concessionaire resulting from such Contamination.] Alternative 2 The Project Site together with the necessary right of way/ way leaves having been acquired through the due process of law belongs to and is vested in the Authority, and that the Authority has full powers to hold, dispose of and deal with the same consistent, inter - alia, with the provisions of this Agreement and that the Concessionaire shall, in respect of the Project Site, have no liability regarding any compensation payment on account of land acquisition or rehabilitation/resettlement of any Persons affected thereby. The Project Site is described in Schedule [reference]. The Concessionaire shall, subject to complying with the terms and conditions of this Agreement, remain in peaceful possession and enjoyment of the Project Site during the Concession Period. In the event the Concessionaire is obstructed by any Person claiming any right, title or interest in or over the Project Site or any part thereof or in the event of any enforcement action including any attachment, distraint, appointment of receiver or liquidator being initiated by any Person claiming to have any interest in/ charge on the Project Site or any part thereof, the Authority shall, if called upon by the Concessionaire, defend such claims and proceedings and also keep the Concessionaire indemnified against any loss or damages which the Concessionaire may suffer, on account of any such right, title, interest or charge.

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Permits

The parties need to agree on the party responsible for procuring permits such as planning approval.

Alternative 1 Concessionaire shall be responsible for: (a) obtaining all Consents which may be required for the performance of

Approvals and consents may extend to more than the rights in relation to land. Alternative 1 adapted from Department of

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EXAMPLE CLAUSES the Project Operations; and (b) implementing each Consent within the period of its validity in accordance with its terms. Alternative 2 The Authority has in respect of Project, procured the Applicable Permits listed in Schedule [ref]. The Concessionaire shall be responsible and shall obtain all other Applicable Permits in such sequence as is consistent with the Project Requirements.

NOTES AND REFERENCES Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1. See SOPC Section 3.4. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Design, construction and maintenance Design

The most important obligation of the project company under the concession agreement is likely to be the construction of the infrastructure asset. The common practice is to confer on the private sector the obligation to design and construct the infrastructure asset (subject to governments obligations as discussed below). The requirements, specifications of for the infrastructure need to be carefully defined in the concession agreement. The task of designing and constructing the infrastructure asset is usually subcontracted to a contractor on a fixed

Alternative 1 Overall Responsibility Concessionaire shall carry out the Works: (a) so as to procure satisfaction of the Authority's Construction Requirements; (b) in accordance with Concessionaire's Proposals; and (c) in accordance with the terms of this Agreement. To avoid doubt, the obligations in sub-Clauses (a), (b) and (c) are independent obligations. In particular: (d) the fact that Concessionaire has complied with Concessionaire's Proposals shall not be a defence to an allegation that Concessionaire has not satisfied the Authority's Construction Requirements; and (e) the fact that Concessionaire has satisfied the Authority's Construction Requirements shall not be a defence to an allegation that Concessionaire has failed to comply with Concessionaire's

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KEY ISSUES price, fixed time and turnkey basis under an EPC agreement. The issues relating to the design and construction of the infrastructure asset dealt with in the concession agreement are as follows: Time and price. The price of design and construction is usually not specified, because the project company relies on future revenue flow from the operation of the facility to recover its construction costs. The time for which the facility construction needs to be completed is usually specified in the agreement. If the project company fails to complete the design and construction of the facility within a specified time, the project company is usually required to pay liquidated damages. If the project company completes the construction of the facility within a specified time, there are sometimes provisions for the government to award bonus payments. Government input. The Proposals. Design responsibility

EXAMPLE CLAUSES

NOTES AND REFERENCES

Concessionaire warrants that it has used, and will continue to use, the degree of skill and care in the design of the Facilities that would reasonably be expected of a competent professional designer experienced in carrying out design activities of a similar nature, scope and complexity to those comprised in the Works. Thermal and energy efficiency [For the purposes of this clause an "average year" means an "example weather year" ("EWY") as defined by the Chartered Institute of Building Services Engineers and including data for the [speficy] area.] During the period of [two (2) years] following the Actual Completion Date, the parties shall monitor the actual energy consumption at the Facilities in accordance with the procedure set out in Schedule [Construction Matters], with a view to ascertaining whether and to what extent the thermal and energy efficiency of the Facilities meets the requirements of the Authority's Construction Requirements and Concessionaire's Proposals. [If either of the [two (2) years] referred to above are not average years, then such monitoring shall continue until the earlier of: (a) there being [two (2)] complete average years; and (b) five (5] years from the Actual Completion Date.] If as a result of the monitoring of actual energy consumption over the periods described above there is any indication that the thermal and energy efficiency of the Facilities fails to meet the Authority's Construction Requirements and/or Concessionaire's Proposals, the parties shall jointly investigate the matter to determine the cause of such failure either in the manner agreed between them or in such manner as may be determined in accordance with Schedule [Dispute Resolution Procedure]. If following any investigation pursuant to clause [Reference], it is agreed between the parties or determined in accordance with Schedule [Dispute Resolution Procedure] that such failure arises as a consequence of the

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KEY ISSUES concession agreement will provide for submission of designs and information to the government. There should be an opportunity for the government to review the design and supervise the construction of the infrastructure facility. There should, however, be no express obligation for the government to approve or provide input, because this may lead to contributory fault by the government if something is wrong in the design or construction of the infrastructure. For example, the private sector may argue that the government has approved the design of the faulty infrastructure asset. Completion. One of the key milestone in the project is the completion of the construction of the infrastructure facility. Mechanisms for the government to test whether completion of the infrastructure facility has occurred needs to be built into the agreement. Consequences of late

EXAMPLE CLAUSES design and construction of the Facilities by Concessionaire not complying with the applicable provisions of the Authority's Construction Requirements and/or Concessionaire's Proposals, Concessionaire shall at its own expense procure that such additional work or other remedial work is carried out to remedy the relevant defect or otherwise compensate the Authority in a manner approved by the Authority (such approval not to be unreasonably withheld or delayed) but where the solution adopted is compensation, the Authority should not as a consequence face any additional liability upon early termination of this Agreement and the provisions of Schedule [Dispute resolution procedure] shall be amended as necessary to achieve this. The Authority design approval The Authority confirms that, as at the date of this Agreement, it has reviewed such of Concessionaire's Proposals as have been initialled by the Authority and that, subject to any qualifications and/or comments notified by the Authority to Concessionaire in writing and set out in [specify] such proposals satisfy the Authority's requirements in respect of Clinical Functionality, so far as can reasonably be determined given the level of detail of Design Data which has been disclosed to the Authority. Concessionaire shall develop and finalise the design and specification of the Works and the Authority shall review the Reviewable Design Data in accordance with Schedule [Review Procedure] and the provisions of this clause: (a) Concessionaire shall submit the Reviewable Design Data and the design of any Variations developed in accordance with the procedure set out in Schedule [Variation Procedure] to the Authority's Representative for review under Schedule [Review Procedure]. Concessionaire shall not commence or permit the commencement of construction of the part or parts of the Facilities to which such Reviewable Design Data relates until it has submitted the appropriate Reviewable Design Data and either it is confirmed by the Authority's Representative that Concessionaire is entitled to proceed with construction in accordance with paragraph [ref] of Schedule [Review Procedure] or Concessionaire is disputing the status of such Reviewable Design Data pursuant to paragraph [ref] of Schedule

NOTES AND REFERENCES

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KEY ISSUES completion. There needs to be target dates for completion of the infrastructure asset. For some projects, other milestones may also be appropriate. The consequences of not completing by those target dates should be dealt with. In general, what the consequences are would depend on whether the failure to complete is caused by the government, the project company (or its sponsors), or something that is the risk or control of either the government or the project company. Consequences of early completion. The parties may consider a bonus payable to the project company for early completion, and consequently early commencement availability of the infrastructure asset. The reward for early completion, however, may already be inbuilt if the period for termination of the concession period is a fixed date. That is, the project company would benefit from a

EXAMPLE CLAUSES [Review Procedure]. [If Concessionaire commences or permits the commencement of construction during such a dispute and it is subsequently determined in accordance with Schedule [Dispute Resolution Procedure] that Concessionaire was not entitled to proceed with construction in accordance with paragraph [ref] of Schedule [Review Procedure] then Concessionaire shall forthwith, at its own cost, undo, remove from the Site and replace (in a manner complying with this Agreement) any parts of the works which it has been determined Concessionaire was not entitled to construct;] (b) with effect from the date at which any item of Reviewable Design Data is or becomes an Approved RDD Item in accordance with Schedule [Review Procedure], such Approved RDD Item shall for the purposes of this Agreement be deemed to have satisfied the requirements of the Authority in the manner and to the extent set out in Schedule [Review Procedure]; (c) Concessionaire shall allow the Authority's Representative, at any time, a reasonable opportunity to view any items of Design Data, which shall be made available to the Authority's Representative as soon as practicable following receipt of any written request from the Authority's Representative; and (d) Concessionaire shall procure that the Contractor establishes and maintains a computerised design database which Concessionaire and the Authority's Representative may access remotely by computer to view drawings comprised within the Design Data (including Reviewable Design Data) and electronically store and/or print copies of such Design Data. In the event of the Authority's Representative being unable to access such design database, Concessionaire shall procure that it is made available for inspection by the Authority's Representative, or any other person authorised by the Authority's Representative. Rectification of Concessionaire's Proposals Without prejudice to clause [reference], if it should be found that Concessionaire's Proposals do not fulfil the Authority's Construction Requirements, Concessionaire shall at its own expense amend

NOTES AND REFERENCES

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KEY ISSUES longer period where the infrastructure asset is operational and generating revenues.

EXAMPLE CLAUSES Concessionaire's Proposals and rectify the Works or any part affected. Such amendment and rectification shall have the effect that: (a) Concessionaire's Proposals shall satisfy the Authority's Construction Requirements; and (b) following the amendment or rectification, the structural, mechanical and electrical performance of the Facilities will be of an equivalent standard of performance to that set out in Concessionaire's Proposals prior to their amendment or rectification (for the purpose of this comparison disregarding the fault which required the amendment or rectification to be made). Alternative 2 Preparation of Drawings The Concessionaire may, subject to the Design Requirements, adopt with or without modifications the Drawings made available by the Authority or adopt its own Drawings. Provided that, the Concessionaire shall in any event be solely responsible for the adequacy of the Drawings and can not hold the Authority/ its advisors responsible for adequacy/ accuracy of drawings made by the Authority. If the Concessionaire chooses to adopt with modifications the Drawings made available by the Authority or to adopt it own Drawings, the Drawings shall be subject to review by the Independent Engineer as provided in the succeeding clause. Review of Drawings The Concessionaire shall promptly and in such sequence as is consistent with the Construction Requirements, submit a copy each of the Drawings to the Independent Engineer and the Authority. By forwarding the Drawings to the Independent Engineer and the Authority pursuant to the preceding sub-clause, the Concessionaire shall

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES be deemed to have represented that it has verified and determined that the Drawings forwarded are in conformity with the Design Requirements. Within 15 days of receipt of the Drawings, Independent Engineer shall review the same taking into account, inter alia, comments of the Authority, if any, thereon, and convey its comments/observations to the Concessionaire on the conformity of Drawings with Design Requirements. If the comments/observations of the Independent Engineer indicate that the Drawings are not in conformity with the Design Requirements, such Drawings shall be revised by the Concessionaire to the extent necessary and resubmitted to Independent Engineer for further review. Independent Engineer shall give its observations and comments, if any, within 15 (fifteen) days of receipt of such revised Drawings. If, within the period stipulated in the preceding sub-clause, the Independent Engineer does not respond to the Drawings submitted to it by the Concessionaire the Concessionaire shall be entitled to proceed with the Project on the basis of such Drawings submitted by it to the Independent Engineer. Notwithstanding any review or failure to review by or the comments/observations of the Independent Engineer or the Authority, the Concessionaire shall be solely responsible for the adequacy of the Drawings and their conformity with the Design Requirements, and shall not be relieved or absolved in any manner whatsoever of any of its obligations hereunder. The Concessionaire shall be responsible for delays in meeting the Design Requirements caused by reason of any Drawings not being in conformity with the Design Requirements, and shall not be entitled to seek any relief in that regard from the Authority. The Concessionaire shall simultaneously with the submission of Drawings to the Independent Engineer prepare and submit to the Independent Engineer the construction plan providing, inter - alia, the Critical Path Method (CPM)/Project Evaluation & Review Technique (PERT) charts in respect of the Project.

NOTES AND REFERENCES

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EXAMPLE CLAUSES Within 90 (ninety) days of COD, the Concessionaire shall furnish to the Authority three copies of "as built" Drawings duly verified by the Independent Engineer, including without limitation an "as built" survey illustrating the layout of the Project and setback lines, if any, of the buildings and structures forming part of Project Facility reflecting the Project as actually designed, engineered and constructed.

NOTES AND REFERENCES

Date for completion

The parties need to consider the consequences of late completion. In particular, the issue of whether liquidated damages is payable. If the late date of completion means and shorter period for the concessionaire to operate the infrastructure facility and derive revenues from the infrastructure facility, the risk of late completion has already been passed to the concessionaire. Often a project provides for an independent engineer or an independent tester to conduct the projects and to make determinations in relation to the project. The idea is to provide objective determinations in relation to the project, significantly in relation to project completion. The terms of this independent third partys appointment is usually set out in a

Concessionaire shall complete the Works by the Completion Date. Without prejudice to Clauses [(Concessionaire Events of Default), (NonDefault Termination), (Effect of Termination) and (Compensation on Termination)], the Authority shall not be entitled to claim liquidated or general damages in respect of any delay which elapses between the Completion Date and the Actual Completion Date.

See SOPC Section 3.3. See SOPC Section 4 for the consequences of late service commencement. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Appointment of independent third parties

Alternative 1 Appointment The parties have prior to the date of this Agreement, in compliance with all Law relating to procurement which is applicable to either party, appointed a suitably qualified and experienced consultant to act as the Independent Tester for the purposes of this Agreement upon the terms of the Independent Tester Contract. Changes to terms of appointment Neither the Authority nor Concessionaire shall without the other's prior written approval (not to be unreasonably withheld or delayed):

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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CONTENT HEADINGS

KEY ISSUES separate appointment agreement. Alternative 1 deals with the appointment of an independent tester, and Alternative 2 deals with the appointment of an independent engineer.

EXAMPLE CLAUSES (a) terminate, repudiate or discharge the Independent Tester Contract or treat the same as having been terminated, repudiated or otherwise discharged; (b) waive, settle, compromise or otherwise prejudice any rights or claims which the other may from time to time have against the Independent Tester; or (c) vary the terms of the Independent Tester Contract or the service performed or to be performed by the Independent Tester. The parties shall comply with and fulfil their respective duties and obligations arising under or in connection with the Independent Tester Contract. Co-Operation The parties agree to co-operate with each other generally in relation to all matters within the scope of or in connection with the Independent Tester Contract. All instructions and representations issued or made by either of the parties to the Independent Tester shall be simultaneously copied to the other and both parties shall be entitled to attend all inspections undertaken by or meetings involving the Independent Tester. Replacement In the event of the Independent Tester's appointment being terminated otherwise than for full performance, the parties shall liaise and co-operate with each other in order to appoint, in accordance with this clause, a replacement consultant to act as the Independent Tester as soon as reasonably practicable. The identity of any such replacement shall be as agreed by the parties and the terms of his appointment shall, unless otherwise agreed, be as set out in the Independent Tester Contract. In the event the parties fail to agree the identity and/or terms of a replacement Independent Tester in accordance with clause [reference], within ten (10) Business Days of the original Independent Tester's appointment being terminated, then such disagreement shall be referred

NOTES AND REFERENCES

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EXAMPLE CLAUSES for resolution in accordance with Schedule [Dispute Resolution Procedure]. Alternative 2 Procedure for Appointment The Authority shall invite proposals from the interest persons to act as Independent Engineer on this Project. Within 15 days of receipt of the proposals, the Authority and the Concessionaire shall carry out a joint assessment and agree a panel of 3 (three) persons, together with the Concessionaires consent for appointment by the Authority of one of the Persons named in such panel as the Independent Engineer. The Authority shall within 30 days of agreement of the panel, appoint one of the Persons included in the panel as the Independent Engineer and communicate the same to the Concessionaire and the Person so appointed. The scope of work of the Independent Engineer shall include that set out in Schedule [reference]. The initial term of the Independent Engineer shall extend upto 1 year after COD, which term may be renewed /extended for a period not exceeding 6 months at a time and 2 years in aggregate. Payments to the Independent Engineer All fees, costs, charges and expenses payable to the Independent Engineer in accordance with the terms of its appointment (collectively "the Remuneration") shall be shared and borne by the Parties equally. The Concessionaire shall within 7 days of receipt of demand from the Authority pay /reimburse to the Authority from time to time its share of the Remuneration.

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES Replacement of the Independent Engineer The Parties may replace the Independent Engineer for the time being in any of the following circumstances : (a) If the Authority or the Concessionaire has reason to believe that the Independent Engineer has not discharged its duties in a fair, appropriate and diligent manner; (b) if the Parties decide not to renew the term of the Independent Engineer; (c) if, in accordance with the terms of its appointment the Independent Engineer resigns or notifies its intention not to continue as the Independent Engineer; (d) any other circumstance which in the opinion of the Parties warrants replacement of the Independent Engineer. Subject to the attendant circumstances and unless the Parties otherwise agree, the procedure laid down in [ref] shall as far as possible be adhered to for replacement of the Independent Engineer, and the replacement shall be so effected as to maintain continuity in the supervision and monitoring of the Project Requirements. The Independent Engineer appointed pursuant to clause [ref] shall be for an initial term not exceeding 2 years which term may be extended /renewed for a further period of not exceeding six months at a time and 2 years in aggregate. Eligibility for Re-appointment No person shall be eligible to be re-appointed as the Independent Engineer unless a period of not less than two years has lapsed since the expiry of his previous tenure as the Independent Engineer.

NOTES AND REFERENCES

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EXAMPLE CLAUSES

NOTES AND REFERENCES

Pre-completion

Alternative 1 envisages the following sequence of events: Final Commissioning Programme ("FCP") agreed Concessionaire commissioning needed in order to achieve Practical Completion The Authority to carry out its commissioning activities scheduled to take place prior to completion (if any) Concessionaire to carry out completion tests in accordance with FCP Visual inspection by The Authority and Independent Tester Certificate of Practical Completion and snagging list issued Commencement of appropriate percentage of the unitary charge Concessionaire post completion commissioning activities in accordance with FCP post The Authority completion

Alternative 1 Final Commissioning Programme Not less than [number] months before the Completion Date the Authority shall provide Concessionaire with a draft of the Final Commissioning Programme as jointly developed by the Authority and Concessionaire in accordance with the provisions of Clauses 0 and 0. Concessionaire shall provide the Authority with comments on the draft Final Commissioning Programme submitted to it no later than [number] months before the Completion Date. The parties shall, within [number] Business Days of receipt by the Authority of Concessionaire's comments agree the terms of the Final Commissioning Programme provided that the Authority may by prior notice to Concessionaire change the scope and time of the Authority's Commissioning and reimburse Concessionaire its reasonable costs incurred as a result of such change in scope or time. If the parties are unable to agree the Final Commissioning Programme or the change in scope or time of the Authority's Commissioning [number] months before the Completion Date the matter shall be referred for determination in accordance with Schedule [Dispute Resolution Procedure]. [The final Commissioning Programme relating to the relevant Phase shall be prepared in accordance with the requirements of the Completion Process. Before the date specified by the Completion Process for each Phase the Authority shall provide Concessionaire with a draft of the Final Commissioning Programme relating to the relevant Phase as jointly developed by the Authority and Concessionaire in accordance with the provisions of Clauses [reference]. Concessionaire shall provide the Authority with comments on the draft Final Commissioning Programme for each relevant Phase submitted to it within the period stated in the Completion Process. The parties shall, within [number] Business Days of receipt by the Authority of Concessionaire's comments agree the terms of the Final Commissioning Programme for the relevant Phase provided that the Authority may by prior notice to Concessionaire change the scope and time of the Authority's Commissioning and reimburse Concessionaire its reasonable costs incurred as a result of such change in scope or time. If the parties are unable to agree the Final Commissioning Programme for each relevant Phase or the change in scope or time of the Authority's Commissioning by the date specified in the Completion Process for the Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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CONTENT HEADINGS

KEY ISSUES commissioning (including, for example, installation of its equipment and decant to new site) in accordance with FCP.

EXAMPLE CLAUSES relevant Phase the matter shall be referred for determination in accordance with Schedule [Dispute Resolution Procedure].] The Final Commissioning Programme [for each Phase] shall be in accordance with the Outline Commissioning Programme and shall impose no greater or more onerous obligations on the Authority than those set out in the Outline Commissioning Programme (unless otherwise agreed by the Authority in its absolute discretion). The Final Commissioning Programme shall then replace the Outline Commissioning Programme [as it relates to that Phase]. The Final Commissioning Programme shall describe the steps necessary, the party responsible for taking each of such steps and the timing and sequence of each of such steps to ensure [insofar as relevant for each Phase of the Works]: (a) that Concessionaire's Pre-Completion Commissioning and the Authority's Commissioning will not delay the Actual Completion Date [Phase Actual Completion Date] from occurring by the Completion Date [Phase Completion Date]; and (b) that Concessionaire's Post Completion Commissioning and the Authority's Post Completion Commissioning is completed by the Commissioning End Date. The parties shall procure that the steps that they are responsible for carrying out and completing pursuant to the Final Commissioning Programme include, [in the case of Concessionaire's activities, the activities described at paragraph [ref] of the Authority's Construction Requirements]. [In accordance with the Completion Process] Concessionaire shall notify the Independent Tester and the Authority's Representative of the date when Concessionaire (acting reasonably) considers that [any Phase of] the Works will be complete in accordance with the Authority's Construction Requirements [the Completion Criteria] and this Agreement not less than [number] months prior to such anticipated completion. Such notification shall trigger the activities of the Independent Tester under this

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES clause.

