Raytheon wins arbitration award of £224 million

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The FT reported on its front page today (19 August 2014) that the UK has been ordered to pay Raytheon £224 million, including £50 million in damages, arising from unlawful termination of a £750 million contract for an electronic control system.

This demonstrates a number of interesting points:

  • the claim was settled by arbitration, which is a common and good choice in technology contracts of this sort;
  • arbitration is confidential, but the UK is accountable to the public, so the news is out;
  • the issues included responsibility for delay and alleged poor performance before termination.  These issues are gaining importance in technology disputes, and there are important approaches and strategies that parties should consider to manage them during the project;
  • termination is a drastic approach, and every party considering it should spend time to work through the options and consequences before pushing the button.  There are usually other options.  The UK paid the price for making a particular choice, and one wonders how much analysis of the options was carried out before termination;
  • the arbitrators criticised the project team for poor communication to its political superiors.  The project team is often in the position of being one side of a contentious relationship and so having a position to defend, while also having an obligation to stand back from the issues and provide a dispassionate view.  The potential conflicts in this position are a management challenge, and can be addressed by involving third parties to provide independent review at appropriate stages.

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