India: Public-Private Partnership For Airport Infrastructure

(i) Parties to the concession: Grantor and Concessionaire.

(ii) Relationship matrix between Grantor and Concessionaire: Grantor exercises control over the Concessionaire as set forth in the concession and also in relation to the management of the Concessionaire by way of participation in the equity capital of the Concessionaire.

(iii) The AOAs of the concessionaires in Delhi and Mumbai contain the following beneficial provisions in favour of AAI:

a. If any shareholder is unable to fulfil its obligation to capitalise the Company in the manner provided in the AOA, then the defaulting shareholder shall be liable to pay an interest of the then State Bank of India Prime Lending Rate plus an additional 10 % per annum from the aforesaid due date upto the date of rectification (in full) of such default by the Defaulting Shareholder except for AAI and AAI Nominees.

b. If the shareholder transferring the Equity Shares is a Private participant, he must obtain the consent of AAI to transfer such shares. (as per Article 35)

c. After expiry of 7 years from the Effective Date, Equity Shares of the Company held by any Prime Member or its transferred shareholder shall not be transferred to any entity without the prior written permission of the AAI, which permission shall be given unless AAI reasonably believes that the technical, financial or operational capability of the Company pursuant to such transfer of Equity Shares.

d. Where any business/transaction of the Company relates to the Reserved Shareholders Matters as set out in Article 68, the requisite quorum of a General Meeting shall constitute two Members present in person (at least one of which shall be AAI).

e. Till AAI, along with AAI Nominees, in the aggregate, hold at least 10 per cent Equity Shares in the Company, the Company shall not give effect to any decision or resolution in respect of identified matters unless the same is approved by the affirmative vote of AAI at the General Meeting.

f. AAI shall have the right to nominate such number of Directors out of maximum strength of the Board (15), as is proportionate to its equity shareholding in the Company subject to a minimum of one director. The aforesaid right of AAI to nominate one director to the Board shall subsist and survive irrespective of AAI not being a Shareholder in the Company.

g. If the aggregate equity shareholding of Private Participants is less than or equal to 50% of the total paid-up and outstanding equity share capital of the Company, AAI shall have the right to nominate the Chairman.

h. AAI shall have the right to examine the books, records, and accounts to be kept by the Company and shall be entitled to receive all information, including monthly management accounts and, operating statistics and other trading and financial information.

(iv) Arguably, direct participation by the Grantor holding equity in the Concessionaire might create a situation of potential conflict and uncertainty for investors. The Grantor may seek to achieve dual objectives, such as, for example, increasing employment and lowering prices for end users.

Conflict of interest can arise between the Grantor and the Concessionaire as the Concessionaire is at one pole, where it seeks to maximise the profit and value of the Concessionaire, while the Grantor is at the other pole, where it seeks to promote social well-being.

(i) The debate between lease versus licence occurs almost in every instance, and typically, the Grantor would prefer a license while the Concessionaire would prefer a lease.

(ii) A lease grants an interest in the immovable property, and use or enjoyment of such immovable property in violation of the terms of the lease would amount to a breach and be liable to consequences set forth thereunder.

In the case of a license, the Grantor grants a right to do or continue to do something in respect of its immovable property, which would otherwise, but for the grant, be unlawful. It follows that the grant should spell out each and every right in favour of the licensee, or else it would be considered unlawful.

The Hon'ble Supreme Court of India in Pradeep Oil Corporation v. Municipal Corporation of Delhi and Ors.⁵ has observed that:

"A license, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name; (c) it is revocable and (d) it is determined when the grantor makes subsequent assignment."

(i) Exclusive grant to design, build, finance, operate and transfer constitute the fundamental elements of each concession in respect of the airport infrastructure.

(ii) Development of the Airport is pursuant to a Master Plan to be implemented in a phased manner based on timeline (in Bangalore) or achievement of traffic triggers (in other cases). Expansion triggers linked to air traffic are logical. The Master Plan is subject to periodic review by the Concessionaire.

