First bespoke liability deal for contaminated land will reduce risk for clients
The UK's first bespoke liability scheme for contaminated land has been developed to help reduce the risks involved in remediation of sites.
Devised by the international environmental consultancy WSP Environmental, the new scheme means the consultancy will guarantee fixed-price remediation to any site, transferring risk away from clients who want the land cleaned, and onto the consultants who would run the whole remediation contract.
Stephen Sykes, Global Head of WSP’s Environmental Liability Solutions told edie news that this was the first such bespoke indemnity scheme in the UK.
“At present, clients ask two basic questions before deciding on a remediation project. First, what is the cost or how can I be certain of the costs? And secondly, what about liability, what am I liable for?” Mr Sykes told edie. “They often are dissuaded from going ahead with projects as remediation costs are uncertain and can grow, and additional risks can arise as the project develops.”
“However, our new scheme removes those uncertainties and gives them one, up-front fixed price.”
He said that the very first deal had now been completed using the new liability deal. For reasons of commercial sensitivity Mr Sykes could not give the name of the client except to say that it was a blue-chip company that wanted to acquire a large, contaminated industrial site in the UK.
The contamination presented just those two risks mentioned above: overrunning remediation costs, and environmental liabilities that could arise from existing contamination during the remediation process.
To address this, WSP offered a guaranteed fixed price remediation contract as well as a contractual solution to manage the client’s environmental liabilities, including an environmental warranty that the remediation would be carried out to a requisite standard and an environmental indemnity.
The environmental indemnity was negotiated with the client’s solicitors, City law firm CMS Cameron McKenna. CMS Partner Paul Sheridan said: “Ordinarily a contractor or consultant might indemnify a client for contamination which it caused. Here WSP agreed to indemnify the client for existing contamination for which WSP would not otherwise be responsible.”
Paul Davies, of law firm Macfarlanes who helped develop the WSP Remediation Plus product, said it should lead to an increase in the number of sites getting remediated: “Remediation Plus is an exciting development in the M&A and commercial property fields. It will be of great value to businesses which face unknown liabilities for brownfield sites. In particular, it will help facilitate transactions which previously would have failed due to lack of certainty.”
Stephen Sykes added that the market in the US, where models like this are being used far more widely, is worth over US$600 million.
“We think that this solution will boost the market in the UK too and increase demand. It is more flexible than insurance and, being bespoke, can be modified to suit the needs of each deal be they modest sites or enormous,” he said.
By David Hopkins