Agreement Related To The Polish LNG Terminal in Świnoujście Has Been Reached. A Success for Poland?

The Parties have reached an agreement, which seems to be quite beneficial for Poland: 

• The first batch of LNG is going to be delivered this year, the contractor takes over full responsibility for the said delivery (the contractor is going to pay for the delivery, should the company be unable to realize the operation – this had not been provided for in the prior agreement),
• Remuneration received by the consortium erecting the terminal remains unchanged,
• The contractor accepted the higher level of the contractual penalties related to the realization of the works, in line with the specified deadlines,
• The parties agreed to execute additional process-related audit regarding the whole plant. Detailed audit is going to be executed once the construction works are finished. The audit is going to be realized by an independent, international auditor, whose experience and qualifications are going to fit the task. 

The negotiations are successful for the Polskie LNG, however, we may speculate that success has not been achieved only by one Party of the agreement. According to the win-win principle, some compromise was also required. What type of compromise? It is not a secret that the Italian Saipem company was driven towards reduction of the contractual penalties related to potential delay of the investment. Most probably, the company realized the goal above. The release published by Polskie LNG notes that “an annex was signed, and the schedule was updated, and this is to make it possible to finalize the project as quickly as it is possible, according to the top standard”. Hence, a decision of the Italian party, related to acceptance of the “more severe contractual penalties related to the on-time realization of the works”. The above words refer to the new way of calculating the penalties and the new deadlines.

This does not change the fact that the agreement may be interpreted as a Polish success. A threat that the works would not be finished on time within the LNG terminal arose, even though the process was fairly advanced (completion status above 98%). Due to the technological difficulties and process-related issues, selecting any alternative contractor could have an effectively detrimental effect on the project, for a long period of time. Fortunately, the above scenario did not take place.