(iii) Change in scope of works is envisaged in Greater NOIDA concession, for which the Grantor will reimburse costs.

(iv) Provision of services or facilities other than aeronautical

Bangalore: Non-Airport Activities

a. Concessionaire to undertake Non-Airport Activities (such as Airport shuttle transport services, Business parks, Industrial parks, Hi-tech parks, Golf course).

b. Non-Airport Activities require prior GoI consent if such activities are to be considered for the calculation of termination payment.

c. Upon Termination, GoI is not bound to accept the terms and conditions of such Non-Airport Activities contracts. Such a provision is not attractive from an investor perspective.

Delhi/Mumbai: Non-Aeronautical Services

a. Non-Aeronautical Services (are defined under Part I and Part II. Part I includes Cargo handling and hangar. Part II includes duty-free sales, Hotels and motels, Tourist information services and Locker rental) to the extent they form part of the Master Plan.

b. Transfer Assets include Non-Aeronautical Services falling in Part I and forming. Transfer Assets are considered for the determination of Termination Payment.

c. Upon Termination, GoI is not bound to accept the terms and conditions of Non-Aeronautical Services contracts. Such a provision is not attractive from the investor's perspective.

Greater NOIDA: City Side Development ('CSD')

a. Concessionaire is entitled to undertake CSD for commercial purposes through Project Agreements. Authority may step into such agreements at its discretion.

b. CSD assets form part of Specified Assets, which are considered for calculating Termination Payment.

c. Project Assets comprising City Side Development may be sub-licensed by the Concessionaire. Upon termination of the Concession, such sub-license shall continue till the agreed term under the sub-license or till the concession term, whichever is earlier.

d. Upon Termination, GoI is not bound to accept the terms and conditions of such Project Agreements. Such a provision is not attractive from an investor perspective.

– the operation and maintenance of the Airport and performance of the Airport Activities and Non-Airport Activities.

– To the extent that the Concessionaire incurs any capital investments, amounts or costs in relation

to the provision of Non-Airport Activities and requires such investments, amounts or

costs to be included in the calculation of the Termination Amount, Debt or Settlement

Amount, the Concessionaire shall seek the prior written consent of the Grantor.

– Concessionaire will be allowed to levy a User Development Fee, subject to escalation as per the inflation index.

– Under the State Support Agreement-

The Airport will grow according to the actual demand. The initiation of the phase follows the development of air traffic.

Phase 1 (Initial phase 2006-2010)

Phase 2 (indicative 2011- 2015)

Phase 3 (indicative 2016 – 2025)

Phase 4: Vision (future)

– determine, demand, collect, retain and appropriate charges from the users of the Airport.

– Concessionaire may seek to undertake Non-Aeronautical Services at the Airport Site if included in the Master Plan.

– The Master Plan shall inter alia provide for identifiable traffic triggers for undertaking specific capital expenditure projects and shall provide for traffic-linked capacity expansions

– Non-Aeronautical Services shall form part of the Transfer Assets.

– Airport is constructed and developed in accordance with the Master Plan.

– Concessionaire may use any area earmarked for future expansion.

– Grantor may require additional works (Change of Scope); costs will be reimbursed by the Grantor.

– expansion not forming part of Change of Scope shall be undertaken at the cost and expense of the Concessionaire.

– Concessionaire shall undertake City Side Development and exploit such development for commercial purposes.

– Concessionaire may sublicense the Project Assets comprising City Side Development; the validity of such sub-license shall not extend beyond the period specified in Clause 28.7.

(i) The term for brownfield airports is 30 years, extendable for another 30 years. Niti Aayog, in its Final Report released in May 2019 titled 'New Approaches to PPP focusing on the Airport Sector' has recommended an increase to the term for Brownfield Airport Concessions to to 50 years with no extension provisions as 30 years restricts Concessionaire potential to leverage CSD, and earn a return on investment.

