Case Nos: CA-2024-002136 - [2025] EWCA Civ 921

Some of the contractual terms

The Project Agreement is very long. The Judge noted in paragraph 69 of the Judgment that the length and complexity of the contract are “not surprising, since it provided both for the construction and the operation over a 30 year period of three separate facilities”.

Clause 77.1 of the Project Agreement states that the provisions of paragraphs 3 and 11 of schedule 15 are to apply in respect of “Third Party Income”.

“Third Party Income” is defined in appendix A to the Project Agreement as follows:

“the Contractor’s [i.e. FCCB’s] (including for the purposes of this definition the Operating Contractor [i.e. FCCR] and/or any Affiliates’) income from third parties (other than the Authority [i.e. the Council] under the Contract and other than Substitute Waste) associated with the Project including without limitation that derived from Third Party Waste, Electricity Output and Recyclates Output. The Contractor and/or Affiliate shall be entitled to deduct from such income the costs directly incurred in generating the income provided that the Contractor is able to demonstrate that:

the costs to be taken into account are specifically and solely related to the generation of Third Party Income additional to that modelled in the Base Case; and

such costs are incremental costs incurred over and above those costs which were either envisaged in the Base Case or have been or will be otherwise recovered through the Payment Mechanism; and

the costs are not the costs of handling or processing the Third Party Waste or Recyclate by the Contractor or Affiliate,

and for the avoidance of doubt, reference to ‘Affiliates’ in sub-paragraph (a) shall be deemed to include FCC Environment (UK) Limited, [FCCR] or any Affiliate of FCC Environment (UK) Limited.”

“Affiliate” is defined in appendix A to the Project Agreement in these terms:

“in relation to any person, any holding company or subsidiary of that person or any subsidiary of such holding company”.

Paragraph 3 of schedule 15 to the Project Agreement deals with the calculation of the Unitary Charge (including adjustments for Third Party Income Share). Paragraph 11 of schedule 15, headed “Third Party Income Share”, explains that the Third Party Income Share in the relevant year is the aggregate of “Recyclate Output Excess TPI Share”, “Electricity Output Excess TPI Share”, “Third Party Waste Excess TPI Share” and “Other Excess TPI Share”. The last two of these featured in argument. Taking them in reverse order, “Other Excess TPI Share” is simply 75% of “Other Third Party Income”. As for “Third Party Waste Excess TPI Share”, paragraph 11.4 states:

“The Third Party Waste Excess TPI Share in the relevant Contract Year shall be calculated in accordance with the following formula: