19. Contingent Liabilities

19a Contingent Assets disclosed under IAS37

Transport Scotland successfully defended an allegation of GARL copyright infringement, and a subsequent appeal which was dismissed in May 2012. It has now submitted a Motion for Additional Fee to recover appropriate costs.

19b Contingent Liabilities disclosed under IAS37

Transport Scotland has a guarantee in place in relation to funding received by European Union re TENS-T funding for GARL Project where there is an obligation for a period of 5 years, to require repayment of 50% of the total funding (€850,000 / £720,970) should it be considered that the monies were not used for the purposes agreed under the original application. This liability therefore runs out in July 2015 and would be based on the exchange rate at the time any repayment is made.

There is a potential claim from the contractor for White Cart Viaduct who expect to incur costs of £25m and only receive funding of £9m from Transport Scotland. The contractor intends to attempt to recover the £16m deficit from Transport Scotland. Transport Scotland consider that that it is more likely at present that no future payment will be required.

As part of Transport Scotland normal course of business the Forestry Commission granted Transport Scotland the right to use a forestry track as an emergency diversion route from the site of the latest landslide on the A83 at the Rest and Be Thankful on the understanding that Transport Scotland will have liability for any incidents that may occur whilst the track is being used for this purpose. The potential obligation is estimated at £5m but it is not considered likely that any liability will occur.

There is a potential claim from the contractor for Erskine Bridge Gantry Contract for £1.6m against Transport Scotland. Initial indications are that no further payment is due. It is therefore more than likely that no future liability will occur.

19c Possible Contingent Liabilities not required under IAS37 but included for parliamentary reporting and accountability purposes

The Financial Reporting Manual states that where information about contingent liabilities is not required to be disclosed because the likelihood of a transfer of economic benefits is considered too remote, they should be disclosed separately for parliamentary reporting and accountability purposes.

i. Contracts held by Transport Scotland should include indemnity clauses where risk is either considered part of the normal course of business or is not quantifiable:

  • Operating agreement (ScotRail Franchise Agreement) with indemnity dated 2004 to First ScotRail;
  • Indemnity clause in roads contracts to compensate Network Rail for any damage or loss of access;
  • Liability agreement for any issues caused by the GARL ground investigation work for the next 11 years; and
  • The unsuccessful appellant of the previous claim for GARL copyright infringement intends to raise two new and separate claims; a further copyright infringement and breach of human rights.

ii. Guarantees / Letters of Comfort issued by Transport Scotland on behalf of Scottish Ministers:

  • S54 guarantees issued as part of rail rolling stock procurement process;
  • Scottish Government underwriting First ScotRail pension fund in line with that provided to other train operators by DfT; and

iii. Other contingent liabilities held by Transport Scotland:

  • Monklands Canal - maintenance of pipes under trunk roads.