(ii) A non-defaulting party may terminate the concession on account of the default of the other Party. In all cases, a cure period is envisaged during which the defaulting Party is given an opportunity to cure the default in order to avoid termination. Typically, prolonged force majeure can be a ground for termination. Notably, the concession agreement in the case of Bangalore is silent in regard.

(iii) Termination Payment provisions would have a bearing on bankability and also tariff determination by AERA. The extent of Termination Payment liability would depend on the trigger for termination, whether on account of default of Grantor or default of Concessionaire or on account of expiration. In some instances, termination on account of Force Majeure is treated separately.

(a) If termination is triggered on account of default by the Grantor, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] being 100% of Debt relatable to Transfer Assets + 120% of the subscribed and paid-up value of the Equity share capital.

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Fair Market Value determined in the manner prescribed.

Bangalore

– shall pay the higher of 100% of Debt (less any insurance received by or due and payable to BIAL) or Settlement Amount being gross fixed assets (as Indexed), net current assets, capital work in progress, intangible assets of BIAL and pre-operating costs and expenses. The Settlement Amount shall exclude costs for Non-Airport activities that were not consented to by GoI. All assets of BIAL would be transferred without additional payment in favour of GoI or its nominee.

Greater NOIDA

– shall pay Debt Due less Insurance Cover;

– shall pay 150% of the Adjusted Equity;

– shall pay 115% of the amount representing the Additional Termination Payment in respect of Specified Assets (Project Assets constructed, acquired or installed between the 5th and 30th anniversary of COD, buildings and immovable structures forming part of CSD and assets forming part of expansion under the Master Plan)

(b) If termination is triggered on account of default by the Concessionaire, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] 90% of Debt relatable to Transfer Assets

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Discounted Fair Value (Lower of Book Value as recorded in the books of the JVC and the Net Present Value) in the manner prescribed.

Bangalore

-shall pay the Termination Amount. Termination Amount shall mean 100% of the Debt (less any insurance received by or due and payable to BIAL). All assets of BIAL would be transferred without payment in favour of GoI or its nominee.

Greater NOIDA

– shall pay 90% (ninety per cent) of the Debt Due less Insurance Cover, and

– shall pay 70% (seventy per cent) of the amount representing the Additional Termination Payment in respect of Specified Assets.

(c) If termination is triggered on account of the expiry of the Agreement, the Grantor;

Delhi & Mumbai

– or its nominee shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] being 100% of Debt relatable to Transfer Assets + 120% of the subscribed and paid-up value of the Equity share capital.

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Fair Market Value determined in the manner prescribed.

Bangalore

– or its nominee shall acquire all of BIAL's rights, title and interests in and to the Airport on payment on the Transfer Date to BIAL the aggregate of one hundred per cent (100%) of the par value of the issued, subscribed and paid-up share capital of BIAL and one hundred per cent (100%) of the Debt.

Greater NOIDA

80% of the Adjusted Depreciated Value of Project Assets acquired and installed after the 30th (thirty ) anniversary of the Appointed Date.

(i) The revenue model should be able to incentivise the Concessionaire to develop infrastructure other than infrastructure for rendering aeronautical and related services.

(ii) The revenue models under the Concessions reflect a shift from a revenue-sharing model with the Grantor (i.e., revenue from aeronautical and non-aeronautical or non-airport activities) in the case of Bangalore, Mumbai and Delhi to a fee being payable by the Concessionaire to the Grantor for each domestic and foreign passenger in the case of Greater Noida.

(iii) A revenue model similar to that of Greater Noida has also been adopted for six airports – Ahmedabad, Jaipur, Lucknow, Guwahati, Mangalore and Thiruvananthapuram.

(b) Insurance proceeds;

(c) any amount that accrues to Concessionaire from the sale of any capital assets or items;

(d) payments and/or monies received in respect of air navigation and air traffic management

services.

(e) payments and/or monies collected by the Concessionaire for and on behalf of any governmental authorities.

User Fees:

– Concessionaire allowed to levy UDF for passenger amenities and services and facilities. UDF is to be used for the development, management, maintenance, operation and expansion of the Airport.

