Energy and Infrastructure Consenting Notes – New HSF UK infrastructure planning blog

5 May, 2022

The London planning team at Herbert Smith Freehills has a new blog called Energy and Infrastructure Consenting Notes, focused on infrastructure planning in the UK.

The team has promoted some of the biggest and most high-profile nationally significant infrastructure project (NSIP) applications to go through the Planning Act 2008 process, from the Hinkley Point and Sizewell new nuclear power stations to the expansion of Gatwick Airport and the Aquind Interconnector between the UK and France. We are promoting DCOs for solar projects, energy from waste plants, and advising on carbon capture and storage in the North Sea.

What is the new blog?

Energy and Infrastructure Consenting Notes include regular updates on what we consider to be the most interesting and topical developments within the NSIP world, together with our monthly newsletter highlighting the key events from the previous month and our opinions on issues that matter to our clients.

Please subscribe to the blog to be notified of new blog posts and to receive our monthly newsletter when published. To subscribe, click here.

We hope that everyone who is involved in the NSIP world, or keen to learn more about it, will find our new blog helpful. If you have any questions on anything mentioned in the blog or have any feedback, please get in touch using the contact details below.

For further information please contact:

Catherine Howard
Catherine Howard
Partner, Planning, London
+44 20 7466 2858
Charlotte Dyer
Charlotte Dyer
Of Counsel, Planning, London
+44 20 7466 2275
Ian Mack
Ian Mack
Senior Associate, Planning, London
+44 20 3692 9622
Fiona Sawyer
Fiona Sawyer
Professional Support Lawyer, Planning, London
+44 20 7466 2674

 

Charging forward – Ofgem’s drive to electrify transport

8 September, 2021

On Saturday, 4 September 2021, Ofgem (the energy regulator in Great Britain) published its plans to further support the UK’s transition to electric vehicles (EVs) in the deployment of EVs and their integration into the electricity system. Ofgem aims to get the network ready for EVs and ensure there is sufficient network capacity for EV uptake, all while aiming to avoid unnecessary investment into the network and keep consumer costs down.

Phasing out petrol and diesel cars and vans

Ofgem’s latest announcement reinforces its commitment to decarbonising transport which has already seen Ofgem commit £300 million to support the installation of 1,800 ultra-rapid charge points in the UK (announced in May 2021), with this initial support considered only a starting block to the over £40 billion to be invested in Britain’s energy networks in the next seven years.

These building blocks are all part of the bigger plan to phase out all new petrol and diesel cars and vans in the UK by 2030 and have all new cars and vans fully zero emission at the tailpipe by 2035. In so doing, and as announced by the UK Government in November 2020, the UK aims to become the fastest nation in the G7 to decarbonise cars and vans.

Growing demand for EVs

Less than a year after the Government’s announced ambition to decarbonise transport, the plan for EVs appears to be on track with over 500,000 ultra low emission vehicles (ULEVs) currently registered in the UK, along with forecasts that more than one in seven registrations in the UK in 2021 will be plug-in vehicles, and an estimated 14 million EVs will be on UK roads by 2030. ULEVs use low carbon technologies and emit less than 75g of CO2/km from the tailpipe, and include pure EVs, fuel cell EVs, plug-in hybrids and extended range EVs. These ULEV thresholds are also those used for the UK Government’s consumer incentive scheme, the Plug-in Car Grant (PiCG), and are also the thresholds used for zero emission vehicles (ZEVs).

Increasing need for electricity

By 2035, the Climate Change Committee has forecast that about 370,000 public charge points will be needed and Ofgem estimates that up to 19 million home charge points may be required (research has shown that a key factor in 36% of households not getting an EV is the lack of charging points near their homes). By 2050, electric cars and vans are expected to need 65TWh to 100TWh of electricity annually, an increase of 20% to 30% over today’s levels. The Competition and Market Authority (CMA) market study into EV charging completed in July 2021 has also identified areas in the nascent charging industry where greater competition is required (e.g. along motorways).