EXAMPLE CLAUSES

NOTES AND REFERENCES

The parties each undertake to co-operate with the Independent Tester to ensure that the Independent Tester is familiar with all necessary aspects of the Project for the purposes of its role as described in this clause. Commissioning prior to Completion Date The Concessionaire shall: (a) undertake the Concessionaire's Pre-Completion Commissioning in accordance with the Final Commissioning Programme; and (b) permit the Authority to undertake the Authority's Commissioning including [permitting specialist contractors engaged by the Authority to deliver and install equipment] on such dates as agreed between the Authority and Concessionaire, in accordance with the Final Commissioning Programme. The relevant party shall insofar as relevant for each Phase: (a) undertake its Post Completion Commissioning in accordance with the Final Commissioning Programme; and (b) permit the other party to undertake its Post Completion Commissioning including [permitting specialist contractors engaged by the Authority to deliver and install equipment] on dates agreed between the Authority and Concessionaire, within the period defined in the Completion Process and in accordance with the Final Commissioning Programme. The Concessionaire shall give written notice to the Independent Tester and the Authority of the commencement of Concessionaire's PreCompletion Commissioning and shall ensure that the Independent Tester and the Authority's Representative are invited to witness all of, and are provided with all information they may reasonably require in relation to, Concessionaire's Pre-Completion Commissioning and that the Independent Tester is invited to comment on Concessionaire's Pre-

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EXAMPLE CLAUSES Completion Commissioning. The Concessionaire shall (or shall procure that the Contractor shall) give the Authority access to the Facilities at such times as may be set out in the Final Commissioning Programme to enable the Authority to undertake the Authority's Commissioning [within the period defined in the Completion Process and] in accordance with the Final Commissioning Programme for the period prior to completion. Pre-Completion inspection The Concessionaire shall give the Independent Tester and the Authority's Representative not less than [number] Business Days' notice and not more than [number] Business Days' notice [the appropriate notice period for that Phase as set out in the Completion Process] of the date upon which Concessionaire considers that [the relevant Phase of] the Works will be complete and the tests on completion [required for the relevant Phase] to be performed in accordance with the Final Commissioning Programme will be carried out. [Following receipt of the notice specified in this Clause], the Authority's Representative and the Independent Tester shall be entitled to inspect [the relevant Phase of] the Works on the date or dates reasonably specified by Concessionaire in accordance with this Clause, and to attend any of the tests on completion [undertake inspections of any Phase in accordance with the periods specified in the Completion Process]. Concessionaire shall, if so requested, accompany the Authority's Representative and the Independent Tester on any such inspection. Pre-Completion matters The parties shall procure that the Independent Tester, within [number] Business Days of any inspection made pursuant to Clause [reference], notifies Concessionaire and the Authority of any outstanding matters (including, without limitation, the repetition of any of the tests on completion which are required to be carried out and passed in accordance with the Final Commissioning Programme) which are required to be attended to before [the relevant Phase of] the Works can be considered to be complete in accordance with the Authority's Construction Requirements and Concessionaire's Proposals [Completion

NOTES AND REFERENCES

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EXAMPLE CLAUSES Criteria]. Concessionaire shall attend to such matters and shall, if necessary, give the Independent Tester further notices in accordance with Clause [ref] (but dealing only with matters raised in the notification under this Clause [reference]) so that the procedures in Clause [reference] and this Clause [reference] are repeated as often as may be necessary to ensure that all outstanding matters in relation to the Works are attended to Alternative 2 The Concessionaire is required to commence Construction Works only on or after the Commencement Date or the Financial Close whichever is later. Nothing contained in the preceding clause shall be deemed to preclude the Concessionaire from commencing Construction Works prior to the Commencement Date, provided the Concessionaire shall do so entirely at its own cost and risk, and shall not be entitled to seek any compensation therefore or in respect thereof in the event the Agreement is terminated prior to Financial Close for any reason whatsoever. Provided however, no Construction Works shall begin unless the Independent Engineer is in place and has assumed charge. The Concessionaire shall immediately upon commencement of Construction Works notify the Authority of the same. The Concessionaire shall adhere to the Construction Requirements and achieve COD on or before the Scheduled Project Completion Date. The Concessionaire may undertake Construction Works by itself or through a Contractor possessing requisite technical, financial and managerial expertise/capability; but in either case, the Concessionaire shall remain solely responsible to meet the Construction Requirements. The Concessionaire shall, before commencement of Construction Works; (a) have requisite organisation and designate and appoint suitable officers/ representatives as it may deem appropriate to supervise the Project, to deal with the Independent Engineer/the Authority and to

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES be responsible for all necessary exchange of information required pursuant to this Agreement; (b) construct, provide and maintain a reasonably furnished site office accommodation for the Independent Engineer, at the Project Site. For the purposes of determining that Construction Works are being undertaken in accordance with the Project Requirements, the Concessionaire shall with due diligence carry out all necessary and periodical Tests in accordance with the instructions and under the supervision of the Independent Engineer and the Construction Requirements. The Concessionaire shall maintain proper record of such Tests and the remedial measures taken to cure the defects or deficiencies, if any, indicated by the Test results. All Tests shall be conducted in accordance with Construction Requirements. If the Tests are successful and all parts of Project Facility can be safely and reliably opened for commercial operation, the Independent Engineer shall issue Completion Certificate. Provided, notwithstanding that certain works or things forming part of Construction Works are not complete, if following Tests the Independent Engineer determines that the Project Facility can be safely and reliably opened for operations, the Independent Engineer may issue Provisional Certificate to the Concessionaire. The Provisional Certificate shall have appended thereto a list of outstanding items signed jointly by the Independent Engineer and the Concessionaire ("Punch List"). All Punch List items shall be completed by the Concessionaire within such time as may be determined by the Independent Engineer, not exceeding 90 (ninety) days of the date of issue of the Provisional Certificate. Upon satisfactory completion of all Punch List items, the Independent Engineer, shall promptly and in any case within 15 days thereof, issue Completion Certificate. If the Concessionaire fails to complete the Punch List items within the said period of 90 days, the Authority may, without prejudice to any other rights or remedy available to it under this Agreement, have such items completed at the risk and costs of the Concessionaire. The cost incurred

NOTES AND REFERENCES

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EXAMPLE CLAUSES by the Authority in completing the Punch List items, as certified by the Independent Engineer, shall be reimbursed by the Concessionaire to the Authority within 7 days from the date of receipt of a claim in respect thereof from the Authority. Thereupon, the Independent Engineer may issue Completion Certificate. The Independent Engineer, may, by written notice, require the Concessionaire to suspend forthwith the whole or any part of the Construction Works if in its reasonable opinion the same is being carried on in a manner that is not in conformity with the Construction Requirements.

NOTES AND REFERENCES

Completion

Alternative 2 provides for a reduction or increase in the availability payment if the project is completed later or earlier than the scheduled time. Alternative 1 does not provide for this. The commercial risk of not completing ahead of the scheduled time is with the Concessionaire already, because the Concessionaire is losing the opportunity to generate revenue within its concession period. (Unless the concession period is expressed to commence from the date of construction completion.)

Alternative 1 Pursuant to the terms of the Independent Tester Contract, the parties shall procure that the Independent Tester shall, when he is satisfied that completion [of a Phase] has occurred in accordance with this Agreement [the Completion Criteria], issue a Certificate of Practical Completion [in respect of that Phase] to that effect stating the date upon which, in his opinion, the Actual Completion Date [Phase Actual Completion Date] occurred. Subject to Clauses [Snagging and Defects], the issue of the Certificate of Practical Completion [in respect of a Phase] shall, in the absence of manifest error, bad faith or fraud, be conclusive evidence for the purpose only of ascertaining the [relevant] Payment Commencement Date, that the Actual Completion Date [Phase Actual Completion Date] has occurred on the date stated in such certificate. The Independent Tester shall issue the Certificate of Practical Completion [in relation to a Phase] notwithstanding that there are Snagging Matters. Where there are Snagging Matters, the parties shall procure that the Independent Tester shall, within [number] Business Days of the date of issue of the [relevant] Certificate of Practical Completion, issue a Snagging Notice which shall specify the Snagging Matters and an estimate of the cost of rectifying such Snagging Matters. Following the issue of a Snagging Notice, Concessionaire shall, in consultation with the Authority's Representative and in such manner as to cause as little disruption as reasonably practicable to the Authority's Post Completion Commissioning and the Authority's use of the Facilities, rectify all Snagging Matters within [number] Business Days of the issue of

See SOPC Section 3.6. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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KEY ISSUES the Snagging Notice.

EXAMPLE CLAUSES

NOTES AND REFERENCES

If, within [number] Business Days of the issue of the Snagging Notice Concessionaire has failed to rectify the Snagging Matters specified in the Snagging Notice the Authority may by itself (or engage others to) carry out the works necessary to rectify the Snagging Matters, at the risk and cost of Concessionaire. If, within [ ] Business Days of the date specified in the programme for the rectification of all Snagging Matters specified in the Snagging Notice Concessionaire has failed to rectify all of those Snagging Matters the Authority may be itself (or engage others to) carry out the works necessary to rectify the Snagging Matters, at the risk and cost of Concessionaire. The issue of the Certificate of Practical Completion [in respect of a Phase] shall in no way affect the obligations of Concessionaire under this Agreement including in respect of any Defects. As-built specification As soon as it is available, after the issue of the Certificate of Practical Completion [in relation to a Phase to the extent relating to that Phase], Concessionaire shall provide to the Authority a copy of the as-built building specification, together with all [drawings relating to the Works]. Alternative 2 The Project shall be deemed to be complete and open to traffic only when the Provisional Certificate or the Completion Certificate is issued by the Independent Engineer in accordance with the provisions hereof. In case COD is different from the Scheduled Project Completion Date, the provisions of clause [8.3] shall apply. Provided if COD is delayed beyond 120 days of the Scheduled Project Completion Date, the Authority shall, subject to the provisions of clause [ref], be entitled to terminate this Agreement and to appropriate the Performance Security. Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1

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EXAMPLE CLAUSES

NOTES AND REFERENCES See SOPC Section 3.5 (in relation to quality management systems). Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Post-completion (Maintenance)

After completion of the construction of the facility, the authority needs to ensure that the infrastructure services is delivered to an acceptable standard and that the facility is maintained for the term of the concession.

Alternative 1 Concessionaire and the Authority shall, within [number] Business Days following the Actual Completion Date, [in accordance with the Final Commissioning Programme,] respectively undertake and complete Concessionaire's Post-Completion Commissioning and the Authority's Post Completion Commissioning, in accordance with the Final Commissioning Programme [for the relevant Phase]. Both parties shall, at all times, and in particular in the period between the Actual Completion Date and the Commissioning End Date, use reasonable endeavours to assist the other party to ensure compliance with the Final Commissioning Programme. Information Concessionaire shall ensure that the Authority's Representative is provided with all the information he may reasonably require in relation to Concessionaire's Post-Completion Commissioning and the Authority shall ensure that Concessionaire is provided with all information Concessionaire may reasonably require in relation to the Authority's Post Completion Commissioning. If the Authority's Representative, acting reasonably, makes any comment in relation to the carrying out of Concessionaire's Post-Completion Commissioning, such comments shall be taken into account by Concessionaire and if Concessionaire, acting reasonably, makes any comment in relation to the carrying out of the Authority's Post Completion Commissioning, such comment shall be taken into account by the Authority. [On the occurrence of [the] [each] Commissioning End Date the Independent Tester shall issue the Commissioning Completion Certificate] Operational Manuals With effect from the Commissioning End Date and throughout the remainder of the Project Term, [Within [number] Business Days after the completion of any Phase] Concessionaire shall at all reasonable times

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EXAMPLE CLAUSES make available on the Site to the Authority's Representative all operation and maintenance manuals [the Authority to list any other manuals required]. Quality Plans and Systems Concessionaire shall procure that all aspects of the Project Operations are the subject of quality management systems. The quality management systems referred to in Clause [above] shall be reflected in appropriate quality plans, the standard of which shall [except in relation to Interim Services] be consistent with [standard] or any equivalent standard which is generally recognised as having replaced them (or either of them). Without limitation to the generality of Clause [above], there shall be: (a) Design Quality Plan; (b) Construction Quality Plan; and (c) Services Quality Plan for each Service, provided that the Design Quality Plan and the Construction Quality Plan may be incorporated into one document. Concessionaire shall procure that the Project Operations are carried out in compliance with the Quality Plans. All Quality Plans shall be submitted to the Authority's Representative in accordance with Schedule [Review Procedure] and Concessionaire shall not be entitled to implement or procure the implementation of any Quality Plan unless Concessionaire is entitled to proceed with such implementation pursuant to Schedule [Review Procedure]. Concessionaire shall implement the quality management systems referred to in Clause [ref] and shall procure that:

NOTES AND REFERENCES

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EXAMPLE CLAUSES (a) the Contractor implements the Design Quality Plan; (b) the Contractor implements the Construction Quality Plan; (c) each Service Provider implements the relevant Services Quality Plan for each Service being provided by that Service Provider. Where any aspect of the Project Operations is performed by more than one contractor or subcontractor, then the provisions of this clause (in so far as relevant or appropriate to the activities to be performed by such contractor or subcontractor) shall apply in respect of each of such contractors or subcontractors, and references in this clause to the "Contractor" or the "Service Provider" shall be construed accordingly. To avoid doubt, this clause shall not be construed as requiring subcontractors of the Contractor or the Service Provider to have their own quality plans but only to comply with the Design Quality Plan and the Construction Quality Plan or the relevant aspects of the Services Quality Plan (as the case may be). Concessionaire shall from time to time submit to the Authority's Representative in accordance with Schedule [Review Procedure] any changes to any of the Quality Plans required for such Quality Plan to continue to comply with the requirements set out in clause [ref]. The Authority's Representative may raise comments on any such proposed change only on the grounds set out in Schedule [Review Procedure]. In the event that any ambiguity, uncertainty, dispute or discrepancy arises in relation to the nature and scope of Concessionaire's obligations under this clause, wherever possible, the provisions of this clause shall be interpreted and construed in such a manner as to resolve the apparent ambiguity, uncertainty, dispute or discrepancy so that all the provisions of this clause may be given meaning and effect but, if such interpretation or construction is not possible, the provisions of this clause shall be given meaning and effect in the following order of precedence (in descending order): (a) the provisions and standards referred to in Clause [ref];

NOTES AND REFERENCES

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KEY ISSUES

EXAMPLE CLAUSES (b) the Quality Plans referred to in Clause [ref]; (c) The Authority's Construction Requirements and/or the Authority's Service Requirements (as the case may be); (d) Concessionaire's Proposals and/or the Method Statements (as the case may be); (e) Concessionaire's and/or the Contractor's and/or any Service Provider's quality manuals and procedures; and (f) Good Industry Practice.

NOTES AND REFERENCES

If there is no objection under Schedule [Review Procedure] to a change to any Quality Plan proposed pursuant to Clause [ref], the Quality Plan shall be amended to incorporate such change. Quality Manuals and Procedures If any Quality Plan refers to, relies on or incorporates any quality manual or procedure, then such quality manual or procedure or the relevant parts of it shall be submitted to the Authority's Representative at the time that the relevant Quality Plan or part of (or change to) a Quality Plan is submitted in accordance with Schedule [Review Procedure], and the contents of such quality manual or procedure shall be taken into account in the consideration of the relevant Quality Plan or part of (or change to) a Quality Plan in accordance with Schedule [Review Procedure]. Quality Management Concessionaire shall maintain a quality management system which shall: (a) ensure the effective operation of the quality systems described in this clause; (b) cause an audit of the quality systems at regular intervals and the findings of such audit will be reported to the Authority's

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KEY ISSUES Representative;

EXAMPLE CLAUSES

NOTES AND REFERENCES

(c) require review of all quality systems at intervals agreed with the Authority's Representative to ensure their continued suitability and effectiveness; (d) require liaison with the Authority's Representative on all matters relating to quality management; and (e) require production of reports and their delivery to Concessionaire. Quality Monitoring The Authority's Representative may carry out audits of Concessionaire's quality management system (including all relevant Quality Plans and any quality manuals and procedures) to establish that compliance with Clauses [ref] is being maintained by Concessionaire. The Authority's Representative may carry out such audits at approximate intervals of three (3) months and may carry out other periodic monitoring, spot checks and auditing of Concessionaire's quality management systems. Concessionaire shall procure that the Authority's Representative shall have a like right in respect of the Contractor and Service Providers. Concessionaire shall co-operate and shall procure that any Sub-Contractor co-operates with the Authority's Representative including providing him with all information and documentation which he reasonably requires in connection with his rights under this Clause. THE SERVICES General obligations Throughout the Operational Term, Concessionaire shall provide (or procure the provision by the Service Providers of) the Services: (a) in accordance with the terms of this Agreement; (b) in accordance with the Method Statements; and

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EXAMPLE CLAUSES (c) as an obligation independent from, and in addition to, Clause [ref], in such manner as ensures that the Service Level Specifications are met. [In Schedule [Service Requirements] there is set out a description of the Services and in Schedule [Interim Service Requirements] a description of the Interim Services to be provided and the periods during which these are to be provided and Concessionaire shall from the times so specified, provide (or procure the provision by Service Providers of) the Services and the Interim Services: (a) in the case of the Services until the end of the Project Term: (i) in accordance with the terms of this Agreement;

NOTES AND REFERENCES

(ii) in accordance with the Method Statements; and (iii) as an obligation independent from and in addition to Clause [ref] in such a manner as ensures that the Service Level Specifications are met, (b) in the case of the Interim Services until the end of the relevant period specified in Schedule [Interim Service Requirements] in accordance with: (i) the provisions of Schedule [Interim Service Requirements];

(ii) the other provisions of this Agreement; and (iii) the Method Statements and Interim Service Statements.] Commencement and phase in of Services [To be drafted on a project specific basis in line with the completion, commissioning, payment and performance provisions developed for the project.]

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EXAMPLE CLAUSES Concessionaire Services Changes Concessionaire may at any time submit to the Authority's Representative in accordance with Schedule [Review Procedure] proposals for amendments to or substitution for the Method Statements [or the Interim Service Statement] or any part of them. If there is no comment on such proposed amendment or substitution (on the grounds set out in Review Procedure]), then the Method Statements [or Interim Service Statements] as so amended or substituted shall be the Method Statements [or Interim Service Statements] for the purposes of this Agreement, subject to any further amendment or substitution to which there has been no comment in accordance with Schedule [Review Procedure]. To avoid doubt, an amendment to or substitution for the Method Statements [or Interim Service Statements] proposed pursuant to Clause [ref] shall not be a Qualifying Variation entitling Concessionaire to any payment (or other compensation) or to any relief from the performance of its obligations under this Agreement. No disruption Concessionaire shall perform the Services so as to co-ordinate with the Authority's operations on the Site and/or in the Facilities and shall take all reasonable care to ensure that it does not interfere with the operations of the Authority or any Authority Party. Programmed Maintenance Works No later than [number] months prior to the Completion Date Concessionaire shall submit to the Authority's Representative in accordance with Schedule [Review Procedure] a Schedule of Programmed Maintenance for the period from the Completion Date to the expiry of that Contract Year. Not later than [number] months prior to the commencement of each subsequent anniversary of the Completion Date [the time prescribed in [specify the relevant place to be included in Schedule [Review Procedure]] Concessionaire shall submit to the Authority's Representative in accordance with Schedule [Review Procedure] a Schedule of

NOTES AND REFERENCES

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CONTENT HEADINGS

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EXAMPLE CLAUSES Programmed Maintenance for the next succeeding Contract Year [for the period from the commencement of Services in respect of that Phase to the expiry of the Contract Year in which such date falls]. Each Schedule of Programmed Maintenance shall contain the following information (the "Programmed Maintenance Information"): (a) details of the proposed start and end dates for each period of Programmed Maintenance, the works to be carried out and the proposed hours of work; and (b) details of any effect of the Programmed Maintenance on the delivery of any of the Services and/or the activities of the Authority. Not later than [number] Business Days prior to the commencement of any quarter (being a three month period commencing on 1 April, 1 July, 1 October or 1 January), Concessionaire may submit to the Authority's Representative for approval in accordance with Schedule [Review Procedure] a revision to the Schedule of Programmed Maintenance for the Contract Year in which the relevant quarter falls showing the effect of the proposed changes to the Programmed Maintenance Information. If the Authority's Representative does not raise comments on such proposed revision in accordance with Schedule [Review Procedure], the Schedule of Programmed Maintenance as revised shall become the Schedule of Programmed Maintenance in respect of that quarter. Where the Authority's Representative raises comments in respect of any Programmed Maintenance periods and/or hours of work shown in a Schedule of Programmed Maintenance in accordance with paragraph [ref] of Schedule [Review Procedure], he shall indicate whether, and if so when, the Programmed Maintenance can be re-scheduled and Concessionaire shall amend the relevant Schedule of Programmed Maintenance accordingly. Programmed and Unprogrammed Maintenance Concessionaire shall not carry out any Programmed Maintenance or Unprogrammed Maintenance Works save:

NOTES AND REFERENCES

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES (a) in accordance with a Schedule of Programmed Maintenance to which no objection has been made under Schedule [Review Procedure] or, where comment has been raised in respect of the Programmed Maintenance periods and/or time, the Schedule of Programmed Maintenance has been amended pursuant to Clause [ref]; (b) in accordance with the procedures set out in Clause [ref]; or (c) in an emergency, in accordance with Clause [ref]. Notwithstanding that there has been no objection to a Schedule of Programmed Maintenance, the Authority's Representative may, at any time, require Concessionaire to accelerate or defer any Programmed Maintenance by giving written notice to Concessionaire, (unless otherwise agreed) not less than ten (10) Business Days prior to the scheduled date for carrying out such Programmed Maintenance, which notice shall set out the time and/or periods at or during which the Authority requires the Programmed Maintenance to be performed. Concessionaire shall notify the Authority of the amount of any additional reasonable costs which it will incur as a direct consequence of such acceleration or deferment (the "Estimated Increased Maintenance Costs"). The Authority shall, within a further period of ten (10) Business Days following receipt by the Authority of notification of the amount of the Estimated Increased Maintenance Costs, at the Authority's option, either confirm or withdraw its request to accelerate or defer the Schedule of Programmed Maintenance. If the Authority does not respond within this ten (10) Business Day period, the request shall be deemed to have been confirmed. The Authority shall reimburse Concessionaire the direct and reasonable costs actually incurred by Concessionaire as a consequence of such acceleration or deferment up to, but not exceeding, the amount of the Estimated Increased Maintenance Costs. If, in circumstances other than an emergency, the need arises for Maintenance Works (excluding any works of a de minimis nature in respect of which the parties have agreed this Clause shall not apply [and excluding works carried out for the purpose of Rectification, which shall take place in accordance with the provisions of Schedule [ref]), which are not scheduled to be carried out as part of the Programmed Maintenance

NOTES AND REFERENCES

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EXAMPLE CLAUSES ("Unprogrammed Maintenance Work"), Concessionaire shall not carry out any Unprogrammed Maintenance Work unless and until the Authority's Representative has approved the proposed commencement date, the proposed hours of work and estimated duration of the requisite Unprogrammed Maintenance Works in accordance with the provisions of paragraph [ref] of Schedule [Review Procedure]. Nothing in this Clause [ref] (including any approval of the Authority pursuant to Schedule [Review Procedure] shall prevent the Authority from making any deductions from the Service Payments pursuant to the Payment Mechanism. If, as a result of an emergency, the need arises for Unprogrammed Maintenance Works, Concessionaire may carry out such Unprogrammed Maintenance Works provided that Concessionaire shall notify the Authority's Representative as soon as possible (and in any event within [ ] Business Days of the occurrence of the emergency) of the extent of the necessary Unprogrammed Maintenance Works and the reasons for them. Concessionaire shall take all reasonable steps to minimise the duration of such Unprogrammed Maintenance Works. Nothing in this Clause shall prevent the Authority from making any deductions from the Service Payments pursuant to the Payment Mechanism. Where Programmed Maintenance scheduled to be carried out in accordance with the Schedule of Programmed Maintenance has been deferred by the Authority's Representative under Clause [ref], Concessionaire shall not be treated as having failed to perform the [indicate the relevant facilities service and/or Interim Service] on account of the condition of the Facilities or any part of them from the time the Programmed Maintenance was scheduled to have been completed until the time the deferred Programmed Maintenance was scheduled to have been completed, but not afterwards, provided always, to avoid doubt, that Concessionaire shall not be relieved from the consequences of any failure to maintain the Facilities in respect of any period prior to the period for performing the particular work according to the Schedule of Programmed Maintenance. Year Maintenance Plan Concessionaire shall deliver to the Authority's Representative not less

NOTES AND REFERENCES

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EXAMPLE CLAUSES than [number] Business Days prior to the commencement of each Contract Year the latest version of the 5 Year Maintenance Plan for the [indicate the relevant facilities service]. The Authority shall have a right to inspect the Facilities and the Maintenance Works to ensure that the Facilities are being maintained in accordance with the Service Level Specifications and that the Facilities comply with the Authority's Construction Requirements and Concessionaire's Proposals throughout the Project Term. The Authority may appoint an independent third party for the purposes of carrying out any such inspection and shall make known the findings to Concessionaire and the Funders. The parties shall then meet to discuss any implications of such findings and any steps that are necessary to remedy any failure to comply with such obligations. Concessionaire shall (subject to Clause [Variation Procedure]) take into account such discussions in the next Schedule of Programmed Maintenance so that any failure to comply with such obligations shall be remedied. Alternative 2 Operation and Maintenance Requirements The Concessionaire shall operate and maintain the Project/Project Facility in accordance with the O&M Requirements, by itself, or through a Contractor possessing the requisite technical, financial and managerial expertise/capability, but in either case, the Concessionaire shall remain solely responsible to meet the O&M Requirements. Failure to meet O & M Requirements In the event the Concessionaire has failed to operate and maintain the Project Facility despite a notice to that effect issued by the Independent Engineer or the Authority (Notice to Remedy), the Authority may, without prejudice to any of its other rights/remedies under this Agreement, be entitled to cause the repair and maintenance of the Project Facility at the risk and cost of the Concessionaire. The Concessionaire shall reimburse all costs incurred by the Authority on account of such repair and

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES maintenance within 7 days of receipt of the Authoritys claim therefore. Material Breach of O&M Requirements The Concessionaire shall be deemed to be in material breach of O&M Requirements if the Independent Engineer acting reasonably and in accordance with the provisions of this Agreement, has determined that due to breach of its obligations by the Concessionaire: (a) there has been failure/undue delay in carrying out scheduled/planned maintenance or the scheduled/planned maintenance has not been carried out in accordance with the O&M Requirements; (b) the riding quality of the Project Facility or any part thereof has deteriorated to a level which is below the acceptance level prescribed by the O&M Requirements; (c) there has been a serious or persistent let up in adhering to safety requirements and standards and thereby the Project Facility or any part thereof is not safe for operations; (d) Non-Availability (as hereinafter defined in clause [non-availability]) during any Availability Payment Period has exceeded _______lane kilometer hours; there has been persistent breach of O&M Requirements. For avoidance of doubt, persistent breach shall mean: (e) any breach of O&M Requirements by the Concessionaire which has not been remedied by the Concessionaire despite a Notice to Remedy in respect thereof issued by the Independent Engineer/the Authority; (f) recurrence of a breach by the Concessionaire, during the pendency of Notice to Remedy by the Independent Engineer/ the Authority

NOTES AND REFERENCES

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EXAMPLE CLAUSES requiring the Concessionaire to remedy a breach; and (g) repeated occurrence of a breach notwithstand- ing that earlier breaches have been remedied pursuant to Notice to Remedy or otherwise. The Authoritys Rights Upon occurrence of a material breach of O&M Requirements, the Authority shall, without prejudice to and notwithstanding any other consequences provided therefore under this Agreement, be entitled to terminate this Agreement. Priority of Traffic Flow Notwithstanding the performance of any operation and maintenance referred to above, the Concessionaire shall ensure that the Carriageway remains open to traffic and that the traffic flow is safe at all times during Operations Period. The Concessionaire shall carry out its operation and maintenance in such manner as to ensure compliance with its above obligation.

