Commentary on Sections Part 1: Defence Procurement Section 3: Financial claims against contractors or former contractors
18.Section 3 provides that the MOD is liable for financial claims made against a current or former contractor, whether claims are brought in the UK or in a foreign court, subject to certain exceptions. The exceptions are where a claim is made by an “excluded person” or a claim is an “excluded claim” as defined in subsection (7). A person is excluded if it is a contractor under an old arrangement bringing a claim against a contractor under a new arrangement, or in a two company structure, one contractor bringing a claim against another; or the claim is brought against the contractor by a government department or a government Minister (i.e. where the MOD has a claim against the contractor, or where the contractor has carried out services for another government department). Claims which are excluded are those relating to services the contractor provides to anyone other than the Secretary of State for Defence; employment claims; claims relating to provision of services to the contractor (e.g. the provision of IT services); those relating to health and safety; and claims relating to the time before or after a company was a contractor. Because liability will only transfer in respect of financial claims, the contractor will remain liable for, for example, claims brought against it for specific performance or injunctive relief.
19.The Secretary of State may make payments to settle claims (subsection (2)). A contractor (or former contractor) must provide the Secretary of State with assistance in connection with the claim and that obligation imposed on a company to provide assistance is enforceable as if contained in a contract between the Secretary of State and the contractor (subsections (3), (4) and (5)). This section does not affect any provision the Secretary of State may make in a contract with a contractor for the contractor to compensate the Secretary of State for any liability which transfers to the Ministry of Defence or in respect of any payment which the Secretary of State may make to settle a claim (subsection (8)).