Getting EV network ready

Ofgem’s strategy is primarily focused on (1) ensuring that EV charge points are able to connect to the grid in a timely and cost efficient manner, (2) enabling further efficiency in the grid through smart charging and vehicle-to-power (V2X) technology, and (3) encouraging consumer participation in the EV transition as EVs become effectively part of the electricity system.

Addressing uncertainty

A major challenge to ensuring sufficient network capacity is that of when and where EV uptake is likely to happen, and having identified EV uptake, the challenge is the time needed and connection charges involved in implementing an EV charging infrastructure. The uncertainty surrounding the location and pace of EV uptake means Ofgem cannot currently approve full five-year programmes of work in advance.

In an effort to address this uncertainty in future EV location uptake, among other issues, distribution network operators (DNOs) will be required to forecast local EV uptake and consumer behaviour through price controls for electricity distribution networks (RIIO-ED2), thereby incentivising improvements to the connection process. DNOs will also be required to engage with local stakeholders and assess local EV investment needs and, under RIIO-ED2 licence obligations, DNOs will be required to publish digitalisation strategies.

Using smart charging

The use of smart charging will be incentivised through the use of special tariffs (e.g. Market-Wide Half-Hourly Settlement and Time of Use), progressing smart charging (e.g. pre-set charging at off-peak times), working with the Government and industry to remove barriers for V2X, and developing data and communication for dynamic smart charging.

Reducing barriers to connection

In an effort to reduce barriers to network connections, Ofgem will remove connection costs associated with reinforcement of shared networks and will publish their Final Access and Forward-Looking Charging Significant Code Review (SCR) decision in 2021, with changes to be implemented from 2023. The SCR looks at proposals for distribution connection charging, definition and choice of access rights, and transmission charging for small distributed generation.

A greener, fairer future

Ofgem will continue to engage with key stakeholders and encourage ongoing engagement and greater consumer participation through supporting product development and extending consumer protections to new products and services.

On EV flexibility and interoperability, Ofgem will publish in 2022 a joint BEIS/Ofgem EV Flexibility Policy Statement, which will include reviews of charge point interoperability, driving consumer engagement with smart technology, and improving data flow between charge points, operators and networks.

A Retail Strategy on how best to support consumer participation and ensure consumer protection will also be published, and work with BEIS and the Government will continue in an effort to identify gaps in the current framework of consumer protection and ensure fair pricing in the aim of enabling the transition to EVs and achieving a greener, fairer future.

Key contacts

Reza Dadbakhsh
Reza Dadbakhsh
Partner, London
+44 20 7466 2679
Sarah Pollock
Sarah Pollock
Partner, London
+44 20 7466 2786
Nick Pantlin
Nick Pantlin
Partner, London
+44 20 7466 2570
Steven Dalton
Steven Dalton
Partner, London
+44 20 7466 2537
Barbara McNulty
Barbara McNulty
Associate, London
+44 20 7466 3184

 

 

Fit for 55 – EU recognises the need for a broad alternative fuels infrastructure across Europe

2 September, 2021

In the context of the ‘fit for 55’ package, published on 14 July 2021, the European Commission proposed the adoption of a new Regulation for the deployment of an alternative fuels infrastructure; the new Regulation will repeal Directive 2014/94/EU (DAFI).

The initiative seeks to ensure the availability and usability of a dense, widespread network of alternative fuels infrastructure throughout the European Union (EU), with the aim that all users of alternative fuel vehicles (including vessels and aircraft) will be able to move through the EU with ease, enabled by key infrastructure such as motorways, ports and airports. The specific objectives of the proposed Regulation are to: (i) ensure minimum infrastructure to support the required uptake of alternative fuel vehicles across all transport modes and in all EU Member States to meet the EU’s climate objectives; (ii) ensure full interoperability of the infrastructure; and (iii) ensure comprehensive user information and adequate payment options.

Background

The Commission’s proposal represents a recognition that mobility brings many socio-economic benefits to the European public and to European businesses, and also has a growing impact on the environment, including in the form of increased greenhouse gas emissions and local air pollution, and that the EU is still missing a complete network of alternative fuels infrastructure.

The Commission carried out an ex post evaluation of the DAFI, which found that it is not sufficient for the purpose of reaching the EU’s increased climate targets for 2030. The main issues include that Member States’ infrastructure planning often lacks the necessary level of ambition, consistency and coherence, leading to insufficient and not-well distributed infrastructure. Further interoperability issues with physical connections persist, while new issues have emerged over communication standards, including data exchange among the different actors in the electro-mobility ecosystem. Additionally, there is a lack of transparent consumer information and common payment systems, which limits user acceptance. Without further action by EU institutions, this lack of interoperability and easy-to use recharging and refuelling infrastructure is likely to become a barrier to growth in the use of low and zero-emission vehicles, vessels and, in the future, aircraft.

By ensuring that the necessary infrastructure for zero and low-emission vehicles and vessels is in place, this initiative will complement a set of other policy initiatives under the ‘fit for 55’ package that stimulate demand for such vehicles by setting price signals that incorporate the climate and environmental externalities of fossil fuels; such initiatives include the revision of the Emissions Trading System (Directive 2003/87/EC), and the revision of the EU Energy Taxation Directive (Directive 2003/96/EC).

Key provisions

Simplification

The review of DAFI increases the overall policy ambition and also includes some important simplification aspects, which primarily affects charge point operators and mobility service providers. The setting of clear and common minimum requirements aims to align business operations, as businesses will face similar minimum requirements in all Member States, and the new requirements will simplify the use of the infrastructure by private and corporate consumers (who currently face a plethora of use approaches) and enable better business service innovation. With these proposed changes, consumer trust in the robustness of a pan-European network of recharging and refuelling infrastructure may increase and thereby support the overall profitability of recharging and refuelling points, and support a stable business case. It is aimed that all market actors and user groups will benefit from lower information costs and, in the case of market actors, lower legal compliance costs in the medium term, as the requirements for infrastructure provisioning under the proposed Regulation will be better harmonised. Public authorities may also benefit from a coherent EU-wide framework that is aimed at making coordination with public and private market actors easier.

Coverage of publicly accessible recharging points

The proposal sets out specific provisions for the rollout of certain recharging and refuelling infrastructure for light- and heavy-duty road transport vehicles, vessels and aircraft.

Road transport

Member States are required to ensure minimum coverage of publicly accessible recharging points dedicated to light- and heavy-duty road transport vehicles on their territory, including on the TEN-T core and comprehensive network. In particular, Member States must install charging and fuelling points at regular intervals on major highways, at every 60 kilometres for electric charging and every 150 kilometres for hydrogen refuelling.

Further provisions are introduced to ensure the user-friendliness of the recharging infrastructure. These include provisions on payment options, price transparency and consumer information, non-discriminatory practices, smart recharging, and signposting rules for electricity supply to recharging points.

Member States are also required to ensure until 1 January 2025 minimum coverage of publicly accessible refuelling points for liquefied natural gas (LNG) dedicated to heavy-duty vehicles on the TEN-T core and comprehensive network.

Vessels

Member States must ensure installation of a minimum shore-side electricity supply for certain seagoing ships in maritime ports and for inland waterway vessels. The proposal also defines the criteria for exempting certain ports and sets requirements to ensure a minimum shore-side electricity supply.

Member States are also required to ensure an appropriate number of LNG refuelling points in maritime TEN-T ports and to identify relevant ports through their national policy frameworks.

Aircraft

The proposed Regulation sets out minimum provisions for electricity supply to all stationary aircraft in TEN-T core and comprehensive network airports.