Passenger service fee:

– The charges to be adopted by Concessionaire at the time of airport opening will be the higher of

a) The AAI tariff effective 2001 duly increased with inflation index, as set out hereunder, up to the airport opening date Or

b) The then prevailing Passenger Service Fee at the other AAI airports

The Passenger Service Fee chargeable by Concessionaire, is inclusive of the cost of

Security Expenditure on Central Industrial Security Force (CISF). This component of cost

towards Security Expenditure on CISF shall be revised upwards by the Concessionaire as and when directed by GOI.

Mumbai:

AF = 38.7 % of projected Revenue [includes Revenue from Aeronautical + Non-Aeronautical Services] for the said Year.

Passenger Service Fee:

– The Passenger Service Fee chargeable at the Airport shall be inclusive of the cost of security expenditure on the designated security agency per embarking passenger and the facilitation component payable to the Concessionaire per embarking passenger.

User Fees:

– Concessionaire shall, for the provision of Aeronautical and Non-Aeronautical Services, be entitled to levy, collect and appropriate the Fee from Users, including airline aircraft, passengers, advertisers and visitors (determined and revised by AERA).

– The Designated GOI Agency shall be entitled to levy, collect and appropriate the Route Navigation Facilities Charges and Terminal Navigation and Landing Charges from airlines in accordance with Applicable Laws.

(i) The development risk to the extent involving critical project approvals should ideally be allocated to the Grantor. Notably, in the case of Greater NOIDA, it is the Grantor's obligation, as a condition precedent, to secure the Right of Way, Applicable Permits relating to environmental protection, conservation and Forest clearance.

(ii) A single point contact nominated by the Grantor for assistance to the Concessionaire in respect of liaising with various agencies under the control of the Grantor is crucial.

(c) Forest clearance (for 90% of the land)

– Grantor to provide reasonable assistance and support to the Concessionaire.

– To facilitate the grant of Clearances, the Grantor shall nominate a senior officer to assist the Concessionaire in liaising with the relevant agencies, authorities, departments, inspectorates, and ministries.

(i) A holistic perspective is required when considering environmental, social and climate risks. While there are several legislations, guidelines and standards supporting sustainability in general and sustainability, particularly with respect to airports, it would be relevant to have a 'Sustainability Plan' for the development and operation of airports. The following standards support a sustainable airport model:

(ii) Sustainable Airport is a multi-dimensional concept based on the interaction of multiple factors consisting of five dimensions: airport services and quality; energy consumption and generation; CO2 emissions and mitigation planning; environmental management and biodiversity; and low atmospheric emission transportation.

(iii) Given the growing concern regarding the environmental impact of air transport, the green performance of an Airport may be judged on the basis of the following criteria⁶:

(1) air and noise control; (2) green building and infrastructure; (3) waste management and recycling practices; (4) environmental monitoring and control; (5) green operation and transportation; (6) employee green training; and (7) green policies and regulations.

(iv) The green performance forms a subset of the larger sustainability model, which can be mapped against the following indicators⁷:

(1) Noise Reduction; (2) Emission Reduction and Air Quality; (3) Energy Management; (4) Water Management; (5) Waste Management; (6) Biodiversity conservation and land use; (7) Cost and economy; (8) Quality of the internal environment; (9) Transport and vehicle control; (10) Social and Cultural Aspects Indicator.

(v) Notably, the Central Government is required to develop national strategies, plans and programmes for conserving the environment and promoting the sustainable use of biological diversity under the Biodiversity Act, 2002.

In furtherance of this requirement, the Government has laid down action points under the National Biodiversity Action Plan, 2008 (amended by addendum 2014 to NBAP 2008). These action points identify sectors for integration of biodiversity concerns in economic and social development, which include;

"Integrate biodiversity concerns across development sectors (such as industry, infrastructure, power, mining, etc.) and promote use of clean technologies."