NOTES AND REFERENCES

Performance monitoring

The concession agreement will need to provide minimum standards that the project company ought to comply with, what mechanisms are in place to monitor compliance of these standards and the consequences if the project company fail to comply with the standards. The concession agreement will need to specify the standards, the

Alternative 1 Monitoring In carrying out the Project Operations, Concessionaire shall, and shall procure that all Concessionaire Parties and any other persons for whom it is responsible shall, comply with the provisions of Schedule [Service Requirements]. Concessionaire shall be responsible for monitoring its performance of this Agreement during the Operational Term, in the manner and at the frequencies set out in Schedule [Service Requirements]. Concessionaire shall provide the Authority's Representative with relevant particulars of any aspects of its performance which fail to meet the requirements of this Agreement (unless otherwise notified in writing by the Authority). The Authority may at all reasonable times observe, inspect and satisfy itself

See SOPC Section 8.5 (in relation to surveys), 9 (performance monitoring). Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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KEY ISSUES governments monitoring rights and the failure to comply with these standards for each of these stages: during the construction phase, technical specifications for design and construction of the facility; on completion of the facility, standard for the operation and maintenance of the facility; and on transfer of the facility to the government, the condition of that facility, including any warranties in relation to the condition of the facility.

EXAMPLE CLAUSES as to the adequacy of the monitoring procedures (including without limitation carrying out sample checks). Service Failure Points The Authority may, by notice to Concessionaire, award Service Failure Points in respect of a Service in accordance with Schedule [Service Requirements], depending on the performance of that Service in any month as measured in accordance with Schedule [Service Requirements]. Service Failure Points which are agreed, or determined, to have been awarded in circumstances where such award was not justified shall be deemed to have been cancelled. Warning Notices Without prejudice to the Authority's rights under Clause [Concessionaire Events of Default] and any other express rights under this Agreement, if at any time Concessionaire has: (a) committed any material breach of its obligations under this Agreement; or (b) in relation to any Service, accrued more than the number of Service Failure Points in any one month rolling period listed against that Service in [specify where in Performance Monitoring this is set out]. then the Authority may give written notice (a "Warning Notice") to Concessionaire setting out the matter or matters giving rise to such notice and containing a reminder to Concessionaire of the implications of such notice. Any such notice shall state on its face that it is a "Warning Notice". Without prejudice to the Authority's rights under Clause [Concessionaire Events of Default] and to any other express rights under this Agreement, if Concessionaire receives [number] or more Warning Notices in any [number] period in respect of any Service, the Authority may by notice to Concessionaire increase the level of its monitoring of Concessionaire, or (at the Authority's option) of Concessionaire's monitoring of its own performance of its obligations under this Agreement, in respect of the

NOTES AND REFERENCES

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EXAMPLE CLAUSES relevant Service, in which case, the following provisions shall apply until such time as Concessionaire shall have demonstrated to the reasonable satisfaction of the Authority that it will perform (and is capable of performing) its obligations under this Agreement: (a) any such notice to Concessionaire shall specify in reasonable detail the additional measures to be taken by the Authority or by Concessionaire (as the case may be) in monitoring the performance of Concessionaire; (b) if Concessionaire (acting reasonably) objects to any of the specified measures on the grounds that they are excessive it shall notify the Authority in writing within two (2) Business Days of the receipt of the notice of the measures objected to (and of any changes necessary in order to prevent prejudice to Concessionaire's performance of its obligations under this Agreement); (c) the measures to be taken by the Authority and Concessionaire (as the case may be) shall be agreed between the parties or, in the absence of agreement within three (3) Business Days of the Authority's receipt of Concessionaire's objection, determined pursuant to Schedule [Dispute Resolution Procedure]; and (d) Concessionaire shall bear its own costs and indemnify and keep indemnified the Authority at all times from and against all reasonable costs and expenses (if any) incurred by or on behalf of the Authority in relation to such increased level of monitoring (including an appropriate sum in respect of general staff costs and overheads). The Authority's remedial rights The provisions of Clauses [ref] shall apply if: (a) the Authority, acting reasonably, considers that a breach by Concessionaire of any obligation under this Agreement:

NOTES AND REFERENCES

(i) may create an immediate and serious threat to the health or

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EXAMPLE CLAUSES safety of any user of the Facilities; or

NOTES AND REFERENCES

(ii) may result in a material interruption in the provision of one or


more of the Services; or

(iii) is prejudicial to the ability of the Authority to provide Clinical


Services to a material degree; or (b) Concessionaire has, in relation to any Service, accrued more than the number of Service Failure Points in any one month rolling period (to avoid doubt, comprising the then previous thirty (30) days) listed against that Service in [specify where in Performance Monitoring this is set out]; or (c) Concessionaire is not in breach of its obligations as described in subclauses (a) and (b), but the Authority considers the circumstances constitute an emergency. In any of the circumstances set out in Clause [ref], the Authority, acting reasonably, may (without prejudice to its rights under Clause [Concessionaire Events of Default] or any other express rights under this Agreement) either: (a) if it considers that there is sufficient time and that it is likely that Concessionaire will be willing and able to provide assistance, require Concessionaire by written notice to take such steps as the Authority considers necessary or expedient to mitigate or rectify such state of affairs and Concessionaire shall use its best endeavours to comply with the Authority's requirements as soon as reasonably practicable; or (b) if it considers there is not sufficient time, or that Concessionaire is not likely to be willing and able to take the necessary steps, take such steps as it considers to be appropriate (either itself or by engaging others to take any such steps) to ensure performance of the relevant Services to the standards required by this Agreement (or as close as possible to those standards as the circumstances permit and, in any event, in accordance with Good Industry Practice). For

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EXAMPLE CLAUSES the avoidance of doubt, the Authority shall not be entitled to use the Retained Staff Members to take such steps without the prior written consent of Concessionaire. If: (a) Concessionaire does not confirm, within ten (10) Business Days of a notice served pursuant to Clause [ref] (or such shorter period as is appropriate in the case of an emergency), that it is willing to take such steps as are referred to in Clause [ref]; or (b) Concessionaire fails to take the steps notified to it by the Authority pursuant to Clause [ref] within such time as the Authority, acting reasonably, shall think fit, then (without prejudice to sub-Clause (b)) the Authority, acting reasonably, may itself take or engage others to take such steps as it considers appropriate. For the avoidance of doubt the Authority shall not be entitled to use the Retained Staff Members to take such steps without the prior written consent of Concessionaire. Where the Authority considers it to be necessary or expedient to do so, the steps which the Authority may take pursuant to this Clause shall include the partial or total suspension of the right and obligation of Concessionaire to provide the relevant Services to the Authority but only for so long as the circumstances referred to in this Clause subsist or, in the circumstances set out in sub-Clause (b), until such time as Concessionaire shall have demonstrated to the reasonable satisfaction of the Authority that it will perform (and is capable of performing) its obligations in respect of the relevant Services to the required standard. If the Authority either takes steps itself or requires Concessionaire to take steps in accordance with this Clause as a result of the circumstance referred to in sub-Clause (c): (a) the Authority shall indemnify and keep indemnified Concessionaire at all times from and against all additional direct reasonable costs, losses, expenses or damages suffered or incurred in relation to undertaking such steps over and above those that would otherwise

NOTES AND REFERENCES

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EXAMPLE CLAUSES have been incurred in the proper performance of Concessionaire's obligations under this Agreement; and (b) any costs incurred by the Authority in taking such steps or requiring Concessionaire to take such steps shall be borne by the Authority. To the extent that the parties shall agree, or it shall be determined in accordance with Schedule [Dispute Resolution Procedure], that the Authority was not reasonable in requiring Concessionaire to take such steps (or in taking such steps itself) as are referred to in this Clause, then the Authority shall indemnify and keep indemnified Concessionaire at all times from and against any costs, losses, expenses or damages (over and above those that would otherwise have been incurred by Concessionaire in the proper performance of its obligations under this Agreement) that are directly and reasonably incurred by Concessionaire in complying with those requirements of the Authority as are agreed or determined not to be reasonable. To avoid doubt, it is acknowledged that Concessionaire has no right to require determination before taking any such action that the Authority may specify; only subsequently may it refer any dispute for resolution to determine if the Authority was reasonable in requiring Concessionaire to take such steps. Subject to Clauses [ref]: (a) any costs or expenses incurred by Concessionaire in taking such steps as are required by the Authority pursuant to Clause [ref] shall be borne by Concessionaire; (b) Concessionaire shall reimburse the Authority for all reasonable costs, losses, expenses or damages incurred by it in relation to taking the steps, or engaging others to take the steps, referred to in Clauses [ref]; and (c) the Authority shall be entitled to deduct any such amount from any amount payable to Concessionaire under the provisions of this Agreement. Alternative 2

NOTES AND REFERENCES

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EXAMPLE CLAUSES (a) if the Authority reasonably believes that the Concessionaire is in breach of its obligations under Clause [Maintenance] then it may carry out (or procure) a survey of the Assets to assess whether the Assets have been and are being maintained by the Concessionaire in accordance with its obligations under Clause [Maintenance]. This right may not be exercised more often than once every [two] years. (b) The Authority shall notify the Concessionaire in writing a minimum of [14] days in advance of the date on which it wishes to carry out the survey. The Authority shall consider in good faith any reasonable request by the Concessionaire for the survey to be carried out on a different date if such request is made at least [7] days prior to the notified date and the Concessionaire (acting reasonably) is able to demonstrate that carrying out the survey on the notified date would materially prejudice the Concessionaire's ability to provide the Service. (c) When carrying out any survey, the Authority shall use reasonable endeavours to minimize any disruption caused to the provision of the Service by the Concessionaire. The cost of the survey shall, except where paragraph (d)(iii) below applies, be borne by the Authority. The Concessionaire shall give the Authority (free of charge) any reasonable assistance required by the Authority during the carrying out of any survey. (d) If the survey shows that the Concessionaire has not complied or is not complying with its obligations under Clause [Maintenance], the Authority shall: (i) notify the Concessionaire of the standard that the condition of the Assets should be in to comply with its obligations under Clause [Maintenance]; (ii) specify a reasonable period within which the Concessionaire must carry out such rectification and/or maintenance work; and (iii) be entitled to be reimbursed by the Concessionaire for the cost of the survey. (e) The Concessionaire shall carry out such rectification and/or maintenance work within the period specified and any costs it incurs

NOTES AND REFERENCES

Alternative 2 adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

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EXAMPLE CLAUSES in carrying out such rectification and/or maintenance work shall be at its own expense.

NOTES AND REFERENCES

Payment and financial matters

Tariff structure is one of the most important issues in a project. It determines the revenue of the project company (and therefore the stream of income against which the financing can be secured), but it is also a risk allocation tool. Note that there is a trade off between how tariff is determined and the willingness of the project company to accept risks. For example, if the project company were able to determine tariff, it would be less concerned about increases in operating costs because it would be able to pass this to the consumer. There are a number of specific issues to be decided in relation to tariffs.

See SOPC Section 10 and 14.

Regulation. Should tariff be regulated, and if so how? Tariff for infrastructure services may be determined by the market or controlled,

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KEY ISSUES either through legislation, an independent regulatory authority or by contract. Often it is a mixture of all of these mechanisms, because there needs to be an appropriate balance between, on the one hand, the freedom of the project company to determine appropriate tariff, and on the other hand, the interest of the community against unjustified increases in the cost of infrastructure services. Amount. Usually tariffs are calculated on the basis of a formula rather than a fixed price. Tariff structure. Tariff may be charged on the basis of quantity used, on a one time fixed fees basis or a combination of these. Access and discrimination. Will differential rates apply to certain groups in the community, for instance, poorer households or frequent users? Integration. This refers to the integration of fees

EXAMPLE CLAUSES

NOTES AND REFERENCES

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KEY ISSUES with other services. For example in transport, local bus fares that may be integrated with train fares. Administration. The cost of metering and measurement of use and the cost (and probability) of collecting the tariffs.

EXAMPLE CLAUSES

NOTES AND REFERENCES

Payment and availability

The Authority may make payments based on the availability of the infrastructure services. This may be in lieu, or in addition to, revenues received by the Concessionaire for charging for the infrastructure services to the public.

Subject to the provisions of this Agreement and in consideration of the Concessionaire accepting the Concession and undertaking to perform and discharge its obligations in accordance with the terms, conditions and covenants set forth in this Agreement, the Authority agrees and undertakes to pay to the Concessionaire, on each Availability Payment Date, the Adjusted Availability Payment, which shall be computed in accordance with the provisions of this clause.

See SOPC Section 7. Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Security

A letter of credit may be provided as security of the availability payment.

The Authority shall also open an irrevocable, revolving letter of credit equivalent to two times of Bid Availability Payment, within 30 days from the expected date of COD as intimated by the Concessionaire, in favour of the Concessionaire

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Sinking Fund

The Concessionaire may be required to build up a sinking fund over some

See SOPC Section 8.2.

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KEY ISSUES years, in anticipation of significant capital expenditure in future periods. This is because the risk of maintaining the facility usually lies with the Concessionaire.

EXAMPLE CLAUSES

NOTES AND REFERENCES

Payment Mechanism

The Concessionaire shall at least one month prior to the relevant Availability Payment Date submit to the Independent Engineer, its invoice (addressed to the Authority) for payment duly adjusted for Nonavailability, if any, in accordance with clause [ref]. The Independent Engineer shall after verification and certification of the amount claimed in the invoice be required to forward the invoice to the Authority with necessary recommendation for payment thereof so as to reach the Authority at least one week prior to the relevant Availability Payment Date.

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Refinancing

Any change in the financing arrangements after Financial Close shall require prior approval of the Authority, which the Authority shall grant on review of the proposed financial arrangements and subject to sharing of refinancing gains, if any.

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Set-off

(a) The Concessionaire shall not be entitled to retain or set off any amount due to the Authority by it, but the Authority may retain or set off any amount owed to it by the Concessionaire under this Contract which has fallen due and payable 1against any amount due to the Concessionaire under this Contract. (b) If the payment or deduction of any amount referred to in paragraph (a) above is disputed then any undisputed element of that amount

See SOPC Section 11.1, 11.2 and 11.3. The example clause adapted from Office of Government Commerce, UK, Standardisation of PFI

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EXAMPLE CLAUSES shall be paid and the disputed element shall be dealt with in accordance with Clause [Dispute Resolution].

NOTES AND REFERENCES Contracts General, index reference C1, folder 5. See SOPC 11.4. Section

VAT

Alternative 1 All amounts stated to be payable by either party under this Agreement shall be exclusive of any VAT properly chargeable on any amount.

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Alternative 2 adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

Alternative 2 (a) All amounts due under this Contract are exclusive of VAT. (b) If any supply made or referred to in this Contract is or becomes chargeable to VAT then the person receiving the supply (the "Recipient") shall in addition pay the person making the supply (the "Supplier") the amount of that VAT against receipt by the Recipient from the Supplier of a proper VAT invoice in respect of that supply Where under this Contract any amount is calculated by reference to any sum which has or may be incurred by any person, the amount shall include any VAT in respect of that amount only to the extent that such VAT is not recoverable as input tax by that person (or a member of the same VAT group), whether by set-off or repayment). The Concessionaire shall provide the Authority with any information reasonably requested by the Authority in relation to the amount of VAT chargeable in accordance with the Contract and payable by the Authority to the Concessionaire.

Performance Security, Indemnities and guarantees

The Authority may require the Concessionaire to provide performance

The Concessionaire shall, for due and punctual performance of its obligations during the Implementation Period deliver to the Authority, simultaneously with the execution of this Agreement, a bank guarantee from a scheduled bank acceptable to the Authority, in the form as set

See SOPC Section 4.3, 4.4 and 23. Example clause

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KEY ISSUES security to ensure completion of the project. This would need to be negotiated between the parties.

EXAMPLE CLAUSES forth in Schedule [Performance Security] for a sum of [amount]. The Performance Security shall be valid upto [12 months after Scheduled Project Completion Date]. Provided that If the Agreement is terminated due to any event other than a Concessionaire Event of Default, as defined in Clause [ref], the Performance Security if subsisting as of the Termination Date shall, subject to the Authoritys right to receive amounts, if any, due from the Concessionaire under this Agreement, be duly discharged and released to the Concessionaire. Alternative 1 Concessionaire shall, at its own cost, procure that the insurances, details of which are set out in Part [ref] of Schedule [Insurance Requirements], are taken out prior to the commencement of the Works and are maintained for the periods specified in Part [ref] of Schedule [Insurance Requirements]. Concessionaire shall, at its own cost, procure that the insurances, details of which are set out in Part [ref] of Schedule [Insurance Requirements], are taken out prior to the Actual Completion Date and are maintained for the periods specified in Part [ref] of Schedule [Insurance Requirements]. Without prejudice to the other provisions of this Clause, Concessionaire shall, at all relevant times, at its own cost, effect and maintain in full force those insurances which it is required to effect by any applicable Law. Alternative 2 Implementation Period The Concessionaire shall at its cost and expense, purchase and maintain by due re-instatement or otherwise, during the Implementation Period such insurance as is necessary in accordance with Financing Documents, Good Industry Practice and Applicable Laws, including but not limited to the following:

NOTES AND REFERENCES adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Insurance

The Authority should specify in detail the key insurances Concessionaire is required to procure. These requirements should be outlined in full in a Schedule. The Authority should be aware that in relation to insurances listed in the Schedule that they may also become insurers of last resort. The following is Insurances to be specified: Construction all risks; Delay in start up; Public Liability; Material Damage; and Business Interruption.

See SOPC Section 24. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES (a) contractors all risk insurance; (b) riot, strike, civil commotion and terrorism insurance cover equivalent to one sixth (1/6th) of the Initial Investment; (c) comprehensive third party liability insurance including injury or death to personnel / representatives of Persons who may enter the Project Site; (d) workmens compensation insurance;

NOTES AND REFERENCES

(e) any other insurance that may be necessary to protect the Concessionaire, its employees and its assets against loss, damage, destruction, business interruption or loss of profit including insurance against all Force Majeure Events that are insurable.
Operations Period The Concessionaire shall at its cost and expense, purchase and maintain by re-instatement or otherwise, during the Operations Period, such insurance as is necessary in accordance with Financing Documents, Good Industry Practice and Applicable Laws, including but not limited to the following: (a) loss, damage or destruction of the Project Facility, at replacement value, (b) riot, strike, civil commotion and terrorism insurance cover equivalent to one sixth (1/6th) of the Initial Investment; (c) the Concessionaires general liability arising out of the Concession, (d) liability to third parties; (e) any other insurance that may be necessary to protect the Concessionaire, its employees and its assets against loss, damage, destruction, business interruption or loss of profit including insurance against all Force Majeure Events that are insurable. Evidence of Insurance The Concessionaire shall, from time to time, provide to the Authority copies of all insurance policies (or appropriate endorsements, certifications or other satisfactory evidence of insurance) obtained by the

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EXAMPLE CLAUSES Concessionaire in accordance with this Agreement. Validity of Insurance The Concessionaire shall from time to time promptly pay insurance premium, keep the insurance policies in force and valid throughout the Concession Period and furnish copies thereof to the Authority. Each insurance policy shall provide that the same shall not be cancelled or terminated unless 10 Days' clear notice of cancellation is provided to the Authority in writing. If at any time the Concessionaire fails to obtain or maintain in full force and effect any and all of the insurance required under this Agreement, the Authority may without prejudice to its other rights and remedies for breach, at its option obtain and maintain such insurance and all sums incurred by the Authority therefore shall be reimbursed by the Concessionaire to the Authority within 7 days from the receipt of claim in respect thereof made by the Authority. The Concessionaire shall inform the Authority in good time of any material variation of insurance policies specified herein before taking out such insurances. Application of Insurance Proceeds Subject to the provisions of the Financing Documents and unless otherwise provided herein, the proceeds of all insurance policies received shall be promptly applied by the Concessionaire towards repair, renovation, restoration or re-instatement of the Project Facility or any part thereof which may have been damaged or destroyed. The Concessionaire may designate the Lenders as the loss payees under the insurance policies or assign the insurance policies in their favour as security for the financial assistance provided by them to the Project. The Concessionaire shall carry out such repair, renovation, restoration or reinstatement to the extent possible in such manner that the Project Facility after such repair, renovation, restoration or re-instatement be as far as possible in the same condition as it were prior to such damage or destruction, normal wear and tear excepted.

NOTES AND REFERENCES

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KEY ISSUES Un-insurable Risks

EXAMPLE CLAUSES

NOTES AND REFERENCES

If during the Concession Period, any risk which has been previously insured becomes un-insurable due to the fact that the insurers have ceased to insure such a risk and therefore insurance cannot be maintained/re-instated in respect of such risk, the Concessionaire shall not be deemed to be in breach of its obligations regarding insurance under this Agreement. Changes Changes in law Alternative 1 General Concessionaire shall take all steps necessary to ensure that the Project Operations are performed in accordance with the terms of this Agreement (including, without limitation, Clause [Compliance with applicable law]) following any Change in Law. Relevant Changes in Law Subject to Clause [Mitigation/any other project specific matters], on the occurrence of any Relevant Change in Law, the parties shall be entitled to seek adjustments to the Service Payments to compensate for any increase or decrease (as the case may be) in the net cost to Concessionaire of performing the Project Operations. Such adjustments (if any) will be calculated in accordance with (and subject to) Clauses [ref] (inclusive). Relevant Change in Law means any of the following: (a) the occurrence of any Discriminatory Change in Law having an impact on the cost of performance of the Project Operations; See SOPC Section 13. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

(b) the occurrence of any Authority Specific Change in Law having an impact on the cost of performance of the Project Operations; or (c) the occurrence, after the relevant date, of any Change in Law which requires Concessionaire to carry out works affecting [any completed Phase comprising part of] the Facilities (being any work of alteration,

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CONTENT HEADINGS

KEY ISSUES

EXAMPLE CLAUSES addition, demolition or extension or variation in the quality or function of the Facilities) which are not Maintenance Works or work which Concessionaire would otherwise be required to undertake to comply with its obligations under this Agreement. For the purposes of this Clause [ref], the relevant date shall be the later to occur of the Completion Date and the Actual Completion Date the [Phase Actual Completion Date for the relevant Phase], save where the [Phase] Actual Completion Date is delayed by a Compensation Event, a Delay Event referred to in Clause [Works Change] or by a Delay Event referred to in Clause [Discriminatory and Authority Specific Changes in Law], in which case the relevant date shall be the later to occur of the [Phase] Completion Date and the date on which [the Phase of] the Works would have been completed in accordance with this Agreement had the relevant Delay Event not occurred, provided that: (i) in the case of a Change in Law referred to in Clauses [above], the impact of such Relevant Change in Law (either singly or in aggregate with any other such Relevant Change in Law in any Contract Year) on the cost of performance of the Project Operations exceeds [amount] (index linked). To avoid doubt, any such amount of [amount] (index linked) shall always be borne by Concessionaire; (ii) such Change in Law was not reasonably foreseeable at the date of this Agreement by an experienced contractor performing operations similar to the relevant Project Operations, on the basis of draft bills published in Government green or white papers or other Government departmental consultation papers, bills, draft statutory instruments or draft instruments or proposals published in the Official Journal of the European Union, in each case published: 1. prior to the date of this Agreement; and

NOTES AND REFERENCES

2. in substantially the same form or having substantially the same effect as the Relevant Change in Law; and

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KEY ISSUES (iii)

EXAMPLE CLAUSES a Change in Law relating to the application for, coming into effect, terms, implementation, repeal, revocation or otherwise of any Planning Permission shall not constitute a Relevant Change in Law.