Provisions for Member States’ national policy frameworks

The provisions for Member States’ national policy frameworks are reformulated under the proposal, which makes provision for an iterative process between Member States and the Commission to develop concise planning to deploy infrastructure and meet the targets as provided in the proposed Regulation. It also includes new provisions on formulating a strategy for the deployment of alternative fuels in other modes of transport together with key sectoral and regional/local stakeholders. This would apply where the Regulation does not set mandatory requirements but where emerging policy requirements connected to the development of alternative fuel technologies need to be considered.

The approach to governance includes reporting obligations corresponding to provisions for Member States on national policy frameworks, and national progress reports in an interactive process with the Commission. It also sets requirements for the Commission to report on Member States’ national policy frameworks and progress reports.

Data provision requirements

Data provision requirements are set out for operators or owners of publicly accessible recharging or refuelling points on the availability and accessibility of certain static and dynamic data types, including the establishing of an identification registration organisation (IDRO) for the issuing of identification (ID) codes. Under this provision, the Commission is also empowered to adopt further delegated acts to specify further elements as required.

Common technical specifications

The existing common technical specifications are integrated with a set of new areas for which the Commission will be entitled to adopt new delegated acts. These will build on, as deemed necessary,  standards developed by the European standardisation organisations (ESOs).

The proposal also includes detailed provisions on national reporting by Member States to support the implementation of the Regulation, and common technical specifications or areas where delegated acts will need to be adopted to define common technical specifications.

More on the Fit for 55 suite of proposals

For more, see also our Decarbonisation Hub where you can also access our full series of posts – Fit for 55: A greener transition for Europe.

Contacts

Francesca Morra
Francesca Morra
Partner, Milan
+39 02 3602 1412

 

Part 26A Restructuring Plans and HoldCo Financings

20 July, 2021

The background to Restructuring Plans

When the UK Government announced a package of measures to support businesses during the pandemic, they included a new restructuring tool – the restructuring plan (or RP) under Part 26A of the Companies Act 2006.

The RP is a very powerful restructuring tool.  Principally because it allows a compromise to be imposed against the wishes of dissenting classes of creditors provided that at least 75% by value of one class with a genuine economic interest has approved the RP and all dissenting classes receive more under the RP than in the “relevant alternative” (which will generally be an administration or liquidation).

Distressed companies and their stakeholders have in recent months been pushing the boundaries of RPs.  The English Court decided in May this year that cramming down classes of creditors (in that case landlords) who have overwhelmingly voted against an RP is principally a question of valuation[1].  This in many ways offers less protection to junior creditors than previously indicated and confirms that RPs are likely to become the tool of choice to restructure complex businesses of scale.

HoldCo Financing

HoldCo financing structures have become increasingly prevalent in the capital stack over the past decade with many equity investors, in particular on infrastructure transactions, using HoldCo facilities to fund acquisitions or recycle equity investments. Institutional investors and other lenders with higher risk appetites are equally increasingly writing HoldCo loans to achieve higher returns in a competitive and liquid market.

HoldCo lenders are structurally subordinated to the creditors of the underlying OpCos and do not benefit from asset level security. They are entirely reliant on cashflows being upstreamed by the OpCos and security over the shares in the OpCo or its shareholder. A HoldCo financing is completely separate to the underlying OpCo senior financing and there is no intercreditor agreement between the two sets of lenders.

Consequences of an OpCo RP for HoldCo Financing

While HoldCo lenders already appreciate and factor in the risk of enforcement action by the OpCo senior lenders, RPs add another tool for distressed companies.  Crucially, the evidential standard required to satisfy the English Court as to the value of the business may fall short of contractual protections negotiated in intercreditor agreements (such as fairness opinions, a public marketing process or an administrator being satisfied proper value has been obtained).