While the Environmental Clearance obtained in respect of the Project takes into account biodiversity concerns, there is a need to ensure effective implementation and monitoring of the action points under the National Biodiversity Action Plan, 2008.

– Concessionaire is to review annually progress under the Environmental Management Strategy and update the said Strategy.- Concessionaire shall provide annual reports in relation to progress under the Strategy to the Grantor.

– Concessionaire shall procure that an independent expert undertakes an environmental audit of the Airport. The Concessionaire shall ensure that, at termination, the environmental condition of the Airport meets all statutory requirements.

– The Concessionaire shall undertake the construction of the Airport and City Side Development in conformity with the Specifications and Standards and the Master Plan.

Specifications and Standards include mandatory standards and requirements, such as

a. Energy Conservation Building Code, 2017

b. Statutory Agency Requirements, including Ministry of Environment, Forests and Climate Change, Pollution Control Board

– Obligation in respect of O&M: protection and conservation of the environment and provision of equipment and materials thereof

– The Master Plan shall include proposed development through the technical, economic, and environmental investigation of concepts and alternatives;

(i) Operating risk may be examined under the following heads:

(a) Inadequate Performance

(b) O&M

(c) Utilities

(d) Latent Defects and Existing Liabilities

(ii) Typically, operating risks, in the ultimate analysis, are factored in the fee charged to the user. It would serve well for the concession to require risk mitigation measures to be put in place and a matrix to address such risks effectively.

-IATA Global Airport Monitor service standards are to be followed.The Concessionaire is to participate in IATA surveys on an annual basis.

If the Airport continues to be rated in respect of the service standards under Concessionaire direct control as lower than three and a half (3.5), GoI shall have the right to impose liquidated damages and/or to give directives to Relevant Authorities participating in the joint coordination committee to assist Concessionaire in improving the rating. The quantum of liquidated damages will, taking into account factors leading to the drop in ratings, be discussed and agreed between the Parties.

-If the Airport continues to be rated as lower than three and a half (3.5) (in the current IATA scale of 1 to 5) in respect of the service standards under

Concessionaire direct control due to Concessionaire poor performance in the survey

conducted in respect of the two (2) years following the date that Concessionaire first becomes liable to pay such liquidated damages, GoI shall have the right to terminate this Agreement.

If the Concessionaire ceases operation of the Airport for more than 48 hours, without the written consent of the Grantor, at the request of either Party, the Grantor will meet with the Concessionaire to discuss and agree on a plan and the appointment of a joint operation and management committee to procure that the operation of the Airport recommences as soon as practicable. If the Grantor and Concessionaire are unable to agree on a plan and appoint a joint operation and management committee within 6 hours of the expiry of the period referred to above, the Grantor shall be entitled to operate the Airport until such time as the Concessionaire is able to resume operation of the Airport.

O&M

– As between Concessionaire and Grantor (and their respective employees, servants and agents), Concessionaire alone will bear any responsibility there may be for any cost, expense, loss, liability or damage suffered or incurred by any user(s) at the Airport or any other Person(s) or otherwise and arising out of or in connection with the design, construction, maintenance and operation of the Airport and Non-Airport Activities without recourse to Grantor (or any of its respective employees, agents and/or servants) to the extent that such cost, expense, loss, liability or damage arises as a result of the negligence of Concessionaire (and its employees, servants and agents).

Utilities

– Concessionaire shall be responsible for and promptly pay all expenses incurred by it in respect of the operation of the Airport, including, without limitation, in respect of tax, insurance and the provision of all services or utilities to or at the Airport such as electricity, water, gas, refuse collection,

sewerage, foul water, drainage and telephone.

– IATA/ACI AETRA service standards are to be followed. The Concessionaire is to participate in IATA/ACI AETRA passenger survey quarterly.- Concessionaire has to achieve the Objective Service Quality Requirements and provide Compliance reports to the Grantor. If the Concessionaire fails to achieve these requirements, it shall pay to the Grantor 0.5% of the monthly Revenue every month.