NOTES AND REFERENCES

On the occurrence of a Relevant Change in Law: (a) either party may give notice to the other of the occurrence of the Relevant Change in Law; (b) the parties shall meet within [number] Business Days of the notice referred to in Clause (a) to consult and seek to agree the effect of the Relevant Change in Law. If the parties, within [number] Business Days of this meeting, have not agreed the occurrence or the effect of the Relevant Change in Law, either party may refer the question of whether a Relevant Change in Law has occurred or the effect of any Relevant Change in Law for resolution in accordance with Schedule [Dispute Resolution Procedure]; and (c) within [number] Business Days of the agreement or determination referred to in Clause (b) above, the Authority's Representative shall issue a Variation Enquiry and the relevant provisions of Schedule [Variation Procedure] shall apply except that: (i) Concessionaire may give notice to the Authority's Representative that it objects to such a Variation Enquiry only on the grounds that the implementation of the Variation would not give effect to or comply with the Relevant Change in Law;

(ii) the Authority shall issue a Variation Confirmation in respect of the Variation in accordance with the relevant provisions of Schedule [Variation Procedure]; (iii) the provisions of Clause [Consents and Planning Approval] shall apply and, to avoid doubt, the provisions of Schedule [Variation Procedure] shall not apply; (iv) the Authority shall not be entitled to withdraw any Variation

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EXAMPLE CLAUSES Enquiry or Variation Confirmation issued in accordance with this Clause; (v) Concessionaire shall, without prejudice to its general obligation to comply with the terms of this Agreement: 1. use all reasonable endeavours to mitigate the adverse effects of any Relevant Change in Law and take all reasonable steps to minimise any increase in costs arising from such Relevant Change in Law; and use all reasonable endeavours to take advantage of any positive or beneficial effects of any Relevant Change in Law and take all reasonable steps to maximise any reduction in costs arising from such Relevant Change in Law; and

NOTES AND REFERENCES

2.

(vi) any compensation payable, or reduction to the Service Payments, shall be calculated in accordance with Clause [ref] (as appropriate) provided that: 1. 2. the amount of any compensation payable; or the amount by which the Services Payment is to be reduced,

shall not take into account any amounts incurred or to be incurred as a result of Concessionaire's failure to comply with Clause [above]. Discriminatory and Authority Specific In relation to a Relevant Change in Law referred to in Clauses [Discriminatory and Authority Specific], any compensation payable, or reduction to the Service Payments, pursuant to this Clause shall be calculated on the basis that Concessionaire shall be placed in no better or worse position than it would have been in had the Relevant Change in Law not occurred, and any assessment of whether

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EXAMPLE CLAUSES Concessionaire is in a better or worse position shall take account (inter alia) of the provisions of Clauses [Failure to mitigate] and: (a) the extent to which Concessionaire has been (or will be) compensated as a result of any indexation of the Service Payments under this Agreement; (b) any decrease in its costs resulting from any Relevant Change in Law; and (c) any amount which Concessionaire will recover under any insurance policy (or would have recovered if it had complied with the requirements of this Agreement or of any policy of insurance required under this Agreement) which amount, to avoid doubt, shall not include the amount of any excess or deductibles or any amount above the maximum insured amount applicable to such insurance policy. Concessionaire shall not be entitled to any other payment or compensation or, save as expressly provided otherwise in this Agreement, relief in respect of such Relevant Change in Law or associated Variation (or the consequences of either) and the provisions of Clause [Delay Events Compensation] shall be construed accordingly. Works after Actual Completion Date In relation to a Relevant Change in Law referred to in Clause [Works after Actual Completion Date] (a "Relevant Works Change in Law"): (a) for which the Allowable Expenses amounts to less than 0.05% of the Capital Cost of the Facilities (a "De Minimis Amount"), Concessionaire shall not be entitled to receive any payment, compensation or, save as expressly provided otherwise in this Agreement, any other relief in respect of such Relevant Works Change in Law, save where in any one Contract Year there shall occur more than two (2) Relevant Works Change in Law which each give rise to a De Minimis Amount, in which case the third and each subsequent such De Minimis Amount resulting from a Relevant Works Change in Law in that Contract Year (each an "Additional De

NOTES AND REFERENCES

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EXAMPLE CLAUSES Minimis Amount") shall be taken into account for the purposes of: (i) calculating the Cumulative Allowable Expenses; and

NOTES AND REFERENCES

(ii) calculating the Authority's Cost Share of such Additional De Minimis Amounts; and (b) subject to Clause [above], the Concessionaire shall be entitled to receive compensation from the Authority of an amount equal to the Authority's Cost Share in respect of such Relevant Works Change in Law. Concessionaire shall not be entitled to receive any other payment, compensation or (save as expressly provided otherwise in this Agreement) any other relief in respect of any such Relevant Works Change in Law or associated Variations (or the consequences of either) and the provisions of Clause [Delay Events Compensation] shall be construed accordingly. Concessionaire has accepted the risk of bearing the financial consequences which are not covered by (or exceed) the Authority's Cost Share and has had the opportunity of assessing the risk when bidding and agreeing the Service Payments. For the purposes of this Clause: (a) "Capital Cost of the Facilities" means [the Authority to include figure by reference to the capital build cost of the Facilities contained in the base case financial model]; (b) "Allowable Expenses" means the costs and expenses to be incurred by Concessionaire as a direct consequence of the Relevant Works Change in Law, which shall be calculated on the basis that Concessionaire shall be placed in no better or worse position than it would have been in had the Relevant Works Change in Law not occurred, taking into account (inter alia) the provisions of Clauses [Failure to mitigate] and: (i) the extent to which Concessionaire has been (or will be) compensated as a result of any indexation of the Service Payments under this Agreement;

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EXAMPLE CLAUSES (ii) any decrease in its costs resulting from such Relevant Works Change in Law; (iii) any amount which Concessionaire will recover under any insurance policy (or would have recovered if it had complied with the requirements of this Agreement or of any policy of insurance under this Agreement) which amount, to avoid doubt, shall not include the amount of any excess or deductibles or any amount above the maximum insured amount applicable to any such insurance policy. (c) For the purpose of calculating Allowable Expenses in Clause [above]: (i) there shall be taken into account in addition to Capital Expenditure all the costs and expenses to be incurred by Concessionaire in performing Project Operations as a consequence of the Relevant Works Change in Law including the additional future capital expenditure, maintenance and lifecycle costs;

NOTES AND REFERENCES

(ii) in taking these costs into account they shall be expressed in nominal terms; and (iii) all future costs and expenses shall be discounted at the relevant cash balance deposit rates prevailing at the time Concessionaire makes its application for payment in relation to the Relevant Works Change in Law having regard to the expenditure profile of such costs and expenses. (d) "Cumulative Allowable Expenses" means the cumulative amount of the Allowable Expenses from time to time (excluding any De Minimis Amount but including any Additional De Minimis Amount); and (e) "The Authority's Cost Share" means an amount equal to the percentage share of the relevant Allowable Expenses that are to be borne by the Authority as indicated in Column 3 in the Table below and which is calculated by reference to the ratio that the Cumulative

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EXAMPLE CLAUSES Allowable Expenses at that time bears to the Capital Cost of the Facilities: Table B Column 1 Cumulative Allowable Expenses (as a % of the Capital Cost of the Facilities) Column 2 Concessionaire share of Allowable Expenses (as a % of the Allowable Expenses) Column 3 The Authority's Cost Share (as a % of the Allowable Expenses) Column 4 Cumulative Concessionaire share of Allowable Expenses (as a % of the Capital Cost of the Facilities) 0.05% 0.38% 0.63% 1.63% 3.13% 3.13%

NOTES AND REFERENCES

<0.05% 0.05% >0.5% - 1% >1% - 5% >5% - 20% >20%

100% 75% 50% 25% 10% 0%

0% 25% 50% 75% 90% 100%

General Change in Law Either party may give notice to the other of the need for a Variation which is necessary in order to enable Concessionaire to comply with any Change in Law which is not a Relevant Change in Law, in which event: (a) the parties shall meet within [number] Business Days to consult in respect of the effect of the Change in Law and any Variation required as a consequence; and (b) within [number] Business Days of the meeting referred to in Clause [above] the Authority's Representative shall, if a Variation is

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EXAMPLE CLAUSES required in order to comply with the Change in Law, issue a Variation Enquiry and the relevant provisions of Schedule [Variation Procedure] shall apply except that: (i) Concessionaire may give notice to the Authority's Representative that it objects to such a Variation Enquiry only on the grounds that the implementation of the Variation would not implement the Change in Law;

NOTES AND REFERENCES

(ii) the Authority shall issue a Variation Confirmation in respect of the Variation in accordance with the relevant provisions of Schedule [Variation Procedure]; (iii) the provisions of Clause [Consents and Planning Approval] shall apply and, to avoid doubt, the provisions of Schedule [Variation Procedure] shall not apply; (iv) the Authority shall not be entitled to withdraw any Variation Enquiry or Variation Confirmation issued in accordance with this Clause; and (v) Concessionaire shall not be entitled to any payment or other compensation or relief from any performance of its obligations under this Agreement in respect of such Change in Law or associated Variation (or the consequences of either). Alternative 2 Change in Law Change in Law means the occurrence or coming into force of any of the following, after the date of this Agreement: a. b. c. d. the enactment of any new [.] law; the repeal, modification or re-enactment of any existing [.]law; a change in the interpretation or application of any [.] law by a court of record; any change in the rates of any of the Taxes, other than Alternative 2 adapted from Concession Agreement for Colombo Kathunayake

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KEY ISSUES Corporate Tax.

EXAMPLE CLAUSES

NOTES AND REFERENCES Expressway Project (note confidential), index reference A2, folder 1.

Provided that Change in Law shall not include; i. coming into effect, after the date hereof, of any provision of a statute which is already in place as of the date hereof or any new law or any change in the existing law under the active consideration of or in the contemplation of any government as of the date hereof, which is a matter of public knowledge.

ii.

Effect on Concessionaire Subject to the Concessionaire/ the Authority taking necessary measures to mitigate the impact or the likely impact of Change in Law on the Project, if as a direct consequence of a Change in Law, any increase/ decrease in capital expenditure/ operating costs/ taxes in any Accounting Year, shall (without duplication) be allocated and shared between the Concessionaire and the Authority as under:

Increase/ decrease in Capital Expenditure (currency million) 0 500 500 1000 1000 1500 Above 1500

The Authoritys Share

0% 33% 67% 100% of expenditure the capital

Increase/ Decrease in

The Authoritys Share

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EXAMPLE CLAUSES

NOTES AND REFERENCES

Operating Costs /Taxes (currency million) 0 10 Above 10 0% 100%

(c) Obligations of the Concessionaire (a) Upon occurrence of a Change in Law, the either party may, if it expects any increase / decrease in capital expenditure/ operating costs/ taxes as per provisions of clause [ref], notify the other party and the Independent Engineer, of the following: i. the nature and the impact of Change in Law on the Project. With in 15 days of issue of above notification, the Concessionaire shall provide the following information to the Authority and the Independent Engineer. ii. in sufficient detail, the estimate of the increase/ decrease in capital expenditure/ operating costs/ taxes likely to be incurred by the Concessionaire on account of the Change in Law; the measures, which the Concessionaire has taken or proposes to take to mitigate the impact of Change in Law, including in particular, minimising the increase in capital expenditure/ operating costs; and the relief, if applicable, sought by the Concessionaire.

iii.

iv.

(b) Upon receipt of the above information upon notice of Change in Law issued by the Concessionaire/ the Authority pursuant to the preceding sub-clause (a), the Authority and the Concessionaire shall

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EXAMPLE CLAUSES along with the Independent Engineer hold discussions and take all such steps as may be necessary including determination/certification by the Independent Engineer and where necessary by the Independent Auditor of the increase/ decrease in capital expenditure/ operating costs/ taxes and to determine the quantum of the increase/ decrease in capital expenditure/ operating costs. (c) The Authority shall, within 30 days from the date of determination of quantum of increase/ decrease in capital expenditure/ operating costs/ taxes , notify the Concessionaire the mode of settlement of variation in capital expenditure/ operating costs/ taxes, which shall be one of the follows: i. ii. by lump-sum reimbursement to the Concessionaire of the increase in capital expenditure/ operating costs/ taxes; or reimbursement of increase in capital expenditure/ operating costs/ taxes to the Concessionaire, in a maximum of four half yearly instalments, subject to payment of interest at AWPR +2% on the amount the payment of which is deferred. Resetting of Bid Availability Payment by taking into account the variation in capital expenditure/ operating costs/ taxes. It is clarified that any decrease in capital expenditure/ operating costs/ taxes due to above Change in Law during the Implementation Period shall be settled through only through resetting of Bid Availability Payment as per provisions of this clause. Provided that if the Change in Law causes variation in cost of meeting O&M Requirements only, such variation during an Availability Payment Period shall be added to / deducted from Adjusted Availability Payment payable by the Authority to the Concessionaire on the Availability Payment Date in respect of that Availability Payment Period.

NOTES AND REFERENCES

iii.

Changes in scope/ service/ order

Limits on the Authority's ability to request changes to the Service may be appropriate in some

Alternative 1:

See SOPC Section 12. Alternative 1 adapted from Concession Agreement for

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KEY ISSUES circumstances. What is appropriate will depend on the Project, but there will be a point at which what is proposed is no longer the same Service (or incidental or ancillary to it) and the Authority should have no difficulty with the principle of limiting its ability to suggest changes in this way. Examples of appropriate limits include, in general terms changes that: (a) require the Service to be performed in a way that infringes any law or is inconsistent with good industry practice; (b) would cause any consent to be revoked (or a new consent required to implement the relevant change in Service to be unobtainable); (c) would, if implemented, result in a change in the nature of the Project (e.g. as a prison or hospital); and (d) would materially and

EXAMPLE CLAUSES

NOTES AND REFERENCES Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

The Authority shall: (a) grant in a timely manner all such approvals, permissions and Authorizations which the Concessionaire may require or is obliged to seek from the Authority in connection with implementation of the Project and the performance of its obligations, under this Agreement; (b) grant or where appropriate provide necessary assistance to the Concessionaire in securing Applicable Permits; (c) ensure peaceful use of the Project Site by the Concessionaire under and in accordance with the provisions of this Agreement without any let or hindrance from the Authority or any Governmental Authority or persons claiming through or under it/them; (d) upon written request from the Concessionaire, assist the Concessionaire in obtaining access to all necessary infrastructure facilities and utilities, including water, electricity and telecommunication facilities at rates and on terms no less favourable to the Concessionaire than those generally available to commercial customers receiving substantially equivalent facilities/utilities; (e) assist the Concessionaire in obtaining necessary authority to regulate traffic on the Project Site/Project Facility subject to and in accordance with the Applicable Laws; and (f) assist the Concessionaire in obtaining police assistance against payment of prescribed costs and charges, if any, for traffic regulation, patrolling and provision of security on the Project Site/Project Facility and implementing this Agreement in accordance with the provisions hereof. The Authority may, notwithstanding anything to the contrary contained in this Agreement, require a change in the scope of the Project ("Change of Scope"), provided that such change does not involve variation in capital expenditure exceeding. The Change of Scope may be required by the Authority by an order (the "Change of Scope Order") issued in accordance with the procedure set forth in clause [ref]. Procedure for Change of Scope (a) The Authority may, at any time during the Implementation Period but at least 90 days prior to the Scheduled Project Completion Date,

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KEY ISSUES adversely affect the Concessionaire's ability to deliver the Service; materially and adversely affect the health and safety of any person; would increase the Concessionaire's capital costs by more than [101% (in aggregate); require the Concessionaire to implement the change in Service in an unreasonable period of time; would (if implemented) materially and adversely change the nature of the Project (including its risk profile); or would represent a departure from good industry practice; or the Authority does not have the legal power or capacity to require the implementation of.

EXAMPLE CLAUSES require Change of Scope by a written notice (the "Change of Scope Notice") to the Concessionaire, through the Independent Engineer. (b) The Concessionaire shall, within 15 days of receipt of Change of Scope Notice, provide to the Independent Engineer such information as is necessary and reasonable together with preliminary documentation and details including calculations where necessary, in support of the following: i. the impact which the Change of Scope is likely to have on the Construction Requirements and/or the O&M Requirements. variation in capital expenditure, operating cost and taxes to be incurred by Concessionaire for implementing the Change of Scope, the estimated additional time (number of days) that the Concessionaire would require to achieve COD consequent to Change of Scope.

NOTES AND REFERENCES

(e)

(f)

(g)

ii.

iii.

(h)

(i)

(j)

(c) The Concessionaire shall upon review by the Independent Engineer of the information, documentation and the details submitted by it pursuant to preceding sub-clause (b), forward to the Authority the statement of variation in capital expenditure, operating cost and taxes and the other details in sub-clause (b) as determined in consultation with and duly certified by the Independent Engineer. The Authority may, within a period of 15 (fifteen) days from the date of receipt of such statement, issue the Change of Scope Order. (d) Provided, if for any reason the Authority chooses not to issue the Change of Scope Order, it shall reimburse to the Concessionaire the cost/expenses certified by the Independent Engineer as having been incurred by the Concessionaire in preparing and submitting the drawings, documents, estimates and other information in compliance with the Change of Scope Notice. (e) Simultaneously with the issue of the Change of Scope Order, the

The government normally wishes to reserve the right to issue a variation or change of orders, to modify the specification,

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KEY ISSUES design and/or scope of the project at its discretion. Change orders usually (but not always) relate to the construction rather than the operation of the infrastructure asset. To exercise this right, the government is likely to be required to compensate the project company for additional costs.

EXAMPLE CLAUSES Authority shall notify the Concessionaire the mode of settlement of variation in capital expenditure/ operating costs/ taxes which shall be one of the following modes: i. ii. by lump-sum reimbursement to the Concessionaire of the increase in capital expenditure/ operating costs/ taxes; or reimbursement of increase in capital expenditure/ operating costs/ taxes to the Concessionaire, in a maximum of four equal half yearly instalments, subject to payment of interest at AWPR +2% on the amount the payment of which is deferred. Resetting of Bid Availability Payment by taking into account the variation in capital expenditure/ operating costs/ taxes. It is clarified that any decrease in capital expenditure/ operating costs/ taxes due to above Change in Scope during Construction Period shall be settled only through resetting of Bid Availability Payment as per provisions of this clause. Provided that if the Change of Scope causes variation in cost of meeting O&M Requirements only, such variation during an Availability Payment Period shall be added to / deducted from Adjusted Availability Payment payable by the Authority to the Concessionaire on the Availability Payment Date in respect of that Availability Payment Period. (f) The Change of Scope Order shall be effective from the date the mode of reimbursement is notified to the Concessionaire in terms of sub-clause (e).

NOTES AND REFERENCES

iii.

(g) The Authority shall, within 30 days from the date of receipt of a Certificate from the Independent Engineer certifying that the Concessionaire has completed the works in accordance with the Change of Scope Order, settle the Concessionaires account in accordance with provisions of this clause.. Alternative 2: Authority Changes Alternative 2 adapted from Office of Government

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EXAMPLE CLAUSES

NOTES AND REFERENCES Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

(a) The Authority has the right to propose changes in Service (other than Small Works Changes9) in accordance with this Clause. The Authority shall not propose a change in Service which [ ]_0. If the Authority requires a change in Service, it must serve an Authority Notice of Change on the Concessionaire. (b) The Authority Notice of Change shall: (i) set out the change in Service required in sufficient detail to enable the Concessionaire to calculate and provide the Estimated Change in Project Costs in accordance with paragraph (c) below (the "Estimate"); (ii) in the event that the change will require Capital Expenditure, state whether the Authority intends to pay to the Concessionaire the costs involved in implementing the change or whether the Authority requires the Concessionaire to use its reasonable efforts to obtain funding in accordance with paragraph (i) below; and (iii) require the Concessionaire to provide the Authority within [21] days of receipt of the Authority Notice of Change with the Estimate. (c) As soon as practicable and in any event within [21] days after having received the Authority Notice of Change, the Concessionaire shall deliver to the Authority the Estimate. The Estimate shall include the opinion of the Concessionaire on: (i) whether relief from compliance with obligations is required, including the obligations of the Concessionaire to achieve the Planned Service Commencement Date and meet the [performance regime] during the implementation of the change in Service ;

(ii) any impact on the provision of the Service; (iii) any amendment required to this Contract and/or any Project

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EXAMPLE CLAUSES Document as a result of the change in Service; (iv) any Estimated Change in Project Costs _2that result from change in Service; (v) any loss of revenue that results from the change in Service; the

NOTES AND REFERENCES

(vi) any Capital Expenditure that is required or no longer required as a result of the change in Service; (vii) any regulatory approvals which are required; and (viii) the proposed method of certification of any construction or operational aspects of the Service required by the change in Service if not covered by the procedures specified in [see Section 3 (Service Commencement)]. (d) As soon as practicable after the Authority receives the Estimate, the parties shall discuss and agree the issues set out in the Estimate, including: (i) providing evidence that the Concessionaire has used reasonable endeavours (including (where practicable) the use of competitive quotes) to oblige its Sub-Contractors to minimise any increase in costs and maximise any reduction in costs;

(ii) demonstrating how any Capital Expenditure to be incurred or avoided is being measured in a cost effective manner, including showing that when such expenditure is incurred, foreseeable Changes in Law at that time have been taken into account by the Concessionaire; and (iii) demonstrating that any expenditure that has been avoided, which was anticipated to be incurred to replace or maintain assets that have been affected by the Authority Change concerned, has been taken into account in the amount which in its opinion has resulted or is required under paragraph (c) (iv)

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EXAMPLE CLAUSES and/or (v) above. In such discussions the Authority may modify the Authority Notice of Change and (if the estimated increase in Capital Expenditure in respect of the change in Service is expected to exceed [monetary amount] (indexed) and it is practicable for the Concessionaire to do so), the Authority may require the Concessionaire to seek and evaluate competitive tenders for the relevant capital works. In each case the Concessionaire shall, as soon as practicable, and in any event not more than [14] days after receipt of such modification, notify the Authority of any consequential changes to the Estimate. (e) If the Concessionaire does not intend to use its own resources to implement any change in Service it shall comply with good industry practice with the objective of ensuring that it obtains best value for money (taking into account all relevant circumstances including, in particular, the requirement that the Concessionaire should not be worse off as a result of the implementation of the change in Service) when procuring any work, services, supplies, materials or equipment required in relation to the change in Service. (f) If the parties cannot agree on the contents of the Estimate then the dispute will be determined in accordance with Clause [Dispute Resolution].

NOTES AND REFERENCES

(g) As soon as practicable after the contents of the Estimate have been agreed or otherwise determined pursuant to Clause [Dispute Resolution], the Authority shall: (i) confirm in writing the Estimate (as modified); or

(ii) withdraw the Authority Notice of Change. (h) lf the Authority does not confirm in writing the Estimate (as modified) within 30 days of the contents of the Estimate having been agreed in accordance with paragraph (d) above or determined pursuant to paragraph (e) above, then the Authority Notice of Change shall be deemed to have been withdrawn.

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KEY ISSUES (i)

EXAMPLE CLAUSES In the event that the Estimate (as modified) involves estimated Capital Expenditure 1_then (unless the Authority has elected to fund such costs in accordance paragraphs (b)(ii)) the Concessionaire shall use its reasonable endeavours to obtain funding for the whole of the estimated Capital Expenditure, on terms reasonably satisfactory to it and the Senior Lenders. If the Concessionaire has used its reasonable endeavours to obtain funding for the whole of the estimated Capital Expenditure, but has been unable to do so within [60] days of the date that the Authority confirmed the Estimate, then the Concessionaire shall have no obligation to carry out the change in Service, unless the Authority agrees within [20] days of the end of such period to pay the costs for which funding is not available on the basis provided in paragraph (m) below.

NOTES AND REFERENCES

(j)

(k) The Authority may, at any time following the date on which the Estimate is confirmed, agree to meet all or, to the extent the Concessionaire has obtained funding for part of the Capital Expenditure, the remaining part of the estimated Capital Expenditure. (l) In the event that the Estimate has been confirmed by the Authority iv, then the adjustment to the Unitary Charge shall be such as [clause (Calculation of Compensation) above].

(m) Where the Authority agrees to pay the costs for which funding is not available pursuant to sub-clause (j) above: (i) the Authority and the Concessionaire shall agree: 1. a payment schedule in respect of the payment of such sum reflecting the amount and timing of the costs to be incurred by Concessionaire in carrying out the change in Service to the extent borne by the Authority; and where payment for part of the change in Service reflects the carrying out of, or specific progress towards, an element within the change in Service, an objective means of providing evidence confirming that the part of the change in Service corresponding to each occasion when payment is

2.

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EXAMPLE CLAUSES due under the payment schedule appears to have been duly carried out, (such payment schedule and evidence to be determined in accordance with Clause [Dispute Resolution]) in the event of the Authority and Concessionaire failing to agree as to its terms); (ii) the Authority shall make a payment to Concessionaire within 15 Business Days of receipt by the Authority of invoices presented to the Authority (in all material respects) in accordance with the agreed payment schedule (as the case may be, varied by agreement from time to time) accompanied by the relevant evidence (where applicable) that the relevant part of the change in Service has been carried out; and (iii) if payment is not made in accordance with sub-paragraph (ii) above, the Authority shall pay interest to Concessionaire on the amount unpaid from the date fifteen (15) Business Days after receipt of the relevant invoice until paid at the default rate set out in Clause [default interest rate clause, if any]. Small Works Changes (a) 28 days prior to the Service Commencement Date and the commencement of each subsequent Contract Year for the first [x] years and within [y] days of any request in any subsequent Contract Year, the Concessionaire shall propose a schedule of rates to be agreed with the Authority (the "Small Works Rates"), such agreed rates to be applied in respect of any request from the Authority for Small Works to be completed during that Contract Year. The value of any Small Works shall be calculated on the basis that: (i) the labour element shall be calculated in accordance with the Small Works Rates or, where such rates are not applicable, in accordance with rates which are fair and reasonable; and

NOTES AND REFERENCES

(ii) the materials element shall be charged at the cost of the materials to the Concessionaire or to the contractor carrying out

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KEY ISSUES

EXAMPLE CLAUSES the work (net of all discounts) plus [7.5] 19%. (b) The Concessionaire and the Authority shall agree the timing of any Small Works, so as to minimise any inconvenience to the Authority. The Concessionaire shall take all reasonable steps to minimise the duration of any Small Works. (c) Any dispute between the parties relating to Small Works shall be determined in accordance with Clause [Dispute Resolution]. "Small Works" means any change to the [Works] requested by the Authority having an individual cost not exceeding [monetary amount] (indexed), or as otherwise agreed from time to time, except for any request which will (if implemented) increase the likelihood of the Service not complying with the [performance regime] or materially and adversely affect the Concessionaire's ability to perform its obligations under this Contract. Concessionaire Changes in Service (a) If the Concessionaire wishes to introduce a change in Service-, it must serve a Concessionaire Notice of Change on the Authority. (b) The Concessionaire Notice of Change must: (i) set out the proposed change in Service in sufficient detail to enable the Authority to evaluate it in full;

NOTES AND REFERENCES

(ii) specify the Concessionaire's reasons for proposing the change in Service; (iii) request the Authority to consult with the Concessionaire with a view to deciding whether to agree to the change in Service and, if so, what consequential changes the Authority requires as a result; (iv) indicate any implications of the change in Service; (v) indicate, in particular, whether a variation to the Unitary Charge

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EXAMPLE CLAUSES is proposed (and, if so, give a detailed cost estimate of such proposed change); and (vi) indicate if there are any dates by which a decision by the Authority is critical. (c) The Authority shall evaluate the Concessionaire's proposed change in Service in good faith, taking into account all relevant issues, including whether: (i) a change in the Unitary Charge will occur;

NOTES AND REFERENCES

(ii) the change affects the quality of the Service or the likelihood of successful delivery of the Service; (iii) the change will interfere with the relationship of the Authority with third parties; (iv) the financial strength of the Concessionaire is sufficient to perform the changed Service; (v) [the residual value of the Assets is reduced]; or (vi) the change materially affects the risks or costs to which the Authority is exposed. (d) As soon as practicable after receiving the Concessionaire Notice of Change, the parties shall meet and discuss the matter eferred to in it. During their discussions the Authority may propose modifications or accept or reject the Concessionaire Notice of Change. (e) lf the Authority accepts the Concessionaire Notice of Change (with or without modification), the relevant change in Service shall be implemented within [7] days of the Authority's acceptance. Within this period, the parties shall consult and agree the remaining details as soon as practicable and shall enter into any documents to amend this Contract or any relevant Project Document which are necessary to give effect to the change in Service. (f) If the Authority rejects the Concessionaire Notice of Change, it shall

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EXAMPLE CLAUSES not be obliged to give its reasons for such a rejection. (g) Unless the Authority's acceptance specifically agrees to an increase in the Unitary Charge, there shall be no increase in the Unitary Charge as a result of a change in Service proposed by the Concessionaire. If the change in Service proposed by the Concessionaire causes or will cause the Concessionaire's costs or those of a Sub-Contractor to decrease, there shall be a decrease in the Unitary Charge such that [ ]. The Authority cannot reject a change in Service which is required in order to conform to a Change in Law. The costs of introducing a change in Service resulting from a Qualifying Change in Law (including any resulting variation in the Unitary Charge) shall be dealt with in accordance with Clause [Change in Law] and to the extent not dealt with shall be borne by the Concessionaire.

NOTES AND REFERENCES

(h)

(i)

Stabalisation

The long-term nature of most concession agreements means there is a risk that events would occur that significantly change the nature of the agreement, or the assumptions that underlie either the government or the project companys risks, rights and obligations under the agreement. For this reason, the concession agreements often contain stablisation provisions to deal with what happens if exceptional events occur. The exceptional events may be changes in law,

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KEY ISSUES modifications to licenses or permits, economic disruption or loss of basic investment protection rights (however they are defined).

EXAMPLE CLAUSES

NOTES AND REFERENCES

Supervening events

There may be circumstances in which the Concessionaire should be fairly relieved from liability for failure to commence or provide the infrastructure service in accordance to the concession agreement. These circumstances are often divided into one of three categories: (a) delay events; (b) relief events; and (c) force majeure. Alternative 1 If, at any time, Concessionaire becomes aware that there will be (or is likely to be) a delay in completion of the Works, Concessionaire shall forthwith give notice to the Authority's Representative to that effect specifying the relevant delay or impediment. In relation to any such delay or impediment: (a) if the Authority's Representative is satisfied, or it is determined in accordance with Schedule [Dispute Resolution Procedure], that such delay or impediment has arisen as a result of the occurrence of a Delay Event, then, subject to Clause [Mitigation] the Authority's Representative shall allow Concessionaire an extension of time equal to the delay or impediment caused by such Delay Event (taking into account reasonably foreseeable consequences of the Delay

See SOPC Section 5.

Delay Events

Delay events usually give rise to an extension of time for completion of construction. Compensation is payable for all delay events (other than force majeure or relief events) in accordance with the other provisions in the concession agreement.

See SOPC Section 5.2. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES Event) and shall fix a new Completion Date which shall replace the existing Completion Date; but (b) to avoid doubt, there shall be no extension to the Project Term as a result of any such delay or impediment. If the Concessionaire is (or claims to be) affected by a Delay Event: (a) it shall (and shall procure that the Concessionaire Parties shall) take and continue to take all reasonable steps to eliminate or mitigate the consequences of such an event upon the performance of its obligations under this Agreement and, where relevant, resume performance of its obligations affected by the Delay Event as soon as practicable; and (b) it shall neither be relieved from liability under this Agreement nor entitled to any extension of time for the purpose of Clause [Delay Event] to the extent that it is delayed or impeded due to its failure (if any) to comply with its obligations under Clause [ref] above. For the purposes of this Agreement, Delay Events means any of the following to the extent in each case that there will be (or is likely to be) a delay in completion of the Facilities: (a) an Authority's Works Variation initiated by an Authority's Works Variation Enquiry in accordance with paragraph 2 of Part 1 of Schedule [Variation Procedure] in relation to which Concessionaire has issued a response pursuant to paragraph [ref] of Schedule [Variation Procedure] specifying and providing evidence that implementation of the Authority's Works Variation would delay the completion of the Facilities if this has been agreed between the parties or determined to be the case in accordance with Schedule [Dispute Resolution Procedure]; (b) any breach by the Authority and/or any Authority Party of any of the Authority's express obligations under this Agreement (including any delay in the Authority giving access to the Site pursuant to Clause [Nature of Land Interests] or any obstruction of the Ancillary Rights afforded to Concessionaire pursuant to Clause [Nature of Land

NOTES AND REFERENCES

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EXAMPLE CLAUSES Interests] by the Authority or any Authority Party) to the extent in each case that any such breach is not caused, or contributed to, by Concessionaire or any Concessionaire Party; (c) the execution of works on the Site not forming part of this Agreement by the Authority or any contractors employed by the Authority; (d) opening up of the Works pursuant to Clauses [Right to open up] (inclusive) () where such Works are not subsequently found to be defective (unless it is agreed or determined in accordance with Clause [Dispute Resolution] that the opening up of the Works was reasonable in the light of other defects previously discovered by the Authority); (e) Force Majeure; (f) a Relief Event; or

NOTES AND REFERENCES

(g) a Relevant Change in Law referred to in Clauses [Discriminatory Changes] or [Authority Specific Changes]. Without prejudice to the generality of Clause [delay event], Concessionaire shall give notice in writing to the Authority's Representative as soon as it (or the Contractor) can reasonably foresee a Delay Event occurring or, if the same is not reasonably foreseeable, as soon as it (or the Contractor) shall become aware of a Delay Event. Concessionaire shall within [number] Business Days after such notification, give further written details to the Authority's Representative which shall include: (a) a statement of which Delay Event the claim is based upon; (b) details of the circumstances from which the Delay Event arises; (c) details of the contemporary records which Concessionaire will maintain to substantiate its claim for extra time; (d) details of the consequences (whether direct or indirect, financial or

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EXAMPLE CLAUSES non-financial) which such Delay Event may have upon completion of the Facilities; and (e) details of any measures which Concessionaire proposes to adopt to mitigate the consequences of such Delay Event. As soon as possible but in any event within [number] Business Days of the Concessionaire receiving, or becoming aware of, any supplemental information which may further substantiate or support Concessionaire's claim then Concessionaire shall submit further particulars based on such information to the Authority's Representative. The Authority's Representative shall, after receipt of written details under Clause [above], or of further particulars under Clause [above], be entitled by notice in writing to require Concessionaire to provide such further supporting particulars as he may reasonably consider necessary. Concessionaire shall afford the Authority's Representative reasonable facilities for investigating the validity of Concessionaire's claim including, without limitation, on-site inspection. Subject to the provisions of this Clause, the Authority's Representative shall fix a revised Completion Date in accordance with Clause [New Completion Date] as soon as reasonably practicable and in any event within [number] Business Days of the later of: (a) the date of receipt by the Authority's Representative of Concessionaire's notice given in accordance with Clause [above] and the date of receipt of any further particulars (if such are required under Clause [above]), whichever is the later; and (b) the date of receipt by the Authority's Representative of any supplemental information supplied by Concessionaire in accordance with Clause [above] and the date of receipt of any further particulars (if such are required under Clause [above]), whichever is the later. If Concessionaire has failed to comply with the requirements as to the giving of notice under Clause [above], or has failed to maintain records or afford facilities for inspection to the Authority's Representative, then the

NOTES AND REFERENCES

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EXAMPLE CLAUSES following provisions shall apply: (a) the Authority's Representative may require Concessionaire to submit details of the reasons for such failure. If the Authority's Representative has not stated that he is satisfied with the reasons given within [number] Business Days of their receipt, Concessionaire may refer the matter for resolution in accordance with Clause [Dispute Resolution Procedure]; (b) if either the Authority's Representative is satisfied with the reasons given or the decision of the Dispute Resolution Procedure is that the failure is excusable, then the Authority's Representative shall proceed to the evaluation of the request for an extension of time in accordance with Clause []; or (c) if the decision of the Authority's Representative (or in the event that the decision is disputed, if the determination in accordance with Schedule [Dispute Resolution Procedure]) is that the failure is not excusable, then Concessionaire shall not be entitled to a revised Completion Date in respect of the relevant Delay Event to the extent that the Authority's Representative has, as a result of such failures, been prevented from assessing the consequences of the Delay Event. If: (a) the Authority's Representative declines to fix a revised Completion Date; or (b) Concessionaire considers that a different Completion Date should be fixed; or (c) there is a disagreement as to whether a Delay Event has occurred, then Concessionaire shall be entitled to refer the matter for determination in accordance with Schedule [Dispute Resolution Procedure]. Compensation

NOTES AND REFERENCES

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EXAMPLE CLAUSES If either the Delay Event is a Delay Event referred to in sub-Clause (a) or there is an event referred to in Clause (b) (each a "Compensation Event"), Concessionaire's sole right to compensation shall be as provided for in this Clause. To avoid doubt, no other Delay Event (or event referred to in Clause [ref] pursuant to which Concessionaire incurs a loss or expense) shall entitle Concessionaire to receive any compensation save as otherwise expressly provided in: (a) Schedule [Variation Procedure] in the case of a Delay Event referred to in Clause [Works Change] (subject always to the provisions of Clause [Changes in Law]); or (b) Clause [Changes in Law] in the case of a Delay Event referred to in Clause [Discriminatory and Authority specific Changes in Law). For the purposes of this Clause, a Compensation Event means either: (a) any Delay Event referred to in Clause [Breach, Execution of non-project related works or Opening up of Works] for which, in each case, it has been agreed or determined pursuant to this Clause that Concessionaire is entitled to an extension of time; or (b) in the period prior to the Actual Completion Date, in circumstances where there is no delay in completion of the Facilities, any breach by the Authority and/or any Authority Party of any of the Authority's express obligations under this Agreement (including any delay in the Authority giving access to the Site pursuant to Clause [Nature of Land Interests] or any obstruction of the Ancillary Rights afforded to Concessionaire pursuant to Clause [Nature of Land Interests] by the Authority or any Authority Party) to the extent in each case that any such breach is not caused, or contributed to, by Concessionaire or any Concessionaire Party or the occurrence of the circumstances described in Clause [ref] to the extent that such circumstances are not caused, or contributed to, by Concessionaire or any Concessionaire Party. Subject to Clause [ref], if it is agreed, or determined, that there has been a Compensation Event, and Concessionaire has incurred loss and/or expense as a direct result of such Compensation Event, Concessionaire

NOTES AND REFERENCES

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EXAMPLE CLAUSES shall be entitled to such compensation as would place Concessionaire in no better or no worse position than it would have been in had the relevant Compensation Event not occurred. Concessionaire shall promptly provide the Authority's Representative with any additional information he may require in order to determine the amount of such compensation. Concessionaire shall take all reasonable steps so as to minimise the amount of compensation due in accordance with this Clause in relation to any Compensation Event and any compensation payable shall: (a) exclude any amounts incurred or to be incurred as a result of any failure of Concessionaire (or any Concessionaire Party) to comply with this Clause; and (b) be reduced by any amount which Concessionaire will recover under any insurance policy (or would have recovered if it had complied with the requirements of this Agreement or of any policy of insurance required under this Agreement) which amount, to avoid doubt, shall not include any excess or deductibles or any amount over the maximum amount insured applicable to any such insurance policy. The amount of any compensation due to Concessionaire under this Clause shall be agreed between the parties or, failing agreement, determined pursuant to Schedule [Dispute Resolution Procedure]. Alternative 2 The Concessionaire shall not be considered to be in breach of its obligations under this Agreement nor shall it incur or suffer any liability if and to the extent performance of any of its obligations under this Agreement is affected by or on account of any of the following: (a) Force Majeure Event; (b) The Authority Event of Default; (c) Compliance with the instructions of the Independent Engineer/the Authority or the directions of any Government Authority other than instructions issued as a consequence of a breach by the Concessionaire of any of its obligations hereunder;

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES (d) Emergency Decommissioning of the Project Facility or part thereof; (e) Closure of the Project Facility or part thereof with the approval of the Independent Engineer / the Authority.

NOTES AND REFERENCES

Relief events

Relief events are events which prevent performance by the Concessionaire of its obligations at any time, in respect of which the Concessionaire bears the financial risk in terms of increased costs and reduced revenue but for which it is generally given relief from termination for failure to provide the full service.

For the purposes of this Agreement, subject to Clause [Mitigation], Relief Events mean any of the following events: (a) fire, explosion, lightning, storm, tempest, flood, bursting or overflowing of water tanks, apparatus or pipes, ionising radiation (to the extent it does not constitute Force Majeure), earthquake, riot or civil commotion; (b) failure by any statutory undertaker, utility company, local authority or other like body to carry out works or provide services; (c) accidental loss or damage to the Works and/or Facilities or any roads servicing the same; (d) without prejudice to any obligation of Concessionaire to provide stand-by power facilities in accordance with the Authority's Construction Requirements, the Service Level Specifications [or the Interim Service Statements], failure or shortage of power, fuel or transport; (e) blockade or embargo falling short of Force Majeure; (f) the discovery of fossils, antiquities and human remains requiring action in accordance with Clause [Fossils and Antiquities]; or (g) official or unofficial strike, lockout, go slow or other dispute in each case generally affecting the construction, building maintenance or facilities management industry (or a significant sector of that industry), provided in each case that such event does not arise (directly or indirectly) as a result of any wilful act or default of the party claiming relief

See SOPC Section 5.3. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES and/or (i) in the case of Concessionaire claiming relief, any Concessionaire Party and (ii) in the case of the Authority claiming relief, any Authority Party. Subject to Clause [ref], no right of termination shall arise under this Agreement by reason of any failure by a party to perform any of its obligations under this Agreement to the extent that such failure to perform occurs because of the occurrence of a Relief Event (and, to avoid doubt, and without prejudice to Clause [No Compensation], unless expressly stated to the contrary in this Agreement, it is acknowledged that all other rights and obligations of the parties under this Agreement remain unaffected by the occurrence of a Relief Event). Without prejudice to Concessionaire's rights under Clause [Delay Events], Concessionaire shall only be relieved of its obligations under Clauses [The Design, Construction and Commissioning Process, Right of Access of The Authority's Representative, Programme and Dates for Completion, Pre-Completion Commissioning and Completion and Delay Events]. Mitigation Where a party is (or claims to be) affected by a Relief Event: (a) it shall take all reasonable steps to mitigate the consequences of such an event upon the performance of its obligations under this Agreement, resume performance of its obligations affected by the Relief Event as soon as practicable and use all reasonable endeavours to remedy its failure to perform; and (b) it shall not be entitled to rely upon the relief afforded to it pursuant to Clause [ref] of this Agreement to the extent that it is not able to perform, or has not in fact performed, its obligations under this Agreement due to its failure (if any) to comply with its obligations under Clause [ref] above. The party claiming relief shall serve written notice on the other party within five (5) Business Days of it becoming aware of the relevant Relief Event. Such initial notice shall give sufficient details to identify the

NOTES AND REFERENCES

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EXAMPLE CLAUSES particular event claimed to be a Relief Event. A subsequent written notice shall be served by the party claiming relief on the other party within a further five (5) Business Days of the notice referred to in Clause [Mitigation] which shall contain such relevant information relating to the failure to perform (or delay in performing) as is available, including (without limitation) the effect of the Relief Event on the ability of the party to perform, the action being taken in accordance with Clause [Mitigation], the date of the occurrence of the Relief Event and an estimate of the period of time required to overcome it (and/or its effects). The party claiming relief shall notify the other as soon as the consequences of the Relief Event have ceased and of when performance of its affected obligations can be resumed. If, following the issue of any notice referred to in Clause 0, the party claiming relief receives or becomes aware of any further information relating to the Relief Event (and/or any failure to perform), it shall submit such further information to the other party as soon as reasonably possible. To avoid doubt, the occurrence of a Relief Event shall not entitle Concessionaire to any compensation.

NOTES AND REFERENCES

Force Majeure

Related to the issue of termination is the issue of force majeure. Laws relating to force majeure are different in different jurisdictions, but in general force majeure relates to the ability of a party to excuse itself from performance of the partys contractual obligations where performance has become difficult or impossible due

Alternative 1 For the purposes of this Agreement, Force Majeure means any of the following events or circumstances: (a) war, civil war, armed conflict or terrorism; or (b) nuclear contamination unless in any case Concessionaire and/or any Concessionaire Party is the source or cause of the contamination; or (c) chemical or biological contamination of the Works and/or the Facilities and/or the Site from any of the events referred to in Clause (a) above; or

See SOPC Section 5.4. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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KEY ISSUES to abnormal or unforeseeable circumstances events that are not the fault of either party, and which the party pleading force majeure could not avoid despite the exercise of due care. The usual list of events that constitute force majeure includes acts of god, war including civil war, revolution, riot, civil disturbance, cyclone, flood, earthquake, volcanic eruption, tidal wave and nuclear accident. The way the force majeure clause is drafted should carefully be considered in the context of the country and the project involved. Force majeure are sometimes called risk events or compensation events in concession agreements.

EXAMPLE CLAUSES (d) pressure waves caused by devices travelling at supersonic speeds, which directly causes either party to be unable to comply with all or a material part of its obligations under this Agreement. Subject to Clauses 0 and 0 the party claiming relief shall be relieved from liability under this Agreement to the extent that by reason of the Force Majeure it is not able to perform its obligations under this Agreement. Where a party is (or claims to be) affected by an event of Force Majeure: (a) it shall take all reasonable steps to mitigate the consequences of such an event upon the performance of its obligations under this Agreement, resume performance of its obligations affected by the event of Force Majeure as soon as practicable and use all reasonable endeavours to remedy its failure to perform; and (b) it shall not be relieved from liability under this Agreement to the extent that it is not able to perform, or has not in fact performed, its obligations under this Agreement due to its failure (if any) to comply with its obligations under Clause 0(a). Without prejudice to Concessionaire's rights under Clause [Delay Events], Concessionaire shall only be relieved from its obligations under Clauses [The Design, Construction and Commissioning Process, Right of Access of The Authority's Representative, Programme and Dates for Completion) and Delay Events. The party claiming relief shall serve written notice on the other party within five (5) Business Days of it becoming aware of the relevant event of Force Majeure. Such initial notice shall give sufficient details to identify the particular event claimed to be an event of Force Majeure. A subsequent written notice shall be served by the party claiming relief on the other party within a further five (5) Business Days which shall contain such relevant information relating to the failure to perform (or delay in performing) as is available, including (without limitation) the effect of the event of Force Majeure on the ability of the party to perform, the action being taken in accordance with Clause [Mitigation], the date of the

NOTES AND REFERENCES

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EXAMPLE CLAUSES occurrence of the event of Force Majeure and an estimate of the period of time required to overcome it (and/or its effects). The party claiming relief shall notify the other as soon as the consequences of the event of Force Majeure have ceased and of when performance of its affected obligations can be resumed. If, following the issue of any notice referred to in Clause 0, the party claiming relief receives or becomes aware of any further information relating to the event of Force Majeure (and/or any failure to perform), it shall submit such further information to the other party as soon as reasonably possible. Compensation If the event of Force Majeure occurs on or after the [Actual Completion Date, the provisions of Schedule [Payment Mechanism] shall apply to determine the payments to be made to Concessionaire during the existence of any event of Force Majeure.] If an event of Force Majeure occurs prior to the Actual Completion Date, Concessionaire shall not be entitled to receive any compensation other than as expressly provided in Clause [Compensation on Termination]. Subject to Clause [Compensation on Termination], Concessionaire's sole right to payment or otherwise in relation to the occurrence of an event of Force Majeure shall be as provided in this Clause. Modifications The parties shall endeavour to agree any modifications to the Agreement which may be equitable having regard to the nature of an event or events of Force Majeure. Schedule [Dispute Resolution Procedure] shall not apply to a failure of the Authority and Concessionaire to reach agreement pursuant to this Clause. Alternative 2

NOTES AND REFERENCES

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EXAMPLE CLAUSES

NOTES AND REFERENCES

Force Majeure Events As used in this Agreement, Force Majeure Event means any of the NonPolitical Events or the Political Events set out in clauses [ref] respectively including the impact/consequence thereof which : (a) is beyond the control of the Party claiming to be affected thereby (the "Affected Party"); (b) prevents the Affected Party from performing or discharging its obligations under this Agreement; and (c) the Affected Party has been unable to overcome or prevent despite exercise of due care and diligence. Non-Political Events Any of the following events which prevents the Affected Party from performing any of its obligations for a continuous period of not less than 7 days from the date of its occurrence, shall constitute a Non-Political Event: (a) earthquake, flood, inundation, landslide; (b) storm, tempest, hurricane, cyclone, lightning, thunder or other extreme atmospheric disturbances; (c) fire caused by reasons not attributable to the Concessionaire or the Contractor or any of the employees or agents of the Concessionaire or the Contractor; (d) strikes, boycotts, labour disruptions or any other industrial disturbances not arising on account of the acts or omissions of the Concessionaire or the Contractor; Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES (e) ionising radiation, contamination by radio activity from nuclear fuel, any nuclear waste, radioactive toxic explosion; (f) volcanic eruptions; (g) any failure or delay of a Contractor caused by any of the aforementioned Non-Political Events, for which no offsetting compensation is payable to the Concessionaire by or on behalf of the Contractor. Political Events Any of the following events shall constitute Political Event: (i) Change in Law for which no relief is provided under the provisions of [ref], resulting in Material Adverse Effect.