Among other outcomes, an RP proposed at the OpCo level could result in the issue of shares to a new party (possibly the original sponsor) and the dilution of the existing shareholders’ interests (and thus the interest of the HoldCo lender). One RP has already been proposed along these lines (seeking to issue bondholders with 95% of the equity in an operating business).  Whilst this RP was rejected by the Court for reasons specific to its particular facts, it shows that RPs are capable of being used to issue new shares on a non-pre-emptive basis and potentially disenfranchising Holdco lenders.[2]

While this development is unlikely to curb lender and sponsor appetite for HoldCo financings in the current market, HoldCo lenders and their credit committees may wish to consider the additional risk (and opportunity) posed by RPs.  In distressed scenarios going forward HoldCo lenders are likely to want to guard against the risk that a strong sponsor seeks, through an RP, to do a deal with the OpCo financiers that dilutes HoldCo rights.  While HoldCo lenders may in these circumstances already have a seat at the table as a result of an event of default, timing and the ability to act quickly will be a key issue.  The timeline for an RP can be as short as six to eight weeks and so HoldCo lenders may need to make accelerated decisions in respect of the enforcement of security and any other rights or otherwise any proposal to participate in the provision of additional capital.

RPs are likely to be an attractive way of restructuring complex transactions going forward. HoldCo lenders should ensure that they have appropriate covenants (in particular information covenants) to give them timely notice of any circumstances which may lead to an RP and that they are also prepared internally in terms of understanding the RP process and being in a position to make accelerated decisions should the timeline require.

[1] Re Virgin Active Holdings Limited [2021] EWHC 1246. See our more detailed briefing here.

[2] Re Hurricane Energy PLC [2021] EWHC 1759 (Ch)

 

Contacts

Helen Beatty
Helen Beatty
Partner, London
+44 20 7466 2926
John Chetwood
John Chetwood
Partner, London
+44 20 7466 7548
Heather Culshaw
Heather Culshaw
Partner, London
+44 20 7466 2571
David Wyles
David Wyles
Partner, London
+44 20 7466 2041
Matthew Job
Matthew Job
Partner, London
+44 20 7466 2137

FUTURE CITIES – THE PODCAST SERIES

16 June, 2021

Building on our series exploring the prospects of the modern city, our new podcast brings you interviews, commentary and fresh perspectives on one of the defining social and economic forces of modern life. Tune in and hear from our leading figures across a range of disciplines as they join industry experts to share insights and bring you real-life perspectives on how cities are evolving before our eyes.

EPISODE 1: SHAPING OUR POST-COVID GLOBAL CITIES

In episode one, partners Matthew White and Nicholas Carney, are joined by special guests Amy Brown from the New South Wales Department of Premier and Cabinet and Alex Williams from Transport for London to bring you real life perspectives on how two of our global cities, London and Sydney, are responding to the Covid-19 pandemic.

EPISODE 2: CAN CITIES LEAD US TO NET ZERO?

In episode two, infrastructure partner Nicholas Carney is joined by Lewis McDonald (Global Head of Energy) and Matthew White (Head of Planning, London), to discuss the pressing need to make our energy consumption more efficient and cut emissions as our cities continue to grow.

EPISODE 3: EMBRACING ESG TO BUILD BACK BETTER

In episode three, infrastructure partner Nicholas Carney is joined by partners Silke Goldberg and Timothy Stutt from our global ESG leadership team, to discuss why ESG is a core element of city planning and to bring you examples of how different cities from across the world are embracing ESG to build back better.

Subscribe

Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. You can subscribe and be notified of all future episodes.

Key contacts

If you have any questions, or would like to know how this might affect your business, phone, or email these key contacts.

Nicholas Carney
Nicholas Carney
Partner, Sydney
+61 2 9322 4727
Matthew White
Matthew White
Partner, London
+44 20 7466 2461

Public-Private Partnership Law Review – latest edition published

27 April, 2021

We are very pleased to announce the publication of the latest edition of the Public-Private Partnership Law Review which explores recent developments and current issues affecting public private partnerships across 21 jurisdictions. The edition was edited by Patrick Mitchell and Matthew Job and has contributions from leading law firms across the world who specialise in public private partnerships. Herbert Smith Freehills contributed the following chapters: Australia, Italy, Russia, South Africa, United Arab Emirates and United Kingdom.

