PFI subcontracts: doubt cast on effectiveness of Equivalent Project Relief clauses

The recent case of Midland Expressway Limited -v- Carillion Construction Limited & Ors [2005] EWHC 2963 (TCC) has cast doubt on the effectiveness of equivalent project relief clauses in PFI subcontracts. The case, which arose out of the construction of the M6 toll road, has implications for project companies and their funders and investors in the PFI industry.

The issue arises due to the applicability of the Housing Grants Construction and Regeneration Act 1996 to construction contracts and the potential mismatch between the needs of investors and funders to a project company with the provisions of the Act.

The outcome of this case will cause waves in the PFI industry. We expect that interested parties will be reviewing equivalent project relief clauses in both signed deals and those approaching close. Funders and investors will be looking to minimise any potential risk to the project company and if it is thought that these clauses could fail then they and their advisers will be