NOTES AND REFERENCES

(ii) Acts of terrorism in [country]; (iii) War (whether declared or not), hostilities (whether war be declared or not), invasion, act of foreign enemy, rebellion, riots, weapon conflict or military actions, civil commotion, in each case in [country]; (iv) Action of a Government Authority having Material Adverse Effect including but not limited to (i) acts of expropriation, compulsory acquisition or takeover by any Government Authority of the Project/Project Facility or any part thereof or of the Concessionaires or the Contractors rights under any of the Project Agreements, (ii) any judgement or order of a court of competent jurisdiction or statutory authority in [jurisdiction] made against the Concessionaire or the Contractor in any proceedings which is non-collusive and duly prosecuted by the Concessionaire and (iii) any unlawful, unauthorised or without jurisdiction refusal to issue or to renew or the revocation of any Applicable Permits, in each case, for reasons other than Concessionaires or the Contractors breach or failure in complying with the Project Requirements, Applicable Laws, Applicable Permits, any judgement or order of a Governmental

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EXAMPLE CLAUSES Authority or of any contract by which the Concessionaire or the Contractor as the case may be is bound. (v) Early determination of this Agreement by the Authority for reasons of national emergency, national security or the public interest. (vi) Any failure or delay of a Contractor caused by any of the aforementioned Political Events, for which no offsetting compensation is payable to the Concessionaire by or on behalf of the Contractor. Obligation to Notify (a) As soon as practicable and in any case within 7 days of the date of occurrence of a Force Majeure Event or the date of knowledge thereof, the Affected Party shall notify the Independent Engineer and the other Party of the Force Majeure Event setting out, inter alia, the following in reasonable detail: (i) the nature and extent of the Force Majeure Event; (ii) the estimated Force Majeure Period; (iii) the nature of and the extent to which, performance of any of its obligations under this Agreement is affected by the Force Majeure Event; (iv) the measures which the Affected Party has taken or proposes to take to alleviate/mitigate the impact of the Force Majeure Event and to resume performance of such of its obligations affected thereby; and (v) any other relevant information concerning the Force Majeure Event, and /or the rights and obligations of the Parties under this Agreement. (b) As soon as practicable and in any case within 5 days of notification by the Affected Party in accordance with the preceding sub-clause (a), the Parties shall along with the Independent Engineer, meet, hold discussions in good faith and where necessary conduct physical

NOTES AND REFERENCES

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EXAMPLE CLAUSES inspection/survey of the Project in order to: (i) assess the impact of the underlying Force Majeure Event; (ii) to determine the likely duration of Force Majeure Period ; and (iii) to formulate damage mitigation measures and steps to be undertaken by the Parties for resumption of obligations the performance of which shall have been affected by the underlying Force Majeure Event. (c) The Affected Party shall during the Force Majeure Period provide to the other Party with regular (not less than weekly) reports concerning the matters set out in the preceding sub-clause (b) as also any information, details or document, which the other Party may reasonably require. Performance of Obligations If the Affected Party is rendered wholly or partially unable to perform any of its obligations under this Agreement because of a Force Majeure Event, it shall be excused from performance of such obligations to the extent it is unable to perform the same on account of such Force Majeure Event provided that: (a) the excuse from performance shall be of no greater scope and of no longer duration than is necessitated by the Force Majeure Event; (b) the Affected Party shall make all reasonable efforts to mitigate or limit damage, if any, caused or is likely to be caused to the Project Facility as a result of the Force Majeure Event and to restore the Project Facility, in accordance with the Good Industry Practice and its relative obligations under this Agreement; (c) the Affected Party shall take all remedial measures including duly prosecuting and exhausting all such remedies available to the Affected Party under the Applicable Laws; (d) when the Affected Party is able to resume performance of its

NOTES AND REFERENCES

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EXAMPLE CLAUSES obligations under this Agreement, it shall give to the other Party written notice to that effect and shall promptly resume performance of its obligations hereunder (e) the Affected Party shall continue to perform such of its obligations which are not affected by the Force Majeure Event and which are capable of being performed in accordance with this Agreement. Termination due to Force Majeure Event If a Force Majeure Event which is Non-Political Event, continues or is in the reasonable judgement of the Parties likely to continue beyond a period of 120 days, the Parties may mutually decide to terminate this Agreement or continue this Agreement on mutually agreed revised terms. If the Parties are unable to reach an agreement in this regard, the Affected Party shall after the expiry of the said period of 120 days, be entitled to terminate this Agreement. Notwithstanding anything inconsistent contained in this Agreement, if a Force Majeure Event is a Political Event and the same subsists for a period exceeding 365 days either Party shall be entitled to terminate this Agreement. Provided that the Authority may at its sole discretion have the option to terminate this Agreement any time after the occurrence of the Political Event. Termination Notice If either Party having become entitled to do so decides to terminate this Agreement pursuant to this clause, it shall issue Termination Notice setting out ; (i) in sufficient detail the underlying Force Majeure Event;

NOTES AND REFERENCES

(ii) the Termination Date which shall be a date occurring not earlier

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EXAMPLE CLAUSES than 60 days from the date of Termination Notice; (iii) the estimated Termination Payment including the details of computation thereof and; (iv) any other relevant information. Obligation of Parties Following issue of Termination Notice by either Party, the Parties shall promptly take all such steps as may be necessary or required to ensure that; (i) the Termination Payment, if any, payable by the Authority in accordance with the following sub-clause (d) is paid to the Concessionaire on the Termination Date and

NOTES AND REFERENCES

(ii) the Project/Project Facility is handed over to the Authority by the Concessionaire on the Termination Date free from any all Encumbrance. Termination Payment Upon Termination of this Agreement after the Commencement Date or the Financial Close whichever is later, due to a Force Majeure Event, Termination Payment shall be made to the Concessionaire by The Authority in accordance with the following: (i) Termination due to Non Political Event a. Before COD - No Termination Payment shall be made by the Authority to the Concessionaire but, the Concessionaire shall be entitled to receive and appropriate the proceeds of any insurance obtained by it. After COD - If Termination is due to a Force Majeure Event which is a Non Political Event, no Termination Payment

b.

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EXAMPLE CLAUSES shall be made by the Authority to the Concessionaire but, the Concessionaire shall be entitled to receive and appropriate the proceeds of any insurance obtained by it. (ii) Termination due to Political Event a. Before COD The Authority shall pay to the Concessionaire Termination Payment equal to the Book Value as on the Date of Termination Notice plus the accrued interest thereon @ AWPR + 3% p.a., from the date of Financial Close. After COD - The Authority shall pay to the Concessionaire Termination Payment equal to the sum of outstanding Lenders Dues, and Discounted Value of Future Net Cashflows as on the date of Termination. Provided the Authority shall be entitled to deduct from the Termination Payment, payable by the Authority to the Concessionaire, any amount due and recoverable by the Authority from the Concessionaire as on the Termination Date and, in the case of Termination due to riot, civil commotion and terrorism, an additional sum equivalent to th one-sixth (1/6 ) of the Initial Investment Allocation of costs during subsistence of Force Majeure: In case Termination of the Concession does not take place in accordance with the provisions of clause [ref], the costs arising out of Force Majeure shall be allocated as follows: (i) When the Force Majeure Event is a Non Political Event, the Parties shall bear their respective costs and neither Party shall be required to pay to the other Party any costs arising out of any such Force Majeure Event;

NOTES AND REFERENCES

b.

(ii) Where the Force Majeure Event is a Political Event, the cost, to the extent actually incurred, to repair physical damage to the

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EXAMPLE CLAUSES Project Facilities during such Force Majeure Event, as certified by the Independent Auditor, shall be reimbursed by the Authority to the Concessionaire in one lump sum or paid in three equal annual installments with interest @ AWPR PLR plus two percent. Provided that in case of riots, civil commotion and terrorism, the obligation of the Authority shall be limited to any shortfall between cost actually incurred and one-sixth (1/6th) of the Initial Investment Save and except as expressly provided in this clause, neither Party hereto shall be liable in any manner whatsoever to the other Party in respect of any loss, damage, cost, expense, claims, demands and proceedings relating to or arising out of occurrence or existence of any Force Majeure Event.

NOTES AND REFERENCES

Authority Step-in rights

Step-in occurs when government elects to assume all or some of the service delivery obligations of the concessionaire for a period of time. Situations in which government may exercise its contractual rights to step-in include: (a) Preventing or mitigating a serious risk to: (i) the environment (ii) public health (iii) the safety people property; (b) Guaranteeing of or

(a) If the Authority reasonably believes that it needs to take action in connection with the Service: because a serious risk exists to the health or safety of persons or property or to the environment _; and/or (ii) to discharge a statutory duty, then the Authority shall be entitled to take action in accordance with paragraphs (b) to (e) below. (b) If paragraph (a) applies and the Authority wishes to take action, the Authority shall notify the Concessionaire in writing of the following: (i) (ii) (iii) (iv) the action it wishes to take; the reason for such action; the date it wishes to commence such action; the time period which it believes will be necessary for such action; and (vi) to the extent practicable, the effect on the Concessionaire and its obligation to provide the Service during the period such action is being taken. (i)

See SOPC Section 28. Example clause adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

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KEY ISSUES continuity of service; (c) Discharging statutory duty; and a

EXAMPLE CLAUSES (c) Following service of such notice, the Authority shall take such action as notified under paragraph (b) above and any consequential additional action as it reasonably believes is necessary (together, the "Required Action") and the Concessionaire shall give all reasonable assistance to the Authority while it is taking such the Required Action. If the Concessionaire is not in breach of its obligations under the Contract, then for so long as and to the extent that the Required Action is taken, and this prevents the Concessionaire from providing any part of the Service: (a) the Concessionaire shall be relieved from its obligations to provide such part of the Service; and (b) in respect of the period in which the Authority is taking the Required Action and provided that the Concessionaire provides the Authority with reasonable assistance (such assistance to be at the expense of the Authority to the extent incremental costs are incurred), the Unitary Charge due from the Authority to the Concessionaire shall equal the amount the Concessionaire would receive if it were satisfying all its obligations and providing the Service affected by the Required Action in full over that period. If the Required Action is taken as a result of a breach of the obligations of the Concessionaire under the Contract, then for so long as and to the extent that the Required Action is taken, and this prevents the Concessionaire from providing any part of the service: (a) the Concessionaire shall be relieved of its obligations to provide such part of the Service; and (b) in respect of the period in which the Authority is taking Required Action, the Unitary Charge due from the Authority to the Concessionaire shall equal the amount the Concessionaire would receive if it were satisfying all its obligations and providing the Service affected by the Required Action in full over that period, less an amount equal to all the Authority's costs of operation in taking the

NOTES AND REFERENCES

(d) Otherwise dealing with a default by the concessionaire under the contract. Although step-in rights normally follow a concessionaires default, it may also occur without the concessionaires default, for example in the case on an emergency.

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KEY ISSUES Required Action.

EXAMPLE CLAUSES

NOTES AND REFERENCES

Events of default and termination

The agreement provide for provisions. provisions specify:

concession needs to termination Termination need to

If a Party having become entitled to do so decides to terminate this Agreement pursuant to clause [ref], it shall issue Termination Notice setting out: (a) in sufficient detail the underlying Event of Default; (b) the Termination Date which shall be a date occurring not earlier than 60 days from the date of Termination Notice; (c) the estimated Termination Payment including the details of computation thereof and; (d) any other relevant information. Notwithstanding anything inconsistent contained in this Agreement, if the Party who has been served with the Termination Notice cures the underlying Event of Default to the satisfaction of the other Party at any time before the Termination occurs, the Termination Notice shall be withdrawn by the Party which had issued the same. Provided the Party in breach shall compensate the other Party for any direct costs/consequences occasioned by the Event of Default which caused the issue of Termination Notice.

See SOPC Section 18. Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

(a) when either the project company or the government can exercise the right to terminate the concession agreement, usually this is on insolvency or liquidation events of the other party, and for material breach (the scope of which should be carefully considered); (b) the mechanisms needed to exercise the termination right, there is usually a requirement to provide a notice of termination, except for termination on insolvency or cases where breaches of the agreements are not capable of being remedied, this may give lenders time and opportunities to exercise any step-in

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KEY ISSUES rights; (c) the compensation payments on termination, usually the government needs to compensate the project company for the investments already made in infrastructure facility; (d) other rights and obligations of the parties following termination, for example surviving confidentially obligations; and (e) the termination provisions need to be reconciled with the lenders step-in rights, the lenders would want to forestall a possible termination of the concession agreement to keep the project alive until the lenders have been paid out.

EXAMPLE CLAUSES

NOTES AND REFERENCES

Concessionaire Events of Default

Alternative 1 For the purposes of this Agreement, Concessionaire Events of Default means any of the following events or circumstances: Insolvency (a) the occurrence of any of the following events in respect of

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES Concessionaire, namely: (i) any arrangement or composition with or for the benefit of creditors (including any voluntary arrangement as defined in the [Insolvency Act 1986]) being entered into by or in relation to Concessionaire; a receiver, administrator, administrative receiver or other encumbrancer taking possession of or being appointed over, or any distress, execution or other process being levied or enforced (and not being discharged within ten (10) Business Days) upon, the whole or any material part of the assets of Concessionaire;

NOTES AND REFERENCES

(ii)

(iii) Concessionaire ceasing to carry on business; or (iv) a petition being presented (and not being discharged within twenty (20) Business Days), or a resolution being passed or an order being made for the administration or the winding-up, bankruptcy or dissolution of Concessionaire; or (v) if Concessionaire shall suffer any event analogous to the events set out in Clauses 00-0 in any jurisdiction in which it is incorporated or resident; Long stop (b) Concessionaire failing to achieve the Actual Completion Date within a period of [length] after the Completion Date; Default (c) Either: (I) Concessionaire committing a material breach of its obligations under this Agreement which has a material and adverse effect on the delivery of Clinical Services or any other services at the Hospital for which Concessionaire is not responsible (other than

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EXAMPLE CLAUSES as a consequence of a breach by the Authority of its obligations under this Agreement); or (ii) Concessionaire wilfully breaches Schedule [Refinancing]; (d) Concessionaire abandoning the Works (other than as a consequence of a breach by the Authority of its obligations under this Agreement); (e) Concessionaire ceasing to provide all or a substantial part of the Services to the Authority in accordance with this Agreement (other than as a consequence of a breach by the Authority of its obligations under this Agreement and/or a Retained Staff Agreement); Health and safety (f) At any time after the Actual Completion Date Concessionaire committing a material breach of its obligations under this Agreement (other than as a consequence of a breach by the Authority of its obligations under this Agreement) which results in the criminal investigation, prosecution and conviction of Concessionaire or any Concessionaire Party or the Authority under the Health and Safety Regime (an H&S Conviction) provided that an H&S Conviction of a Concessionaire Party or the Authority shall not constitute a Concessionaire Event of Default if, within ninety (90) Business Days from the date of the H&S Conviction (whether or not the H&S Conviction is subject to an appeal or any further judicial process), the involvement in the Project Operations of each relevant Concessionaire Party (which in the case of an individual director, officer or employee shall be deemed to include the Concessionaire Party of which that person is a director, officer or employee) is terminated and a replacement is appointed by Concessionaire in accordance with Clause [Sub-contracting]; In determining whether to exercise any right of termination or right to require the termination of the engagement of a Concessionaire Party pursuant to this Clause, the Authority shall: (i) act in a reasonable and proportionate manner having regard to

NOTES AND REFERENCES

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EXAMPLE CLAUSES such matters as the gravity of any offence and the identity of the person committing it; and (ii) give all due consideration, where appropriate, to action other than termination of this Agreement; Change in Control (g) the occurrence of any Change in Control which is prohibited by Clause [Assignment, sub-contracting and Changes in Control];

NOTES AND REFERENCES

Assignment (h) Concessionaire failing to comply with the provisions of Clauses [Assignment, sub-contracting and Changes in Control]; Service Failure Points (i) Concessionaire being awarded a total of [period] or more Service Failure Points in any [period] rolling period; or Payment (j) Concessionaire failing to pay any sum or sums due to the Authority under this Agreement (which sums are not in dispute) which, either singly or in aggregate, exceed(s) [amount] (index linked) and such failure continues for sixty (60) Business Days from receipt by Concessionaire of a notice of non payment from the Authority. Notification Concessionaire shall notify the Authority of the occurrence, and details, of any Concessionaire Event of Default and of any event or circumstance which is likely, with the passage of time or otherwise, to constitute or give rise to a Concessionaire Event of Default, in either case promptly on Concessionaire becoming aware of its occurrence.

Page 123 of 161

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KEY ISSUES The Authority's options

EXAMPLE CLAUSES

NOTES AND REFERENCES

On the occurrence of a Concessionaire Event of Default, or within a reasonable time after the Authority becomes aware of the same, and while the same is subsisting, the Authority may: (a) in the case of the Concessionaire Events of Default referred to in Clauses [see above], terminate this Agreement in its entirety by notice in writing having immediate effect; (b) in the case of any Concessionaire Event of Default referred to in Clause [see above], serve notice of default on Concessionaire requiring Concessionaire at Concessionaire's option either: (i) to remedy the Concessionaire Event of Default referred to in such notice of default (if the same is continuing) within twenty (20) Business Days of such notice of default; or

(ii) to put forward within twenty (20) Business Days of such notice of default a reasonable programme (set out, if appropriate, in stages) for remedying the Concessionaire Event of Default. The programme shall specify in reasonable detail the manner in, and the latest date by, which such Concessionaire Event of Default is proposed to be remedied (Concessionaire shall only have the option of putting forward a programme in accordance with this Clause [ref] if it first notifies the Authority within ten (10) Business Days of such notice of default that it proposes to do so); and (c) in the case of any Concessionaire Event of Default referred to in Clause [Service Failure Points], if Concessionaire is awarded [amount] or more further (Service Failure Points) (Warning Notices) in the following [amount] month period, terminate this Agreement in its entirety by notice in writing having immediate effect. Remedy provisions Where Concessionaire puts forward a programme in accordance with Clause [ref], the Authority shall have twenty (20) Business Days from

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EXAMPLE CLAUSES receipt of the same within which to notify Concessionaire (acting reasonably) that it does not accept the programme, failing which the Authority shall be deemed to have accepted the programme. Where the Authority notifies Concessionaire that it does not accept the programme as being reasonable, the parties shall endeavour within the following five (5) Business Days to agree any necessary amendments to the programme put forward. In the absence of agreement within five (5) Business Days, the question of whether the programme (as the same may have been amended by agreement) will remedy the Concessionaire Event of Default in a reasonable manner and within a reasonable time period (and, if not, what would be a reasonable programme) may be referred by either party for resolution in accordance with Schedule [Dispute Resolution Procedure]. If: (a) the Concessionaire Event of Default notified in a notice of default served under Clause [ref] is not remedied before the expiry of the period referred to in Clause [ref]; or (b) where Concessionaire puts forward a programme pursuant to Clause [ref] which has been accepted by the Authority or has been determined to be reasonable and Concessionaire fails to achieve any element of the programme or the end date for the programme (as the case may be); or (c) any programme put forward by Concessionaire pursuant to Clause [ref] is rejected by the Authority as not being reasonable, and the Dispute Resolution Procedure does not find against that rejection, then the Authority may terminate this Agreement in its entirety by written notice to Concessionaire with immediate effect. Provided that for the purposes of Clause [ref] if Concessionaire's performance of the programme is adversely affected by the occurrence of Force Majeure, a Relief Event or an Excusing Cause then, subject to Concessionaire complying with the mitigation and other requirements in this Agreement concerning Force Majeure, a Relief Event or an Excusing Cause (as the case may be), the time for performance of the programme or any relevant element of it shall be deemed to be extended by a period equal to the

NOTES AND REFERENCES

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EXAMPLE CLAUSES delay caused by Force Majeure, the Relief Event or the Excusing Cause (as the case may be) which is agreed by the parties or determined in accordance with Schedule [Dispute Resolution Procedure]. Replacement of a non-performing Sub-Contractor The Authority may, in its discretion, require Concessionaire by written notice to terminate the provision of any Service pursuant to any relevant Service Contract or procure the termination of the provision of any Service pursuant to any relevant Sub-Contract (as the case may be) in respect of any relevant Market Tested Service and procure that a replacement Sub-Contractor is appointed in accordance with Clause [Assignment, sub-contracting and Change in Control] to provide all those parts of the Services which were performed pursuant to the previous SubContract: (a) within sixty (60) Business Days, as an alternative to termination of this Agreement or part thereof pursuant to the provisions of Clause in any circumstance in which the Authority could exercise such power; or (b) within the period required to operate the procedures of Schedule [Market Testing Procedure], if Concessionaire receives more than the number of Service Failure Points listed against that Service in [specify where] a rolling [period] month period. If the Authority exercises its rights under Clause [ref], Concessionaire shall forthwith put forward proposals for the interim management or provision of the relevant Service to the Authority until such time as an alternative Service Provider or Sub-Contractor can be engaged by Concessionaire. If Concessionaire fails to do so (or its proposals if implemented are not reasonably likely to give adequate provision of the relevant Services) then without prejudice to the other rights of the Authority in this Clause, the Authority may perform, or procure a third party to perform, such Services itself and the provisions of Clause [Monitoring of Performance] shall apply, changed according to context (save that the Authority shall not be entitled to use the Retained Staff Members to perform such services without the prior written consent of

NOTES AND REFERENCES

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EXAMPLE CLAUSES Concessionaire), to such Service in those circumstances. In the event that a replacement Sub-Contractor is appointed pursuant to Clause [ref], the Authority and Concessionaire shall procure that (if relevant) the provisions of the Retained Staff Agreement apply in respect of the replacement Sub-Contractor. If Concessionaire fails to terminate the relevant Service (or procure the termination of the relevant Service) and to procure a replacement SubContractor is appointed in accordance with the provisions of Clause [ref] the Authority shall be entitled at its option to exercise its rights in accordance with the provisions of Clause [ref]. The Authority's costs Concessionaire shall reimburse the Authority for all reasonable costs incurred by the Authority in exercising any of its rights (including, without limitation, any relevant increased administrative expenses). The Authority shall take reasonable steps to mitigate such costs. The Authority shall not exercise, or purport to exercise, any right to terminate this Agreement except as expressly set out in this Agreement. The rights of the Authority (to terminate or otherwise) under this Clause are in addition (and without prejudice) to any other right which the Authority may have to claim the amount of loss or damage suffered by the Authority on account of the acts or omissions of Concessionaire (or to take any action other than termination of this Agreement). Alternative 2 Any of the following events shall constitute an event of default by the Concessionaire ("Concessionaire Event of Default") unless such event has occurred as a result of one or more reasons set out in clause [supervening events]; (a) The Concessionaire has failed to achieve Financial Close within months from the date hereof.

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake

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KEY ISSUES (b)

EXAMPLE CLAUSES The Concessionaire has failed to adhere to the Construction Requirements and in the reasonable estimation of the Independent Engineer, such failure is likely to delay achievement of COD beyond 120 days of the Scheduled Project Completion Date. The Concessionaire has failed to achieve COD within 120 days from the Scheduled Project Completion Date. The Concessionaire is in Material Breach of O&M Requirements. Any representation made or warranties given by the Concessionaire under this Agreement is found to be false or misleading. The Concessionaire has created any Encumbrance on the Project Site/ Project Facility in favour of any Person save as otherwise expressly permitted under this Agreement. The Concessionaire has failed to ensure minimum shareholding requirements specified in clause [ref]. A resolution has been passed by the shareholders of the Concessionaire for the voluntary winding up of the Concessionaire. Any petition for winding up of the Concessionaire has been admitted and liquidator or provisional liquidator has been appointed or the Concessionaire has been ordered to be wound up by Court of competent jurisdiction except for the purpose of amalgamation or reconstruction with the prior consent of Agency, provided that, as part of such amalgamation or reconstruction, the property, assets and undertaking of the Concessionaire are transferred to the amalgamated or reconstructed entity and that the amalgamated or reconstructed entity has unconditionally assumed the obligations of the Concessionaire under this Agreement and the Project Agreements, and provided further that: (i) the amalgamated or reconstructed entity has the technical capability and operating experience necessary for the performance of its obligations under this Agreement and the

NOTES AND REFERENCES Expressway Project (note confidential), index reference A2, folder 1.