 

Key contacts

Patrick Mitchell
Patrick Mitchell
Partner, London
+44 20 7466 2157
Matthew Job
Matthew Job
Partner, London
+44 20 7466 2137

 

The Biden Infrastructure Plan

20 April, 2021

United States President Joseph R. Biden Jr. and his administration recently made proposals concerning approximately US$2.3 trillion in government funds to be devoted to infrastructure-related projects in the United States. This is referred to as the Biden Infrastructure Plan, or formally, the “American Jobs Plan” (the Plan).

To view a summary of the anticipated structure and reception, and particularly how the Plan may present opportunities for foreign contractors and investors click here.

If you would like to discuss the implications and opportunities for your business, please contact one of our key contacts below.

Key contacts
James Robinson
James Robinson
Partner, New York
+1 917 542 7803
Edward Dougherty
Edward Dougherty
Partner, New York
+1 917 542 7806
Robert Dawes
Robert Dawes
Senior Associate, New York
+1 917 542 7855

Healthcare as an Infrastructure asset

17 February, 2021

The search for yield is driving infrastructure investors to expand beyond typical core infrastructure assets into core+ or ‘infra-like’ assets. As part of this, infrastructure funds are increasingly looking at capital-heavy healthcare assets like hospitals and diagnostic imaging.

Healthcare assets exhibit many similar characteristics to core infrastructure assets, particularly if investors ‘think outside the box’ in relation to barriers to entry.

Continue reading →

Rule against penalties: Singapore Court of Appeal affirms Dunlop test

3 February, 2021

The decision of the Singapore Court of Appeal on 15 December 2020 in Denka Advantech Pte Ltd & another v Seraya Energy Pte Ltd & another [2020] SGCA 119, has affirmed that, under Singapore law, the rule against penalties remains as stated by Lord Dunedin in Dunlop Pneumatic Tyre Company, Ltd v New Garage and Motor Company, Limited [1915] AC 79.

In reaching its decision, the Court declined to adopt the wider legitimate interest test introduced by the UK Supreme Court in Cavendish Square Holding BV v Makdessi [2016] AC 1172 and also declined to extend the rule against penalties to situations outside of a breach of contract, as outlined in the Australian case Andrews and others v Australia and New Zealand Banking Group Limited (2012) 247 CLR 205.

This decision will be of particular interest in the context of construction, infrastructure and energy contracts, which often contain provisions for liquidated damages in the event of delay, but it is also relevant to other sectors in Singapore.

The claims

The case concerned three electricity retail agreements, entered into in 2012 between Seraya Energy Pte Ltd (Seraya), an electricity retailer and a wholly owned subsidiary of electricity generator YTL PowerSeraya Pte Ltd (YTL), and its customers Denka Advantech Pte Ltd and Denka Singapore Pte Ltd (together, Denka).

The electricity retail agreements were due to expire on 31 January 2021 and each contained a liquidated damages clause, linked to Seraya’s express contractual right to terminate the agreements in various circumstances, including for Denka breaching the obligations under the agreements. The liquidated damages were to be determined by a formula: A x B x 40%, where A was the number of months between the date the contract was terminated and 31 January 2021, and B was the average amount payable by Denka in the period before termination.

On 20 August 2014, Denka wrote a letter to YTL stating that “the supply of steam and electricity shall cease”. In subsequent correspondence, YTL and Seraya held that the electricity retail agreements had been repudiated by Denka in that letter. Seraya accepted Denka’s repudiation of one of the agreements in a letter dated 28 August 2014 and subsequently terminated the other two agreements in October and November 2014 pursuant to the express termination provisions in the agreements.

Seraya brought claims against Denka based principally on the wrongful termination of the three electricity retail agreements. Denka denied liability for wrongful termination on several grounds and also argued that Seraya was not entitled to liquidated damages as the relevant provisions were unenforceable penalties.