– After the completion of Stage 1, the Airport target rating shall be 3.5; provided, however, that after the completion of Stage 2, the Airport target rating shall be 3.75; if the Concessionaire fails to achieve these, it shall pay to the Grantor 2.5% of the monthly Revenue for every month that the standards are below the Target Rating by more than 0.1 points and 1.25% of the monthly Revenue (prior to default) for every month in the event the standards are below the Target Rating by less than 0.1 points.

– Concessionaire to provide to the Grantor report on each development that is completed in accordance with the development plan. If, on review of these reports, the Independent Engineer certifies that a particular development under progress is below the respective Development Standards and Requirements [which post notification is not rectified], the Concessionaire shall pay to the AAI 2.5% of the monthly Revenue (prior to default) for every month.

O&M

– Concessionaire has to achieve and maintain ISO 9001:2000 certification for all facilities relating to Aeronautical Services. If the Concessionaire fails to achieve or maintain this certification, it shall pay the Grantor 2.5% of the monthly Revenue (prior to default) for every month till it achieves the certification.

Utilities

– Concessionaire to provide the Grantor with a continuous supply of electrical power and water sufficient to enable it to perform the Grantor Services (Communications, Navigation and Surveillance Systems for Air Traffic Management) and the Grantor shall reimburse Concessionaire the costs it incurs in procuring such services.

– Concessionaire to provide Essential Services (which includes water) at the Airport Site.

The Concessionaire shall, at its cost, maintain the airfield lighting system and the main and standby power supply systems in accordance with the relevant standards prescribed in the relevant ICAO Annexes and Documents.

– If the Grantor determines that, as a result of the expansion of the Airport, additional standby supplies of electrical power are required at the Airport, parties will discuss and seek to reach an agreement.

– The Concessionaire shall ensure and procure compliance with each of the Key Performance Indicators. Damages for non-compliance will be determined by AERA and adjusted against Aeronautical Charges.

O&M

– Maintenance Manual shall include provisions for life cycle maintenance and repair of Project Assets.

– Failure to repair defects in Maintenance Requirements shall be a breach, and the Authority shall be entitled to recover Damages for each day of delay until the breach is cured at the higher of (a) 0.5% of Average Daily Revenue and (b) 0.1% of the cost of such repair or rectification.

– If the Concessionaire does not maintain the Airport in conformity with the Maintenance Requirements and fails to commence remedial works within 15 days of receipt of the O&M Inspection Report or a notice from the Grantor or the Independent Engineer, the Grantor is entitled to undertake such remedial measures at the risk and cost of the Concessionaire, and a sum equal to 20% of such cost shall be paid by the Concessionaire as Damages.

– In the event that the Airport or any part thereof suffers any loss or damage during the Concession Period from any cause, the Concessionaire shall, at its cost and expense, rectify and remedy such loss or damage forthwith.

If such loss or damage has resulted due to any breach or by the Concessionaire under this Agreement, the costs for the repair or rectification shall not be considered for determination of the Aeronautical Charges.

– O&M Terminal Building: Level of service in the Terminal Building shall, during the Peak Hour, be no inferior to 'Level of Service optimum or similar standard 69 as specified by IATA.

If it is found to be inferior, the Concessionaire is to pay Damages to the Grantor, which shall be determined at the rate of 1% of the total revenue from Fees of that Accounting Year.

Utilities

– Concessionaire shall procure water and electricity, as may be necessary for the operation of the Airport.

– Concessionaire shall ensure that the respective entities owning the utilities on, under or above the Site are enabled by it to keep such utilities in continuous satisfactory use.

– State Support Agreement- GoUP further confirms that it shall make best endeavours to maintain and develop existing facilities in relation to Utilities (to the extent that these services are generally maintained by the GoUP or its departments/ agencies/ entities substantially owned or controlled by the GoUP).