(c)

(d) (e)

(f)

(g)

(h)

(i)

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EXAMPLE CLAUSES Project Agreements; (ii) the amalgamated or reconstructed entity has the financial standing to perform its obligations under this Agreement and the Project Agreements and has a credit worthiness at least as good as that of the Concessionaire as at Commencement Date; and (iii) each of the Project Agreements remains in full force and effect. (j) A default has occurred under any of the Financing Documents and any of the Lender(s) has recalled its financial assistance and demanded payment of the amounts outstanding under the Financing Documents or any of them as applicable. The Concessionaire has abandoned the Project Facility. The Concessionaire has repudiated this Agreement or has otherwise expressed an intention not to be bound by this Agreement.

NOTES AND REFERENCES

(k) (l)

(m) The Concessionaire has suffered an attachment levied on any of the assets located or comprised in the Project Site/Project Facility, causing a Material Adverse Affect on the Project and such attachment has continued for a period exceeding 90 days. (n) The Concessionaire has delayed any payment that has fallen due under this Agreement for 90 days or more. The Concessionaire has otherwise been in Material Breach of any of its other obligations under this Agreement. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

(o)

Authority Events of Default

Alternative 1 For the purposes of this Agreement, the Authority Events of Default means any of the following events or circumstances: (a) the Authority committing a material breach of its obligations under Clause [Nature of Land Interests] and/or the Licence (other than as a consequence of a breach by Concessionaire of its obligations under

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EXAMPLE CLAUSES this Agreement) and such breach shall materially adversely affect the ability of Concessionaire to perform its material obligations under this Agreement for a continuous period of not less than thirty (30) Business Days; (b) the failure of the Authority to pay any sum or sums due to Concessionaire under this Agreement (which sums are not in dispute) which, either singly or in aggregate, exceed(s) the amount of the Authoritys Monthly Service Payment from time to time and such failure continues for thirty (30) Business Days from receipt by the Authority and the Strategic Health Authority (addressed to the Director of Finance) and to the Director of Finance and Investment of the Department of Health (or such other party as may be notified in advance in writing by the Authority to Concessionaire in substitution for such regional office) of a notice of non-payment from Concessionaire; or (c) an Adverse Law or a Proposal for an Adverse Law being made. Concessionaire's options On the occurrence of an Authority Event of Default, or within a reasonable time after Concessionaire becomes aware of the same, and while the same is still subsisting, Concessionaire may, at its option: (a) in respect of execution of the Works prior to the Actual Completion Date, suspend performance by it of its obligations under this Agreement until such time as the Authority shall have demonstrated to the reasonable satisfaction of Concessionaire that it will perform and is capable of performing its obligations under this Agreement; or (b) serve notice on the Authority and the Strategic Health Authority (addressed to the Director of Finance) and to the Director of Finance and Investment of the Department of Health (or such other party as may be notified in advance in writing by the Authority to Concessionaire) of the occurrence (and specifying details) of such an Authority Event of Default. If the relevant matter or circumstance has not been rectified or remedied by the Authority (or otherwise) in respect of Clause [ref] within sixty (60) Business Days of such

NOTES AND REFERENCES

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EXAMPLE CLAUSES notice, and in respect of Clause within thirty (30) Business Days of such notice, Concessionaire may serve a further notice on the Authority and [any others?] terminating this Agreement with immediate effect. Concessionaire shall not exercise or purport to exercise any right to terminate this Agreement (or accept any repudiation of this Agreement) except as expressly set out in this Agreement. Alternative 2 Any of the following events shall constitute an event of default by Agency ("Agency Event of Default"), unless caused by a Concessionaire Event of Default or a Force Majeure Event: (a) Authority is in breach of any of its obligations under this Agreement except those for which specific remedy has been provided elsewhere, and has failed to cure such breach within 30 (thirty) days of receipt of notice thereof issued by the Concessionaire. (b) Authority has repudiated this Agreement or otherwise expressed its intention not to be bound by this Agreement. (c) Authority has (i) failed to execute the Substitution Agreement in accordance with clause [ref] or having executed the same is in breach of any of its obligations thereunder and such breach has not been cured within 30 days from the date of written notice thereof given by the Concessionaire. (d) Authority has failed to execute and/or procure execution of the BOI Agreement/ Site Licence Agreement in accordance with Article 6.1(a) or having done the same is in breach of any of its obligations there under and has failed to cure such breach within 30 (thirty) days of receipt of notice thereof issued by the Concessionaire. (e) Authority has unreasonably withheld or delayed grant of any approval or permission which the Concessionaire is obliged to seek under this Agreement, and thereby caused Material Adverse Effect.

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES (f) Authority has delayed payment of any amount that has fallen due in terms of this Agreement beyond 90 days. (g) Any representation made or warranties given by the Authority under this Agreement has been found to be false or misleading.

NOTES AND REFERENCES

Non-default termination

Force Majeure If, in the circumstances referred to in Clause [Force Majeure], the parties have failed to reach agreement on any modification to this Agreement pursuant to Clause [Force Majeure] within six (6) calendar months of the date on which the party affected serves notice on the other party in accordance with Clause [Force Majeure] either party may at any time afterwards terminate this Agreement by written notice to the other party having immediate effect provided always that the effects of the relevant event of Force Majeure continues to prevent either party from performing any material obligation under this Agreement. Voluntary termination The Authority shall be entitled to terminate this Agreement at any time on [period] months' written notice to Concessionaire. In the event of notice being given by the Authority in accordance with this Clause, the Authority shall, at any time before the expiration of such notice, be entitled to direct Concessionaire, where the Works (or any part or parts of the Works) or any Service [or Interim Service] (or any elements of any Service [or Interim Service]) have not been commenced, to refrain from commencing any such Works or Services [or Interim Services] (or to procure the same). Expiry This Agreement shall terminate automatically on the expiry of the Project Term unless it shall have been terminated earlier in accordance with the provisions of this Agreement. To avoid doubt, Concessionaire shall not be entitled to any compensation for termination of this Agreement on expiry of the Project Term.

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES

NOTES AND REFERENCES

Consequences of termination

The government needs to ensure that the concession agreement include adequate provisions for ongoing delivery of public services or the implementation of other suitable arrangements to cover for events where termination becomes necessary. These arrangements will require the outgoing concessionaire to cooperate fully with the government during any transaction period.

Alternative 1 Termination Notwithstanding any provision of this Agreement, on service of a notice of termination, this Agreement shall only terminate in accordance with the provisions of this Clause. Continued effect - no waiver Notwithstanding any breach of this Agreement by either party, and without prejudice to any other rights which the other party may have in relation to it, the other party may elect to continue to treat this Agreement as being in full force and effect and to enforce its rights under this Agreement. The failure of either party to exercise any right under this Agreement, including any right to terminate this Agreement and any right to claim damages, shall not be deemed a waiver of such right for any continuing or subsequent breach. Continued performance Subject to any exercise by the Authority of its rights to perform, or to procure a third party to perform, the obligations of Concessionaire, the parties shall continue to perform their obligations under this Agreement, notwithstanding the giving of any notice of default or notice of termination, until the termination of the Agreement becomes effective in accordance with the provisions of this Clause. Transfer to the Authority of Assets, Contracts etc. On the service of a notice of termination in accordance with this Agreement for any reason: (a) if prior to the Actual Completion Date, in so far as any transfer shall be necessary fully and effectively to transfer property to the Authority, Concessionaire shall transfer to, and there shall vest in, the Authority, such part of the Works and/or the Facilities as shall have

Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES been constructed and such items of the Plant and [add project specific items] as shall have been procured by Concessionaire if the Authority so elects: (b) all goods and all materials on or near to the Site not yet incorporated in the Works shall remain available to the Authority for the purposes of completing the Works and if the cost of such goods and materials has not been reflected in the payment of any compensation pursuant to Schedule [Compensation on Termination], subject to the payment by the Authority (determined as between a willing vendor and willing purchaser with any disputes determined pursuant to Clause [Dispute Resolution Procedure]); (c) the construction plant shall remain available to the Authority for the purposes of completing the Works, subject to payment of the Concessionaire's reasonable charges; (d) Concessionaire shall hand over to, and there shall vest in, the Authority, free from all encumbrances, the Facilities [include project specific provisions re IT and Equipment etc] (which in the case of the termination of this Agreement in accordance with Clause [NonDefault Termination Expiry] shall be in the state required in accordance with Schedule [Handback Procedure]); (e) if the Authority so elects, Concessionaire shall procure that any of the Construction Contract, the Service Contracts and/or the Independent Tester Contract shall be novated or assigned to the Authority, provided that where termination occurs under Clause [Authority Events of Default] the consent of the Concessionaire, the Service Provider or the Independent Tester (as the case may be) shall be required; (f) Concessionaire shall, or shall procure that any Contracting Associate shall (as the case may be), offer to sell to the Authority at a fair value (determined as between a willing vendor and willing purchaser, with any disputes as to such fair value being determined pursuant to Schedule [Dispute Resolution Procedure]), free from any security interest with full title guarantee all or any part of the stocks of material and other assets, road vehicles, spare parts and other

NOTES AND REFERENCES

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EXAMPLE CLAUSES moveable property owned by Concessionaire or any of its Contracting Associates and reasonably required by the Authority in connection with the operation of the Facilities or the provision of the Services [or Interim Services]; (g) Concessionaire shall deliver to the Authority (as far as not already delivered to the Authority) one complete set of: (i) "as built drawings" showing all alterations made to the Facilities since the commencement of operation of the Facilities; and

NOTES AND REFERENCES

(ii) maintenance, operation and training manuals for the Facilities; (h) Concessionaire shall use all reasonable endeavours to procure that the benefit of all manufacturer's warranties in respect of mechanical and electrical plant and equipment used or made available by Concessionaire under this Agreement and included in the Facilities are assigned, or otherwise transferred, to the Authority with full title guarantee; and (i) Concessionaire shall deliver to the Authority information equivalent to the information it is required to provide in accordance with Clause [Employment matters] and Clause [Pension Matters] in relation to the employees employed by Concessionaire and/or Service Providers and the records referred to in Clause [Records and Reports] except where such documents are required by Law to be retained by Concessionaire or its Contracting Associates (in which case complete copies shall be delivered to the Authority).

Concessionaire shall ensure that provision is made in all contracts of any description whatsoever to ensure that the Authority will be in a position to exercise its rights, and Concessionaire will be in a position to comply with its obligations, under Clause [ref]. Termination On completion of the transfer required by Clause [ref] (except in so far as any of the requirements of that Clause may be waived by the Authority),

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EXAMPLE CLAUSES this Agreement shall terminate and, save as provided in Clause [Continuing obligations], all rights and obligations of the Authority and Concessionaire under this Agreement shall cease and be of no further force and effect. Transitional arrangements On the termination of this Agreement for any reason, for a reasonable period both before and after any such termination, Concessionaire shall have the following duties: (a) Concessionaire shall co-operate fully with the Authority and any successor providing to the Authority services in the nature of any of the Services [or Interim Services] or any part of the Services [or Interim Services] in order to achieve a smooth transfer of the manner in which the Authority obtains services in the nature of the Services [or Interim Services] and to avoid or mitigate in so far as reasonably practicable any inconvenience or any risk to the health and safety of the employees of the Authority and members of the public; (b) Concessionaire shall as soon as practicable remove from the Site all property not acquired by the Authority pursuant to Clause [ref] (or not belonging to the Authority or any Authority Party) and if it has not done so within forty (40) Business Days after any notice from the Authority requiring it to do so the Authority may (without being responsible for any loss, damage, costs or expenses) remove and sell any such property and shall hold any proceeds less all costs incurred to the credit of Concessionaire; (c) Concessionaire Representative: (i) shall forthwith deliver to the Authority's

NOTES AND REFERENCES

any keys to the Facilities; and

(ii) without prejudice to Clause [Intellectual Property], any copyright licences for any computer programmes (or licences to use the same) necessary for the operation of the Facilities (but excluding computer programmes, which have been developed or acquired by a Service Provider for its own use and not solely for the

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EXAMPLE CLAUSES purposes of provision of any of the Services at the Facilities or the assignment or transfer of which is otherwise restricted); and (d) Concessionaire shall as soon as practicable vacate the Site and (without prejudice to Schedule [Handback Procedure]) shall leave the Site and the Facilities in a safe, clean and orderly condition. If the Authority wishes to conduct a competition prior to the Expiry Date with a view to entering into an agreement for the provision of services (which may or may not be the same as, or similar to, the Services or any of them) following the expiry of this Agreement, Concessionaire shall cooperate with the Authority fully in such competition process including (without limitation) by: (a) providing any information which the Authority may reasonably require to conduct such competition but, to avoid doubt, information which is commercially sensitive to Concessionaire shall not be provided (and, for the purpose of this Clause, commercially sensitive shall mean information which would if disclosed to a competitor of Concessionaire give that competitor a competitive advantage over Concessionaire and thereby prejudice the business of Concessionaire but shall, to avoid doubt, exclude any information referred to in Clause [Employment matters]); and (b) assisting the Authority by providing all (or any) participants in such competition process with access to the Site and the Facilities. Continuing Obligations Save as otherwise expressly provided in this Agreement: (a) termination of this Agreement shall be without prejudice to any accrued rights and obligations under this Agreement as at the date of termination; and (b) termination of this Agreement shall not affect the continuing rights and obligations of Concessionaire and the Authority under Clauses [Indemnities and Liability, Limits on Liability, Nature of Land Interests, Employment Matters, Payment, Insurance, Force Majeure,

NOTES AND REFERENCES

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EXAMPLE CLAUSES Non-Default Termination and Transitional Arrangements Compensation on Termination, Intellectual Property, Confidentiality, Taxation, Corrupt Gifts and Payments, Records and Reports, Dispute Resolution Procedure, Notices, Mitigation and Governing Law and Jurisdiction] or under any other provision of this Agreement which is expressed to survive termination or which is required to give effect to such termination or the consequences of such termination. Alternative 2 Following issue of Termination Notice by either Party, the Parties shall promptly take all such steps as may be necessary or required to ensure that: (a) until Termination the Parties, to the fullest extent possible, discharge their respective obligations so as to maintain the continuity of service to the users of the Project Facility, (b) the Termination Payment, if any, payable by Authority in accordance with Clause [ref] is paid to the Concessionaire on the Termination Date and (c) the Project/Project Facility is handed over to the Authority by the Concessionaire on the Termination Date free from any Encumbrance.

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

Compensation on termination

Alternative 1 If this Agreement is terminated pursuant to Clause [Force Majeure], then the Authority shall pay compensation to Concessionaire in accordance with Schedule [Compensation on Termination]. If this Agreement is terminated pursuant to Clause [Concessionaire Events of Default] other than pursuant to Clause [ref], then the Authority shall pay compensation to Concessionaire in accordance with

See SOPC Section 20, 21 and 22. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES Schedule [Compensation on Termination, relevant section]. If this Agreement is terminated pursuant to Clause [Authority Events of Default], then the Authority shall pay compensation to Concessionaire in accordance with Schedule [Compensation on Termination, relevant section]. If this Agreement is terminated pursuant to Clause [Voluntary Termination], then the Authority shall pay compensation to Concessionaire in accordance with Schedule [Compensation on Termination, relevant section]. Alternative 2 Upon Termination of this Agreement after the Commencement Date or the Financial Close whichever is later, the Concessionaire shall be entitled to receive Termination Payment as under: (a) Prior to COD. (i) If the Agreement is terminated due to Concessionaire Event of Default, the Concessionaire shall receive from the Authority, Termination Payment equal to outstanding principal amount of Lenders as on the date of the Termination Notice. (ii) If the Agreement is terminated due to the Authority Event of Default, the Concessionaire shall receive from the Authority, Termination Payment equal to Book Value and interest thereon @ AWPR +3% p.a., from the date of Financial Close. (b) After COD. (i) If the Agreement is terminated due to Concessionaire Event of Default, the Authority shall pay to the Concessionaire, Termination Payment equal to outstanding principal amount of Lenders as on the date of Termination Notice. (ii) If the Agreement is terminated due to the Authority Event of Default, the Concessionaire shall receive from the Authority,

NOTES AND REFERENCES

Alternative 2 adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES Termination Payment equal to the sum of outstanding dues of Lenders and Discounted Value of Future Net Cashflows as on the date of Termination Notice. Provided the Authority shall be entitled to deduct from the Termination Payment any amount due and recoverable by the Authority from the Concessionaire as on the Termination Date.

NOTES AND REFERENCES

Project facility

Upon Termination of this Agreement for any reason whatsoever, the Authority shall have the power and authority to: (a) enter upon and take possession and control of Project Site/Project Facility forthwith; (b) prohibit the Concessionaire and any Person claiming through or under the Concessionaire from entering upon/dealing with the Project Assets; (c) step in and succeed upon election by the Authority without the necessity of any further action by the Concessionaire, to the interests of the Concessionaire under such of the Project Agreements as the Authority may in its discretion deem appropriate with effect from the date of communication of such election to the counter party to the relative Project Agreements. (d) Provided any sums claimed by such counter party as being due and owing for work and services performed or accruing on account of any act, omission or event prior to such date of election shall and shall always constitute debt between the Concessionaire and such counter party and the Authority shall in no way or manner be liable or responsible for such sums. The Concessionaire shall ensure that the Project Agreements contain provisions necessary to give effect to the provisions of this clause. (e) Notwithstanding anything contained in this Agreement, the Authority shall not, as a consequence of Termination or otherwise, have any

Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES obligation whatsoever including but not limited to obligations as to compensation for loss of employment, continuance or regularisation of employment, absorption or re-employment on any ground, in relation to any person in the employment of or engaged by the Concessionaire in connection with the Project, and the handback of the Project Site/Project Facility by the Concessionaire to the Authority shall be free from any such obligation. (f) For the avoidance of doubt, it is clarified that title to the Project Facilities shall not pass to the Authority, notwithstanding the above, until the date on which the Termination Payment, subject to the deductions expressly contemplated in this Agreement is received in full by the Concessionaire.

NOTES AND REFERENCES

Handover of Project facility

Handover and Defect Liability Period (a) Upon the expiry of the Concession Period by efflux of time and in the normal course, the Concessionaire shall at the end of the Concession Period, hand over vacant and peaceful possession of Project Site/Project Facility to the Authority free of cost, in accordance with the Handback Requirements. (b) The process of handing over shall be initiated at least 18 months before the actual date of expiry of the Concession Period by a joint inspection by the Authority, the Independent Engineer and the Concessionaire (Initial Inspection). Within fourteen (14) days after the completion of the Initial Inspection the Independent Engineer shall provide Concessionaire and the Authority with a notice (the Handback Proposals) setting out: (a) A schedule of dilapidations on the condition of the Project Facilities; (b) Determination as to the maintenance works or other works of renewal, reconstruction, repair or reinstatement (the Renewal Works) required to be carried out in respect of the Project Facilities in order to procure that, on expiry of the Concession Period, the Project Facilities shall comply with the Handback Requirements;

See SOPC Section 8.3, 8.4 and 19 (treatment of assets). Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

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EXAMPLE CLAUSES (c) Determination as to the programme (the Renewal Construction Progamme) for carrying out the Renewal Works over the remainder of the Concession Period; and (d) Determination as to the cost of carrying out the Renewal Works (the Renewal Amount). The Handback Proposals shall be made, amongst other things, on the assumption that the Project Facilities shall be maintained in accordance with the O & M Requirement . Upon receipt of the Independent Engineers determinations as to the Renewal Works, the Renewal Construction Programme and the Renewal Amount: (a) Concessionaire shall, within fourteen (14) days of the receipt of such determinations, provide a bond in an amount equal to the Renewal Amount from a bank or insurance company which is authorised to carry on business in [country] (Renewal Amount Bond) or provide such other security as the Authority and Concessionaire may agree; (b) Concessionaire shall ensure that the Renewal Works are carried out in accordance with the Renewal Construction Programme; and (c) Concessionaires right to receive any payment under this Agreement or any other agreement between it and the Authority shall be suspended (and no interest shall in any event be payable in respect of the suspension period) from the fifteenth (15th) day following the receipt of the Experts determinations until the Renewal Amount Bond of other security required under sub-clause (a) is duly executed and delivered to the Authority. To avoid doubt, Concessionaire shall procure at its own cost that the Renewal Works are carried out even if the actual cost of the Renewal Works may be higher than the Renewal Amount. Handback Procedure On the day on which the Concession Term expires the Independent Engineer shall conduct a further inspection of the Facilities. The

NOTES AND REFERENCES

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EXAMPLE CLAUSES inspection shall comply with the requirements set out in this Agreement. Within seven (7) days after the completion of the inspection referred to in the preceding sub-clause, the Independent Engineer shall either; (a) Issue a Handback Certificate to Concessionaire with a copy to the Authority; or (b) Notify Authority of its decision not to issue a Handback Certificate and state the reason for that decision (a Handback Deficiency Notice). The Independent Engineer shall not issue the Handback Certificate if: (a) Concessionaire shall have failed to complete all of the Renewal Works; or (b) Facilities for any other reason do not comply with any material aspect of the Handback Requirements. Any Handback Deficiency Notice shall describe each way in which the Renewal Works have not been completed or the Facilities do not comply with the Handback Requirements and shall state the cost of completing those Renewal Works and/or of procuring that the Facilities fully comply with the Handback Requirements. If the cost of completion of the Renewal Works exceeds the Renewal Amount Concessionaire shall, as the case may be, either increase the value of the Renewal Amount Bond by the excess or post a bond (or other security) (Handback Deficiency Bond) whose face value equates such excess. If Concessionaire has not completed the Renewal Works or the Facilities do not fully comply with the Handback Requirements, then without prejudice to any other right or remedy of the Authority, the Authority shall be entitled to draw down the Renewal Amount Bond (increased as above), Handback Deficiency Bond and/ or the last Availability Payment as the case may be. Despite the provisions of this clause, the Authority may in its absolute discretion direct that all or any part of the Renewal Works, shall not be carried out. If the Authority gives that direction the value of the work

NOTES AND REFERENCES

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EXAMPLE CLAUSES which is not to be done shall be deducted from the amount (if any) secured by the Renewal Amount Bond or Handback Deficiency Bond and Concessionaire shall be entitled to the amount by which the Renewal Amount Bond or Handback Deficiency Bond is reduced. If the Independent Engineer issues a Handback Certificate under clause [ref], the Authority shall promptly return to Concessionaire the value of the Renewal Amount Bond. On the completion of the Renewal Works, or on Concessionaire making payment to the Authority in respect of any additional work required by this clause, the Authority shall return to Concessionaire the bonds provided under this clause.

NOTES AND REFERENCES

Subcontracting/Assignment/Change of control Change of control

As the concessionaire is likely to be a special purpose vehicle (SPV) incorporated specifically for the project, the government in granting the concession is relying on the reputation, resources and commitment of the sponsors (stakeholders in the SPV). Therefore it is important to ensure that the sponsors remain committed and in control of the SPV vehicle. On the other hand, any prohibitions on the changes in ownership structure need to be realistic, commercial and flexible given the long life of the concession.

Alternative 1 Subject to Clause [ref], prior to the expiry of a period of twelve (12) months commencing on the Actual Completion Date, no Change in Control in any or all of the shares in Concessionaire (or any company of which Concessionaire is a subsidiary excluding public quoted parent companies whose equity securities are listed on a recognised investment exchange as defined in [to provide])) shall be permitted without the prior written approval of the Authority. Subject to Clause [ref], the conditions and restrictions in Clause [ref] shall not apply to a Change in Control in any shares in Concessionaire held by any Third Party Shareholder. No Change in Control (at any time) in any or all of the shares in Concessionaire (or any company (other than a public quoted company whose equity securities are listed on a recognised investment exchange, as defined in [to provide]) of which Concessionaire is a subsidiary) shall be permitted without the prior written approval of the Authority where the person acquiring control is a Restricted Person

See SOPC Section 17. Alternative 1 adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Alternative 2 The Concessionaire shall ensure that:


Alternative 2 adapted from Concession

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EXAMPLE CLAUSES

NOTES AND REFERENCES Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

(a)

the Promoters/Consortium holds not less than 51% of its paid up equity capital until 3 years after COD and not less than 26% of its paid up equity capital during the balance Operations Period. M/s _________ ["Lead Member"] holds at any time not less than 51% of the Consortiums holding in the paid up equity capital of the Concessionaire. Subject to sub-clauses (b) and (c) hereinbelow, neither Party shall assign this Agreement or the rights, benefits and obligations hereunder save and except with prior consent of the other Party. Except as provided in sub-clause (c) hereinbelow, the Concessionaire shall not create nor permit to subsist any Encumbrance over or otherwise transfer or dispose of all or any of its rights and benefits under this Agreement except with prior consent in writing of the Authority, which consent the Authority shall be entitled to decline without assigning any reason whatsoever.

