International Construction Law Review
USE OF THE FIDIC SILVER BOOK IN THE CONTEXT OF A BOT PROJECT*
JOSEPH A.HUSE
Partner, Freshfields, Paris
INTRODUCTION
In August 1999, the Fédération Internationale des Ingénieurs-Conseils (FIDIC) published the first edition of its Conditions of Contract for EPC and Turnkey Projects
, commonly referred to as the “Silver Book”. In the Introductory Note to the Silver Book, FIDIC states that the Silver Book is intended to be suitable, in particular, for BOT and similar type projects. The purpose of this article is to identify important issues and generally discuss the suitability of the Silver Book in BOT-type projects. It will begin by providing a description of a typical BOT power project, then discuss issues of risk allocation in such projects and conclude with an examination of the relevant provisions of the Silver Book as they relate to the BOT method.
DESCRIPTION OF A BOT PROJECT
The term “build-operate-transfer” or “BOT” is used to identify a particular type of project, generally falling within the broader category of project financing. In project finance, as the term is now commonly used, a project is developed and financed on a non-recourse or limited recourse basis. Project lenders look primarily to the revenues generated by the completed facility for repayment of the loan and to all the project assets as security for the loan. Project finance differs from traditional loan structures in that lenders generally have recourse only to project assets or limited recourse to sponsor assets.
Under the BOT model a particular country’s government (host government) identifies an infrastructure need, for example, a power generation facility. Potential sponsors organise in an effort to obtain a concession from the government through a bidding process. Under such a concession, the sponsors agree to build and own the project for a specified number of years and to then transfer ownership of the facility to the host government. The sponsors will organise into some type of special purpose vehicle (project company), which will normally be a limited liability
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Use of the FIDIC Silver Book in the Context of a BOT Project
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