(i) 'Change in law' typically refers to any change in the provisions of law or imposition of any requirement by an authority having the force of law. The following aspects, among other things, would require careful consideration in relation to a 'change in law' definition and use case:

1. Categories of exclusions. For example, the definition may exclude 'environmental laws' or tax laws'.
2. Jurisdiction to which the Change in Law applies.
3. The cut-off period beyond which 'change in law' would be considered.
4. Allocation of risks and costs between the Grantor and the Concessionaire arising due to Change in Law.

Risk emanating from Change in Law requires careful consideration as it would have an impact on the bankability of the Project.

(ii) The 'Change in Law' meaning and use case appears well designed in the case of Greater Noida where the foregoing aspects have been documented:

"Change in Law" means the occurrence of any of the following after the Bid Date: a) the enactment of any new Indian law; b) the repeal, modification or re-enactment of any existing Indian law; c) the commencement of any Indian law which has not entered into effect until the Bid Date; d) a change in the interpretation or application of any Indian law by a judgement of a court of record which has become final, conclusive and binding, as compared to such interpretation or application by a court of record prior to the Bid Date; or e) any change in the rates of any of the Taxes that have a direct effect on the Project;

Bangalore:

'Change in Law' means the occurrence of any of the following (other than in respect of any laws of GoK, any Tax laws (except for those that relate to any Tax benefits provided to BIAL and/or the Airport pursuant to GoIs infrastructure policy and as more specifically set out in Schedule 12) or any environmental laws or Labour Laws) after the date of this Agreement: (i) the modification, amendment, variation, alteration or repeal of any existing Indian law or the enactment of any new Indian law; (ii) the commencement of any Indian law which has not yet entered into effect except to the extent where such Indian law was enacted prior to the date hereof with a commencement date after the date hereof and such Indian law takes effect on that commencement date without any material amendment or a change in the interpretation, application or enforcement of any Indian law by the Supreme Court of India or GoI; (iii) after the date of grant of any Clearance a material change in the terms and conditions attaching to such Clearance or the attachment of any new material terms or conditions or such Clearance ceasing in part or in whole to remain in full force and effect. Provided that the creation or introduction of an Independent Regulatory Authority (including the framing of rules and regulations in relation thereto or thereunder but, for the avoidance of doubt, shall exclude any amendments and/or changes relating to the Regulated Charges) having jurisdiction over all Major Airports shall not constitute a Change in Law.

Delhi & Mumbai:

"Change in Law" means the occurrence of any of the following (other than in respect of any tax laws or any environmental laws) after the last date of submission of a binding offer or bid for the Airport by the Private Participants during the competitive bidding process initiated by the AAI for the purposes of selection of the Private Participants (the "Bid Date"); (a) the modification, amendment, variation, alteration or repeal of any existing Indian Law or the enactment of any new Indian Law; (b) the commencement of any Indian Law, which has not yet come into effect except to the extent where such Indian Law was introduced in the central legislature (as a bill) or enacted, prior to the Bid Date, with a commencement date after the date hereof and such Indian Law takes effect on that commencement date without any material amendment; (c) a change in the interpretation, application or enforcement of any Indian Law by the Supreme Court of India; (d) after the date of grant of any Clearance a change in the terms and conditions attaching to such Clearance or the attachment of any new terms or conditions or such Clearance ceasing in part or in whole to remain in full force and effect otherwise than on account of any action or inaction of the JVC; Provided however that the creation or introduction of a Regulatory Authority (including the framing of rules and regulations in relation thereto or thereunder) having jurisdiction over the Airport shall not constitute a Change in Law. Provided further an event, the adverse effect of which has been insured against or could have been insured against in accordance with Good Industry Practice shall not constitute a Change in Law.

(i) 'Force Majeure' typically refers to events which are reasonably beyond the control of a Party upon the occurrence of which such Party is excused from discharging its obligation which is affected on account of such force majeure event.

(ii) The following aspects, among other things, would require careful consideration in relation to a 'force majeure' definition and use case:

a. Categories of exclusions. For example, in almost all cases, economic hardship is an exception to the 'force majeure' definition. At times, 'Change in Law' may be expressly included or excluded.

b. Steps to be taken by the Party affected by the occurrence of a force majeure event and the timeline to undertake such steps.

c. Effect of prolonged force majeure

d. Consequences of force majeure

(iii) Risk emanating from Force Majeure requires careful consideration as it would have an impact on the bankability of the project.

