Judgment in £2.4bn PFI judicial review

21 Jun 2024

The Administrative Court has handed down judgment in a public law challenge concerning a £2.4bn Private Finance Initiative (PFI) project for Birmingham’s road network.

PFIs are long-term contracts between a private party and a government entity where the private sector designs, builds, finances and operates a public asset and related services, and bears the financial risks of doing so.

In 2010, Birmingham City Council (BCC) entered into a project agreement with a private contractor for delivery of a 25-year PFI project that includes 2,500 km of the city’s road network, up to 100,000 street lighting columns, over 850 highway structures and bridges, three tunnels, 5,000 km of footways and 76,000 street trees. In response to significant contractual disputes between BCC and the contractor (which culminated in a Court of Appeal judgment in favour of BCC), BCC sought Government approval for proposed changes to the project agreement. In November 2023, the Government rejected those proposals on the basis they were unaffordable when set against existing spending commitments.

The Court has quashed, on grounds of procedural fairness, the Government’s decision to reject BCC’s proposals. However, the Court dismissed BCC’s main case that it had unlawfully been deprived of a substantive legitimate expectation that Government would continue to pay PFI credits for the remaining 12 years of the project. In reaching that conclusion, the Court concluded that documentation produced by the Government at the time the PFI was entered into did not restrict the Government’s ability to terminate PFI credits only in “exceptional circumstances”.

The Judgment is available here.

Ewan West KC and Will Perry acted for the Secretary of State for Transport.