The decision

The Court of Appeal concluded that, in applying the Dunlop test, the liquidated damages clauses were not penalties and were therefore enforceable.

The Court held that, having considered the expert evidence, the amounts payable by Denka as liquidated damages were not extravagant and unconscionable when compared to the greatest loss that could conceivably be proved to have followed from the breach. Therefore, Seraya was awarded the net sum of S$30,829,369.79 pursuant to the liquidated damages provisions.

The rule against penalties

The Singapore Court of Appeal noted that, until recently, the leading common law case on the rule against penalties was Dunlop, in which Lord Dunedin set out the traditional test of whether a clause that takes effect on breach is a “genuine pre-estimate of loss” and therefore compensatory, or whether it is aimed at deterring a breach and therefore penal, referring to the following four factors:

  1. The provision would be penal if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.
  2. The provision would be penal if the breach consisted only in the non-payment of money and the provision provided for the payment of a larger sum.
  3. There is a presumption (but no more) that the provision would be penal if the same sum is payable in a number of events of varying gravity.
  4. The provision would not be treated as penal by reason only of the impossibility of precisely pre-estimating the true loss.

The Court of Appeal noted that there had been two recent common law cases relevant to the rule against penalties: Andrews, pursuant to which the High Court of Australia held that the rule on penalties was not limited only to clauses operating on a breach of contract; and Makdessi, which set out a new “true test” in relation to penalties, based on whether the relevant clause is a secondary obligation which imposes a detriment on the party in breach, out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. (Click here to read our previous briefing outlining the differences between the law in the United Kingdom and Australia).

Accordingly, the Court of Appeal considered that there were two questions to address:

  1. whether the rule against penalties should be limited only to clauses imposing secondary obligations for a breach of contract; and
  2. what the applicable legal criteria for the rule against penalties should be.

In relation to the first question, the Court declined to extend the rule against penalties to situations other than breach of contract, as outlined in Andrews, stating that any such extension would vest in the courts a discretion that was both wide and uncertain, and this would enable the courts to review a wide range of clauses on substantive grounds, resulting in a significant incursion into the freedom of contract.

In relation to the second question, the Court declined to follow the legitimate interest approach outlined in Makdessi, stating that the concept of “legitimate interest” was a very general concept that could utilised in many ways, particularly in relation to its application to the facts and circumstances of a given case. Its “protean character” could potentially be used “too flexibly” and this would lead to too much uncertainty both in terms of parties prior to entry into a contract and also in terms of a court subsequently interpreting the contract. In particular, the Court noted that the focus is whether the clause concerned provided a genuine pre-estimate of the likely loss at the time of contracting. In this regard, the only “legitimate interest” which the rule is concerned with is that of compensation.

Conclusion

The traditional “genuine pre-estimate of loss” test from Dunlop and its guidelines remain in place in Singapore law. In this regard, Singapore law now diverges from the position in England, which rewrote the English law on penalties in the Makdessi case.

It is notable, however, that other common law jurisdictions including Australia, Hong Kong and Malaysia have been similarly reluctant to depart from the Dunlop principles when interpreting commercial contracts.

Sophie Lenox
Sophie Lenox
Senior Associate, Singapore
+65 6868 8036
Jamie McLaren
Jamie McLaren
Corporate Partner, Singapore
+65 6868 8038
Sandra Tsao
Sandra Tsao
Director (Prolegis LLC), Singapore
+65 6812 1353
Daniel Waldek
Daniel Waldek
Disputes Of Counsel, Singapore
+65 6868 8068

Greener national transportation – point 5 of the UK Government’s Ten Point Plan

11 December, 2020

Point 5 of the Ten Point Plan reveals the ways in which the government proposes to encourage more journeys to be taken by public transport, cycling and/or walking, and how it will decarbonise public transport in the UK. The Ten Point Plan was quickly followed up with the National Infrastructure Strategy on 25 November.

