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Settlement unlocks runway tunnel project

The Gibraltar Government will today announce that it has successfully negotiated a settlement with Obrascon Huarte Lain SA (OHL) to complete the runway tunnel.

The settlement will avoid further delays by requiring the contractor to complete the tunnel by 30th November 2018 and at a price close to the original 2008 budget.

The completion contract explicitly specifies that any delay to the contracted completion date would immediately incur financial penalties to be paid to the Government by OHL.

“This settlement therefore provides the Government and the taxpayer with the certainty of a completion date and also with certainty of cost,” the Government said in a statement.

OHL were the contractors who originally started work on the project but, after the Government terminated the contract in August 2011, the company commenced proceedings against the Government.

The subsequent long-running legal dispute came to an end in July 2015 when the Court of Appeal dismissed an OHL claim on liability and was refused leave to appeal to the UK Supreme Court.

The trial to assess the exact amount of damages to be paid by OHL to the Government was envisaged to start in 2017. However, today’s announcement signals the end of those legal proceedings.

“The completion contract will bring to an end all the costs and uncertainties associated with these legal proceedings as well as various claims still being pursued by OHL against the Government - which will now be abandoned,” the Government said.

Having originally contracted to pay OHL £30m for the tunnel in 2008, OHL will now receive a total sum of no more than £24m.

This amount includes sums already paid.

The reduction in price will contribute towards the costs and expenses incurred by the Government since termination. These include the cost of certain works undertaken directly by GJBS.

Another feature of the completion contract is that many potential risks involved in completing the tunnel project will now be assumed by OHL rather than by the Government.

The contract provides for dealing with various different eventualities in light of the unusual circumstances giving rise to it.

“Importantly however the Government is improving its current position by obtaining bank guarantees in the total sum of £37.1m to ensure OHL's performance of the works.”

The Government will also be able to pursue OHL for further sums if they fail to deliver.

“This completion contract includes various safeguards and places the Government in a far better position to avoid the problems of the past,” the statement said.

These include the provisions of bank guarantees, termination provisions designed to avoid lengthy litigation and a specific provision for any disputes to be resolved by a retired construction judge within 84 days.

The Government will continue to retain a team of monitoring consultants to supervise the completion works to ensure these are delivered on time with the agreed specifications and to the required quality.

“OHL has stated that this settlement now closes all past differences between the parties and, in a new climate of cooperation with the Government of Gibraltar, it wishes now to focus all its efforts in the successful completion of the project.”

Under the completion contract, OHL has agreed to bring in a completely fresh team to work on the tunnel project and have appointed members of its international division to ensure the delivery of the project in accordance with its obligations.

OHL will be mobilising on site during the early part of July although formal commencement under the completion contract will be 1st August 2016.

The Chief Minister, Fabian Picardo said: “Although this announcement may come as a surprise to many, our priority has been to ensure that work on the tunnel is going to be completed as soon as possible and to the standard required.”

“By reaching this agreement with OHL, we can now begin immediately with a contracted end-date in sight and for a clear and final agreed price. To continue with the court case would potentially only delay the finalisation of work on the tunnel and would incur continuing expense. It also exposed us to the risk and uncertainty of further court hearings relating to quantum.”

“This settlement with OHL ensures that the final cost of the tunnel will be as close as we could hope to achieve to that which was originally budgeted for. The result also de-risks the process for Gibraltar quite considerably.”

“This is a chance for OHL to demonstrate what it can do and to re-establish a reputation that has been severely tarnished in Gibraltar. Finalising this litigation, in which Gibraltar has been repeatedly successful has been hard work in particular for the professional and legal teams involved.”

“I want to thank the team at TSN comprising Guy Stagnetto and Nick Culatto, the team at Corbett & Co led by Edward Corbett, Mr Nigel Pardo and also Stephen Orciel and John Joe de la Paz who have been involved throughout.”

“Additionally I am also very grateful to the team in-house within HMGoG in particular Michael Gil, Hector Montado, Dilip Dayaram, Albert Mena, former Chief Minister Sir Peter Caruana who have been of great assistance in the litigation leading up to this result. GJBS have – as usual – stepped into the breach when they were needed by the Gibraltarian taxpayer and they could have done a great job of finishing the tunnel. The work they have done and completed is of the very highest standard, as usual. I want to thank them also for that work. Now, on behalf of the people and Government of Gibraltar, I very much look forward to our disputes with OHL being a thing of the past and to seeing this project completed as soon as possible and by the date agreed. It’s time to put the dispute behind us and move on.”

Pic by DM Parody