Wednesday, 20 July 2011

Irish toll road case goes to Supreme Court

The National Roads Authority, Ireland’s government highways agency, initially took Celtic Roads Group (Dundalk) Ltd to court, for overcharging motorists paying tolls on Ireland’s M1 tolled motorway. The M1 connects Dublin from the north to the border with the UK (Northern Ireland). The Irish Times reported that the claim was that around 26,000 Euro a week in additional tolls was being collected above that which was legal under the PPP agreement.

The key point being that the bylaw regarding PPP tolls allows for toll operators to vary tolls according to inflation to maximum levels, but the NRA claims this means that at times of deflation, tolls should be reduced. As the consumer price index in 2009 in Ireland was negative, the NRA claims the toll of 1.90 Euro per car should have dropped to 1.80 according to TV3 Ireland.

Noting that it was acknowledged that it is impossible to reimburse the difference, the Commercial Court in Ireland agreed with the NRA. As a result, Celtic Roads dropped the toll immediately on the M1, as did the owners of three other Irish toll roads with similar PPP contractual conditions.

The Irish Times has since reported that Celtic Roads is now appealing the decision to the Supreme Court. Part of the motivation is that toll roads in Ireland are now in dire financial straits because of the recession and collapse of the property and banking sectors in Ireland. With demand down, toll revenues are down, and the owners are facing significant difficulties in meeting their debt management obligations.

Irish taxpayers are saved this risk of course, because it isn’t their debt, the roads were built (and to a high standard), so regardless if the owners go bankrupt, the roads will still be there for use. Meanwhile, the projections of investors in toll road PPPs may take a pause for breath before investing so quickly in new roads in economies that so clearly are subject to an inexplicable bubble of growth. Celtic Roads Group will be hoping its Supreme Court appeal is successful, as it is likely to want as much revenue as possible in the current economic climate.

1 comment:

  1. It would be good to know, how the contractual mechanism to evaluate deflation (% and period) was constructed, and how the grunts for reimbursement by the operator were calculated?
    Perhaps there were none.
    Witold Grzybowski