Three main themes emerge from what the government has to say on public transport in the Ten Point Plan and the National Infrastructure Strategy:

1. Decarbonisation – transport is the highest emitting sector of the UK and, according to government statistics, accounted for 28% of domestic emissions in 2019. The government recognises that to achieve the UK’s net zero target by 2050 it will be essential to decarbonise both private vehicles and public transport.

2. Levelling up the regions – the government plans to prioritise investment in regions that have received less support in the past and this is particularly the case with respect to public transport infrastructure. The government recognises that connectivity (both digital and physical) is key to economic growth in the regions outside London.

3. (Lack of) private finance – the National Infrastructure Strategy is clear on the importance of private capital in financing public infrastructure and it says this is especially so in the case of energy, water and telecoms. There is, however, no explicit mention of private capital having a role in financing greenfield rail or road infrastructure.

Decarbonisation

The Ten Point Plan and the National Infrastructure Strategy place huge importance on decarbonising road transport and private vehicles. They say significantly less about the task of decarbonising the rail sector. This is a task that should not be underestimated. The electrification of the network has been a slow process, with less than 40% of the mainline network now electrified, yet the sector has been challenged to remove all diesel-only trains from the network by 2040.  This will require fleet refurbishments and conversions of existing rolling stock together with further electrification of the rail network. In the longer term battery and hydrogen powered trains will be needed where there is no electrified network.

Levelling up the regions

Phase 1 of High Speed 2 commenced construction in 2020 and once built will increase connectivity between the North and South by improving travel times as well as increasing capacity on the network.  The Ten Point Plan promises that the government will also progress the Midlands Rail Hub and Northern Power House Rail schemes, and in addition the National Infrastructure Strategy promises record investment in strategic roads (mostly outside the London area).

These are ambitious, if not entirely new, proposals and will take time to implement. Large-scale public infrastructure projects invariably take a long time coming to fruition so benefits should not be expected to materialise immediately.  The aptly named ‘Project Speed’ promises a number of reforms (including planning, procurement and environmental reforms) which are aimed at accelerating the development of new infrastructure projects –  how successful these reforms will be at reducing project timelines, however, is not yet clear.

Private finance

There continues to be appetite from the private sector to invest in road transport infrastructure as can be seen from recent procurements such as the Silvertown Tunnel and the A465 dualling project (the latter reaching financial close in recent months). The private sector’s interest in rail infrastructure (excluding for these purposes rolling stock) is perhaps more complicated. However, investor interest in the Western and Southern Heathrow Rail Links (admittedly before air passenger numbers collapsed) shows that with the right project and the right revenue model investors are willing to invest their capital.

On the demand side, however, neither the Ten Point Plan nor the National Infrastructure Strategy explicitly mention any role for private capital in the financing of greenfield road or rail infrastructure. Even if the government does see private finance playing a part, it is likely that new revenue models would be needed to facilitate this. The government has made clear that it will not reintroduce PFI/PF2 or similar models and instead favours ‘consumer-pay’ models such as contracts for difference and the regulated asset base model. Consumer-pay models are tricky for transport projects due to the absence of widely accepted user-charging for road infrastructure and the already very high user costs for rail passengers. Leaving aside the question of value-for-money and the debate on whether the benefits private capital bring outweigh its additional cost, it seems likely that the role of the private sector in financing greenfield road and rail infrastructure will be limited in the short term.

Looking ahead

The Ten Point Plan and the National Infrastructure Strategy set out ambitious proposals for improving the UK transport network in the coming years. However, much of the detail will follow in related publications over the next 12 months.  The policy documents we expect to be most relevant to the issues covered above are:

  • Union Connectivity Review
  • Integrated Rail Plan
  • Transport Decarbonisation Plan
  • National Bus Strategy
  • National Infrastructure and Construction Pipeline
Tom Marshall
Tom Marshall
Partner, London
+44 20 7466 7470
Patrick Mitchell
Patrick Mitchell
Partner, London
+44 20 7466 2157
John Williams
John Williams
Of Counsel, London
+44 20 7466 2392