Sector:

Water and sanitation

Name of Agreement:

Agreement for supply of treated water

Type of Agreement:

BOT (build, operate and transfer)/ bulk supply agreement/ offtake agreement - new build only.

Region (if known):

Europe  

Year of Agreement/ Draft:

2004

Principal Author(s) (firm and contact person):

Prepared by international law firm for utility in European country, with stable legal, political and regulatory regimes.

Annotated by:

Victoria Delmon, LEGPS, World Bank

Purpose and Context:

Agreement sets out terms on which the Supplier is to treat water. 

It also sets out how Supplier is to design and install the water treatment facility. Purchaser pays a fee (fixed and variable) for treated water.

Supplier is to finance the project.

Circumstances where this contract may be appropriate:

This is a simple BOT agreement for installation and operation of a water treatment plant. It could be used as a standalone agreement to build a small-scale wastewater/ effluent treatment works for a utility or for an industrial customer. It could also be used, with small modification, for installation of a mobile water treatment facility.

It is drafted with a common law system in mind although it could be adapted to a civil law jurisdiction (subject to local laws).

Main Features:

Contract Period is as stipulated in Schedule 3.

Supplier shall install Facility in accordance with the Contract (4.1(a))

Supplier shall from the Completion Date operate and maintain the Facilityin accordance with the terms of the contract and perform the services in good faith in accordance with, inter alia, Standards of a Reasonable and Prudent Supplier, the Technical Specification and Applicable Laws (4.1(b)).

Supplier is given extension of time and paid additional cost for unforeseeable sub-surface conditions that result in extra cost (4.4).

General design obligations of Supplier (5) and Supplier to complete installation within the Time for Completion (7.2) Extension of Time for Completion for various reasons (including changes in Applicable Law) (7.3) Supplier to pay liquidated damages for delay (7.4).

Performance test regime (8).

Metering (9) – Supplier to be responsible for metering – where a party suspecting measuring equipment is not accurate in any respect, Supplier to arrange for testing where it is a Supplier owned meter and Purchaser for Purchaser owned meter (who is responsible for which meters and who pays for maintenance and repair is often a subject of negotiation and is dependent on where the meters are located (ie whether they are within the Supplier’s facility or on Purchaser’s equipment).

Untreated Water quality (11) – if this is polluted (exceeds Guaranteed Level (Quantity) or falls outside the Guaranteed Level (Quality) Supplier is to use reasonable efforts to treat the water and in the event of a Pollution Incident shall be relieved from meeting the Technical Specification unless such failure is due to its negligence or failure to comply with the Contract (11.2).

Emergencies (12) – Supplier may take action in the case of an Emergency as it deems necessary (acting in accordance with standards of a Reasonable and Prudent Supplier).

Variations (14) – Purchaser with right to initiate Variations – subject to following the procedure set out in clause 14, Supplier entitled to adjustment to Charge and to Time for Completion. Supplier has right to refuse Variation in certain circumstances (14.4).

Charging mechanism (15) – Variable Fee and Fixed Fee (Base Monthly Charge). This ensures that Supplier’s fixed costs are recovered.

Termination (16) – circumstances when each party with right to terminate. [There is no right for the Supplier to terminate at will (sometimes this is something that the supplier will want. Whether it is possible will depend in part on how the facility is being financed and also whether the Supplier is willing to make the Purchaser whole for its costs and loss of profits (or part thereof) if it wishes to terminate]. Consequences of termination depend on the cause for termination (16.3). [General note - For termination due to extended Force Majeure Purchaser generally is not given compensation for loss of profit but should recover its out of pocket costs. Where the Supplier is at fault it could be argued that it should not receive all its out of pocket costs (although financiers will want to be made whole).]

Release Events (17.3) – quite extensive list of events where Supplier is relieved of its obligations to meet the Technical Specifications, will receive Extension of Time and/ or extra Cost. Distinction is made between Purchaser Risks and other Release Events as Supplier only receives a profit element to increased costs where the extra cost is due to Purchaser Risks (17.4(e)).

Patent rights (17.5) – indemnification for infringement.

Limitation of liability – no liability for indirect, special or consequential loss (17.7).

Survival on termination of certain clauses (17.8).

Insurance (18) – relatively standard provision here [provisions should be checked with local insurance expert to ensure complies with local laws/ market].

Force Majeure (19) – relatively commonly found drafting of this provision. [Force Majeure should be considered on a case by case basis to determine whether in particular case additional events should be included, what consequences of Force Majeure are appropriate etc). For more, click on Force Majeure Clauses ].

Dispute resolution (20) – negotiation, arbitration.

There are a number of additional clauses listed after the schedules which may be of interest (see below).

Possible additional provisions that it might be appropriate to include:

Please see above for additional clauses.

Provisions that may not be advisable to replicate/ may need further thought:

N/A

Provisions of wider general use:

Generally useful agreement with clear drafting.

Experience Since Coming Into Force (including any amendments)/ if draft form, whether it has been applied:

N/A

Tracking Number:

WaterBOT1