(b)

Assignment

(a)

See SOPC Section 16. Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2, folder 1.

(b)

(c) Restraint set forth in sub-clauses (a) and (b) above shall not apply to: (i) liens/encumbrances arising by operation of law (or by an agreement evidencing the same) in the ordinary course of business of the Concessionaire ;

(ii) mortgages/pledges/hypothecation of goods/assets other than Project Site, as security for indebtedness, in favour of the Lenders and working capital providers for the Project; (iii) assignment of Concessionaires rights and benefits under this Agreement to or in favour of the Lenders as security for financial assistance provided by them.

Subcontracting

The Concessionaire shall:

See SOPC Section 15.

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EXAMPLE CLAUSES

NOTES AND REFERENCES Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

(a) not terminate or agree to the termination of the engagement and/or employment of (or the replacement of) the Contractor or any Service Provider under the Ancillary Documents; and (b) without prejudice to Clause [Assignment], procure that none of the persons listed below shall sub-contract all (or substantially all) of their obligations under or in the agreement set out next to its name: Person Contractor Service Provider Contract Construction Contract Service Contract

without, in each case, the prior written consent of the Authority (such consent not to be unreasonably withheld or delayed). To avoid doubt, (i) any failure to comply with Clause [ref] shall be a reasonable ground for withholding consent and (ii) consent shall, without prejudice to the other provisions of Clause [ref], not be required in respect of the appointment of any party currently approved by the Authority as a suitable replacement. If the contract set out next to the name of any person referred to in Clause [ref] shall at any time lapse, terminate or otherwise cease to be in full force and effect (whether by reason of expiry or otherwise), with the effect that such person shall cease to act in relation to the Project, the Concessionaire shall forthwith appoint a replacement (subject to compliance with Clause [Sub-contractors]). (c) The Concessionaire shall procure that any replacement for any person referred to in Clause [ref] shall enter into a contract upon the same or substantially similar terms as the person so replaced and shall also enter into a collateral agreement on the same or substantially the same terms as the Collateral Agreement entered into by the person so replaced.

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EXAMPLE CLAUSES

NOTES AND REFERENCES See SOPC Section 25. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Confidentiality

Confidential Information In this Agreement, "Confidential Information" means all information relating to the other party which is supplied by or on behalf of the other party (whether before or after the date of this Agreement), either in writing, orally or in any other form, directly or indirectly from or pursuant to discussions with the other party or which is obtained through observations made by the receiving party. "Confidential Information" also includes all analyses, compilations, studies and other documents whether prepared by or on behalf of a party which contain or otherwise reflect or are derived from such information. Use and disclosure of Confidential Information Each party shall hold in confidence any Confidential Information, provided that the provisions of this Clause shall not restrict either party from passing such information to its professional advisers, to the extent necessary, to enable it to perform (or to cause to be performed) or to enforce its rights or obligations under this Agreement, and provided further that Concessionaire may, subject to obtaining appropriate confidentiality restrictions: (a) pass to the Funders such documents and other information as are reasonably required by the Funders in connection with the raising of finance for the Project Operations or which Concessionaire is obliged to supply by the terms of the Funding Agreements; and (b) pass to the Concessionaire and the Service Providers documents and other information which are necessary for Concessionaire's performance of this Agreement. Exceptions The obligation to maintain the confidentiality of the Confidential Information does not apply to Confidential Information: (a) which the other party confirms in writing is not required to be treated

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EXAMPLE CLAUSES as Confidential Information; (b) which is or comes into the public domain otherwise than through any disclosure prohibited by this Agreement; (c) to the extent any person is required to disclose such Confidential Information by Law or any regulatory or government authority (but only to that extent); (d) as the Authority may require for the purpose of the Project Operations or for the operation, maintenance or improvement of the Facilities in the event of, or following, termination of this Agreement; (e) disclosed pursuant to Clause [authority disclosure]; or (f) to the extent required to be disclosed pursuant to Clause [Information and Audit Access]. Announcements Unless otherwise required by any Law or any regulatory or governmental authority (but only to that extent), neither party shall make or permit or procure to be made any public announcement or disclosure (whether for publication in the press, the radio, television screen or any other medium) of any Confidential Information or in the case of Concessionaire of its (or any Concessionaire Party's) interest in the Project or, in any such case, any matters relating thereto, without the prior written consent of the other party (which shall not be unreasonably withheld or delayed).

NOTES AND REFERENCES

Intellectual Property Rights Boilerplates Public relations and publicity The Concessionaire shall not by itself, its employees or agents and procure that its Sub-Contractors shall not communicate with representatives of the press, television, radio or other communications media on any matter concerning the Contract without the prior written approval of the Authority.

See SOPC Section 26. Example clause adapted from Office of Government Commerce, UK, Standardisation of PFI

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NOTES AND REFERENCES Contracts General, index reference C1, folder 5.

No facilities to photograph or film in or upon any property used in relation to the Project shall be given or permitted by the Concessionaire unless the Authority has given its prior written approval.

Information and audit access

Concessionaire shall provide to the Authority's Representative all information, documents, records and the like in the possession of, or available to, Concessionaire (and to this end Concessionaire shall use all reasonable endeavours to procure that all such items in the possession of the Concessionaire or any Service Providers shall be available to it and Concessionaire has included, or shall include, relevant terms in all contracts with the Concessionaire or any Service Providers to this effect) as may be reasonably requested by the Authority's Representative for any purpose in connection with this Agreement. For the purpose of: (a) the examination and certification of the Authority's accounts; or (b) any examination pursuant to [Section 6(1) of the National Audit Act 1983] of the economy, efficiency and effectiveness with which the Authority has used its resources, the Comptroller and Auditor General may examine such documents as he may reasonably require which are owned, held or otherwise within the control of Concessionaire (and Concessionaire shall procure that any person acting on its behalf who has such documents and/or other information shall also provide access) and may require Concessionaire to produce such oral or written explanations as he considers necessary. To avoid doubt, it is hereby declared that the carrying out of an examination under [Section 6(3)(d) of the National Audit Act 1983] in relation to Concessionaire is not a function exercisable under this Clause. Concessionaire shall provide and shall procure that its Sub-Contractors shall provide such information as the Authority may reasonably require from time to time to enable it to meet its obligations to provide reports and returns pursuant to regulations, directions or guidance applicable to the

Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES Authority or as required by external agencies including, without limitation, reports and returns regarding the physical condition of buildings occupied by the Authority, health and safety, under the firecode, relating to environmental health and to comply with [requirements for the provision of information relating to achievement of customer service targets].

NOTES AND REFERENCES

Records and Reports

(a) The Concessionaire shall at all times: (i) maintain a full record of particulars of the costs of performing the Service, including those relating to the design, construction, maintenance, operation and finance;

(ii) when requested by the Authority, provide a summary of any of the costs referred to in paragraph (i), including details of any funds held by the Concessionaire specifically to cover such costs, in such form and detail as the Authority may reasonably require to enable the Authority to monitor the performance by the Concessionaire of its obligations under this Contract; (iii) provide such facilities as the Authority may reasonably require for its representatives to visit any place where the records are held and examine the records maintained under this Clause6; and (iv) at the request of the Authority, provide to the Authority any information provided by it to the Senior Lenders during the term of the Contract. (b) Compliance with the above shall require the Concessionaire to keep (and where appropriate shall procure that the Sub-Contractors shall keep) books of account in accordance with best accountancy practice with respect to the Contract showing in detail: (i) administrative overheads; (ii) payments made to Sub-Contractors; (iii) capital and revenue expenditure; (iv) such other items as the Authority may reasonably require to conduct cost audits for verification of cost expenditure or estimated expenditure, for the purpose of Clause

Example clause adapted from Office of Government Commerce, UK, Standardisation of PFI Contracts General, index reference C1, folder 5.

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NOTES AND REFERENCES

and the Concessionaire shall have (and procure that the Subcontractors shall have) the books of account evidencing the items listed in paragraphs (i) to (iv) available for inspection by the Authority (and any expert) upon reasonable notice, and shall present a report of these to the Authority as and when requested. (c) The Concessionaire shall maintain or procure that the following are maintained: (i) a full record of all incidents relating to health, safety and security which occur during the term of the Contract; and (ii) full records of all maintenance procedures carried out during the term of the Contract, and the Concessionaire shall have the items referred to in paragraphs (i) and (ii) available for inspection by the Authority upon reasonable notice, and shall present a report of them to the Authority as and when requested. (d) The Concessionaire shall permit records referred to in this Clause to be examined and copied by the Controller and other representatives of the Authority, and by [the Comptroller and Auditor General and his representativesg]. (e) The records referred to in this Clause shall be retained for a period of at least [5] years after the Concessionaire's obligations under the Contract have come to an end. (f) Upon termination of the Contract, and in the event that the Authority wishes to enter into another contract for the operation and management of the Project the Concessionaire shall (and shall ensure that the Sub-Contractors will) comply with all reasonable requests of the Authority to provide information relating to the Concessionaire's costs of operating and maintaining the Project.

(g) All information referred to in this Clause is subject to the obligations set out in Clause [Information and Confidentiality].

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EXAMPLE CLAUSES

NOTES AND REFERENCES Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Notices

All notices under this Agreement shall be in writing and all certificates, notices or written instructions to be given under the terms of this Agreement shall be served by sending the same by first class post, facsimile or by hand, leaving the same at Notices given by post shall be effective upon the earlier of (i) actual receipt, and (ii) five (5) Business Days after mailing. Notices delivered by hand shall be effective upon delivery. Notices given by facsimile shall be deemed to have been received where there is confirmation of uninterrupted transmission by a transmission report and where there has been no telephonic communication by the recipient to the senders (to be confirmed in writing) that the facsimile has not been received in legible form: (a) within two (2) hours after sending, if sent on a Business Day between the hours of 9am and 4pm; or (b) by 11am on the next following Business Day, if sent a after 4pm, on a Business Day but before 9am on that next following Business Day.

Amendments

This Agreement may not be varied except by an agreement in writing signed by duly authorised representatives of the parties.

Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Waiver

Any relaxation, forbearance, indulgence or delay (together "indulgence") of any party in exercising any right shall not be construed as a waiver of the right and shall not affect the ability of that party subsequently to exercise that right or to pursue any remedy, nor shall any indulgence constitute a waiver of any other right (whether against that party or any other person).

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EXAMPLE CLAUSES

NOTES AND REFERENCES Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

Relationship

Nothing in this Agreement shall be construed as creating a partnership or as a contract of employment between the Authority and Concessionaire. Save as expressly provided otherwise in this Agreement, Concessionaire shall not be, or be deemed to be, an agent of the Authority and Concessionaire shall not hold itself out as having authority or power to bind the Authority in any way. Without limitation to its actual knowledge, Concessionaire shall for all purposes of this Agreement, be deemed to have such knowledge in respect of the Project as is held (or ought reasonably to be held) by any Concessionaire Party.

Entire Agreement

Except where expressly provided otherwise in this Agreement, this Agreement and the Retained Staff Agreement constitute the entire agreement between the parties in connection with its subject matter and supersedes all prior representations, communications, negotiations and understandings concerning the subject matter of this Agreement. Each of the parties acknowledges that: (a) it does not enter into this Agreement on the basis of and does not rely, and has not relied, upon any statement or representation (whether negligent or innocent) or warranty or other provision (in any case whether oral, written, express or implied) made or agreed to by any person (whether a party to this Agreement or not) except those expressly repeated or referred to in this Agreement and the only remedy or remedies available in respect of any misrepresentation or untrue statement made to it shall be any remedy available under this Agreement; and (b) this Clause shall not apply to any statement, representation or warranty made fraudulently, or to any provision of this Agreement which was induced by fraud, for which the remedies available shall be all those available under the law governing this Agreement.

Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1.

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EXAMPLE CLAUSES

NOTES AND REFERENCES

Conflicts of agreements

In the event of any conflict between this Agreement and the [Project Documents], the provisions of this Agreement shall prevail. If any provision of this Agreement shall be declared invalid, unenforceable or illegal by the courts of any jurisdiction to which it is subject, such provision may be severed and such invalidity, unenforceability or illegality shall not prejudice or affect the validity, enforceability and legality of the remaining provisions of this Agreement. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. Example clause adapted from Department of Health (UK), Standard Form Project Agreement Index reference A1 Folder 1. See SOPC Section 27. Example clause adapted from Concession Agreement for Colombo Kathunayake Expressway Project (note confidential), index reference A2,

Severability

Counterparts

This Agreement may be executed in one or more counterparts. Any single counterpart or a set of counterparts executed, in either case, by all the parties shall constitute a full original of this Agreement for all purposes.

Costs and expenses

Each party shall be responsible for paying its own costs and expenses incurred in connection with the negotiation, preparation and execution of this Agreement.

Dispute resolution and jurisdiction

The parties need to ensure that a court or an arbitral body in whom the parties have confidence can resolve any conflict or disputes in relation to the agreement. In addition, the parties need to ensure that the final determination of the court

Alternative 1 Conciliation Before referring a dispute or difference to arbitration under clause [arbitration] the Parties shall establish a conciliation team to attempt in good faith to resolve the dispute or difference promptly according to the following arrangements: (a) the conciliation team shall consist of two (2) senior representatives

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KEY ISSUES or arbitral body concerned is enforceable against the other party. The parties would want to be able to enforce any decision in the jurisdiction (or jurisdictions) in which the assets of the other party are located. Most countries have laws that prevent or limit the enforcement of judgments of a foreign court in its jurisdiction (that is, without review by a court in the jurisdiction). Many countries, however, are signatories to an international convention on the enforcement of arbitral awards, which means that (in theory at least) the parties would be able to enforce the arbitral awards in that jurisdiction. Other advantages of arbitration are that they can be private, the parties can select their own arbitrators and the process can be more flexible than the court process. The downside to arbitration is that it is often more expensive than the court process, the process can be cumbersome and administrative, and there

EXAMPLE CLAUSES nominated by the Authority and two (2) senior representatives nominated by the Concessionaire; those nominations shall be made within seven (7) days of either Party notifying the other that it wishes to establish the conciliation team; (b) the purpose of the conciliation team is to try to agree between the representatives how best to resolve the dispute or difference and then to make recommendations to the Parties; recommendations of the conciliation team must have the unanimous support of all the representatives; (c) the dispute or difference shall be resolved if the Parties accept the recommendations made by the conciliation team and enter into a written agreement describing the arrangements for resolution of the dispute or difference; the written agreement shall be binding on the Parties; (d) to avoid doubt, the conciliation team by itself shall not have the power to vary this Agreement; (e) the conciliation team shall have joint chairmen, consisting of one representative of the Authority and one of the Concessionaire; the Joint chairmen may adopt such procedures for the conduct of the activities of the conciliation team as they consider appropriate, from time to time; and (f) if representatives have not been nominated by the required time or if the conciliation team is unable to agree its recommendations to resolve the dispute or if the Parties do not agree in writing to resolve the dispute, within sixty (60) days of any Party notifying the other that it wishes to form the conciliation team, the dispute shall be referred to arbitration under the following provisions of this clause. Arbitration Any difference, dispute, controversy or claim arising from, out of or in connection with this Agreement, or the interpretation thereof or the rights, duties, obligations, or liabilities of any Party or the operation, breach, termination or invalidity thereof which arises or occurs between the Parties to this Agreement, other than to those which clause [ref] applies,

NOTES AND REFERENCES folder 1.

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KEY ISSUES can be delays in arbitral hearings. Alternative 1 is a standard clause conferring jurisdiction to a court of a jurisdiction agreed by the parties. Arbitration decisions are legally enforceable if a country has adopted laws to say that arbitration decisions are legally binding. Foreign arbitration judgments would be enforceable in countries that are signatories of a convention on enforcement of foreign arbitration judgments. It is not necessary to set out the process in such detail as in Alternative 2, unless the parties wish to. The dispute will be heard according to the procedures stipulated in the arbitration tribunal chosen.

EXAMPLE CLAUSES shall be referred by either Party to arbitration for final settlement in accordance with clauses [arbitration process]. Each of the Parties submits to arbitration in Colombo (or such other place as the Parties may agree in writing at the start of any arbitration proceedings) before a panel (the Arbitral Tribunal) of three (3) arbitrators under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) as then in force, as modified by clauses [process]. The proceedings shall be conducted and the award shall be rendered in the English Language. Each Party shall appoint one (1) arbitrator and the two (2) arbitrators so appointed shall appoint a third (3rd) arbitrator. The (3rd) third arbitrator shall be the chairman of the Arbitral Tribunal. If either Party fails to appoint an arbitrator or if the two (2) Parties appointed arbitrators fail to agree upon a third arbitrator, then such arbitrator shall, at either Partys written request, be appointed by the Chairman of the International Court of Arbitration of the International Chamber of Commerce acting in accordance with the rules adopted by the International Chamber of Commerce for selecting in arbitrator but without giving effect to the provisions of paragraph 6 of Articles 9 of these rules. Any award rendered by the Arbitral Tribunal shall be final and binding and judgement thereon may be entered in any court of competent jurisdiction. Any monetary award shall be made in reasonable time and payable in [currency] free of any tax, deduction or offset and the Arbitral Tribunal shall be authorised in its discretion to grant pre-award and post-award interest at commercial rates. Any costs, fees or taxes incidental to enforcing the award shall, to the maximum extent permitted by law, be charged against the Party resisting such enforcement. The Parties hereby waive and agree to exclude any rights of application or appeal to the fullest extent permitted by law in connection with any question of fact or law arising in the course of the arbitration or with respect to any award made except for actions to enforce an arbitral award. Except as expressly provided in this Agreement, pending the award in any arbitration proceedings hereunder, (i) this Agreement and the rights and obligations of the Parties shall remain in full force and effect and (ii)

NOTES AND REFERENCES

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EXAMPLE CLAUSES each of the Parties shall continue to perform their respective obligations under this Agreement. The termination of this Agreement shall not result in the termination of any arbitration proceedings pending at the time of such termination nor otherwise affect the rights and obligations of the Parties under or with respect to such pending arbitration. Any award rendered by the Arbitral Tribunal shall determine the extent to which the costs of the arbitration are to be borne by each of the Parties. The reference to the arbitration, all proceedings in the arbitration and all documents and copies of documents or records produced on discovery or created for the purposes of the arbitration shall be confidential to the Parties and the arbitrators and shall not be disclosed to any other person (other than the Lenders) without the express prior written consent of both Parties, except as may be necessary to enforce the terms of any award made by the arbitrators or to challenge the conduct of the arbitrators or the validity of any award in a court of competent jurisdiction. The powers of the arbitrators shall include the power to conduct proceedings in part in any place other than Colombo where the arbitrators in their sole discretion determine that it is necessary for the more effective and efficient determination of the matters before them. The Parties hereby waive any objection to or claim of immunity in respect of the enforcement of any arbitral award made by the Arbitral Tribunal; and each party represents, warrants and affirms that it is not entitled to claim immunity in connection with any proceedings relating to an arbitration or arbitral award under this Agreement. Expert Any dispute, difference, controversy or claim of any kind which arises or occurs between the Parties as to any thing or matter arising under, out of or in connection with this Agreement or otherwise in connection with the implementation of the Project shall be determined by an expert (the Expert) if: (a) This Agreement expressly so provides; or (b) The Parties so agree in writing.

NOTES AND REFERENCES

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EXAMPLE CLAUSES Either party may initiate the reference of a dispute described in clause [ref] to an Expert by proposing to the other party the appointment of an Expert. Clauses [arbitration] shall not apply to matters to be determined by an Expert and in particular there shall be no arbitration challenging the Experts decision. The Expert shall be a civil engineer, a transport economist, a toll road manager, a transport economist (specialising in transport project economics for operating issues), or other person experienced in the construction or operation of road projects or a financial expert having experience in similar infrastructure projects implemented through public private partnership (as appropriate), except for disputes principally concerning the manner in which an amount, sum or quantity is to be calculated, where the Expert shall be an individual who holds an internationally recognised qualification in the relevant field. The Expert shall be appointed by agreement between the Parties or, if the Parties have not agreed within fourteen (14) days of the date of the request, on the application of either party, [the President of the Institute of Engineers of [country]] in the case of technical or non financial matters or the President of the Institute of Chartered Accountants of [country] in respect of financial matters as appropriate shall appoint an Expert. The Expert shall act an expert and not as an arbitrator. The decision of the Expert shall be final and binding on the Parties and may include orders that one or both of the Parties are to pay his reasonable costs, stating the proportion and that one party is to pay the costs (or a proportion of the costs) of the other party and/or compensation for increased costs incurred by a party as a result of the reference to the Expert. If either party does not pay its proportion of the Experts costs, the other party may make such payment and that party shall be entitled to an immediate reimbursement of such amount from the party in default plus interest at the AWPR + 2% The Expert shall have the power to order (and each party agrees to adhere to such an order) each party to pay from time to time and in equal amounts, sums to settle his reasonable costs to date. This power shall also extend to the reasonable costs of any advisor or other person referred to in clause [ref]. The Expert shall take account of any such sums paid by the Parties when, on costs he should make pursuant to clause

NOTES AND REFERENCES

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EXAMPLE CLAUSES [ref] which may result in one party being ordered to reimburse the other party amounts so paid by the other party together with default interest at the AWPR + 2% The Parties shall each have the right to make written representations to the Expert with notice and a copy to the other party. There shall be no formal hearing. The Expert shall regulate procedure as he sees fit (except that he must give each party a reasonable opportunity to make representations), including, if the Expert chooses, requiring written submissions and/or hearing witnesses in person. The Experts powers shall include the power to open up, review and revise any notice and determine all matters in dispute. He shall be instructed to make his determination as soon as possible. The Expert may take such advice and assistance from independent professional advisors or other persons as he considers appropriate to enable him to reach a determination of the dispute. Each of the Parties shall upon and in accordance with a request by the Expert supply to the Expert free of charge such information and documents as he shall require for the purposes of the reference to him. That information and those documents shall be kept confidential by him and by the Parties. If any dispute referred to an Expert raises issues which, in the reasonable opinion of either party, are substantially the same as or are connected with issues raised in a related dispute between any of the following persons (or their successors in title and permitted assignees): (a) the Concessionaire; or (b) other sub-contractors of the Concessionaire; the Parties agree that the related dispute shall be referred to the Expert appointed to determine the dispute under this Agreement and the Concessionaire shall procure that it has the power in its contracts with the persons described above to procure the related dispute is dealt within that manner. Alternative 2 Both parties agree that the courts of. shall have exclusive jurisdiction to

NOTES AND REFERENCES

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EXAMPLE CLAUSES hear and settle any action, suit, proceeding or dispute in connection with this Agreement and irrevocably submit to the jurisdiction of those courts.

NOTES AND REFERENCES

Governing law

The choice of law is usually, but not always, the venue of dispute resolution. For example, arbitration process in Singapore can have agreements governed under the laws of the United Kingdom. Though quite unusual, it is also possible for the parties to submit to the exclusive jurisdiction of a specified court and choose the law from another jurisdiction. This means that the courts of one jurisdiction will be forced to decide on a case based on the law of another jurisdiction. This clause should be consistent with the dispute resolution clause. In particular, a submission to jurisdiction clause is not appropriate if the parties choose arbitration as the dispute resolution method.

This Agreement shall be governed by the law of [jurisdiction].

END OF OPERATIVE PART

IN WITNESS WHEREOF the parties have executed this Agreement the day and year first above written: Check with the local laws for the appropriate FOR AND ON BEHALF of [the Concessionaire] by [authorized signatory]

Signing clauses

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KEY ISSUES execution procedure. For example, the need for common seal, authorised signatories and the need for witnesses.

EXAMPLE CLAUSES in the presence of [witness]

NOTES AND REFERENCES

Schedules, Appendices

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