(iv) The concessions typically provide for termination as an option in case of prolonged force majeure. The relevant provisions are as under:

If termination is triggered on account of the occurrence of a Force Majeure event, the Grantor;

Delhi & Mumbai

– shall acquire Transfer Assets [Aeronautical and Part I Non-Aeronautical] 100% of Debt relatable to Transfer Assets.

– have the right to acquire Non-Transfer Assets [Part II Non-Aeronautical] at Discounted Fair Value (Lower of Book Value as recorded in the books of the JVC and the Net Present Value) in the manner prescribed.

Bangalore

-Neither Party is to be liable for failure to comply with obligation and must not be required to perform obligations if such is prevented by force majeure, and time shall also be extended to perform such obligations.

Greater NOIDA

– Force Majeure means the occurrence in India of any or all Non-Political Event, Indirect Political Event and Political Events.

a. For a Non-Political Event

– Shall pay 90% of Debt Due less Insurance Cover.

b. For an Indirect Political Event

– Shall Pay Debt Due less Insurance Cover.

– 110% of Adjusted Equity

– Additional Termination Payment less Insurance Cover

c. For a Political Event

– Shall Pay the same amount as on the account of default by Grantor

(iv) the manner in which the event affects the party's obligation.

-Time for performance by the affected Party of any obligation with any time limit affected by force majeure and for the exercise of any right affected shall be extended by the period during which such FM continues and by such additional period as is necessary.

– The Party receiving the claim for relief shall, if it is to dispute the claim, give written notice of dispute to the Party making the claim within 15 days of receiving the notice. Not contesting the validity of the notice of claim within 15 days shall be deemed acceptance.

– If the force majeure event continues for more than 365 days, either Party shall have the right to terminate by giving a notice of termination.

– In the event of any such termination, Grantor shall-

a. acquire all of the Concessionaire's rights, title and interests in and to the Transfer Assets on payment within six months of the Transfer Date of 100% of Debt in respect of the Transfer Assets as recorded in the books of the Concessionaire.

b. have the right to acquire all of Concessionaire's rights, title and interests in and to all or any of the Non-Transfer Assets on payment within six months of the Transfer Date of Discounted Fair Value and the Net Present Value of such Non-Transfer Assets.

Costs:

– In case of a Non-Political Event, the Parties shall bear their respective force majeure Costs.

In case of an Indirect Political Event, all force majeure Costs attributable to such Indirect Political Event, not exceeding the Insurance Cover, shall be borne by the Concessionaire, and to the extent force majeure Costs exceed such Insurance Cover, one-half of such excess amount shall be reimbursed by the Authority to the Concessionaire.

In case of a Political Event, all force majeure Costs attributable to such Political Event shall be reimbursed by the Authority to the Concessionaire.

Termination:

– If force majeure event subsists for a period of 180 days or more within a year, either party may, in its discretion, terminate this agreement by issuing a Termination Notice to the other Party.

Termination Payment:

a. If Termination is because of a Non-Political Event, the Grantor shall pay equal to 90% of the Debt Due less Insurance Cover.

If Termination is because of an Indirect Political Event, the Grantor shall pay an amount equal to

(a) Debt Due less Insurance Cover, provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be included in the computation of Debt Due;
(b) 110% of the Adjusted Equity;

(c) an amount equivalent to the Additional Termination Payment less Insurance Cover; provided that if any insurance claims forming part of the Insurance Cover are not admitted and paid, then 80% of such unpaid claims shall be included in the computation of the amount payable.

(i) Step-in right of the Grantor cannot be argued with as such a right is essential given the critical nature of airport infrastructure. However, such right should be exercisable under specified and limited circumstances, for example, in case of an occurrence of an event affecting national security and safety.