CBS Outdoor (CBSO) gave notice Thursday to London Underground Limited (LUL) of its intent to terminate the current Commercial Advertising Concession agreement, effective March 31, 2012, unless CBSO and LUL are able to agree to new terms prior.
CBSO won the contract from LUL in 2006. Under the contract, CBSO agreed to radically improve the quality of the advertising system on the tube. Since then, CBSO’s investment in high-technology screens on track walls, digital escalator panels, and LCD displays, has created what is arguably the most technologically advanced advertising infrastructure that exists in any public transport system in the world.
The issue for CBSO is that LUL, and its parent company Transport for London (TfL), have refused to acknowledge that changes implemented by London Underground have resulted in an adverse event under the contract, requiring that LUL negotiate new contract terms reflecting the massive cost over-runs suffered by CBSO.
The cost over-runs were caused primarily by fundamental changes within LUL, including the massively delayed PPP construction projects undertaken by LUL’s Infracos. These changes made it impossible for CBSO to gain the access and approvals, and to have the information, necessary to complete its upgrade work in a timely fashion and within budget.
CBS Outdoor claims to have faithfully performed its obligations under the contract. The contract requires, upon the occurrence of an adverse event, that the parties enter into bona fide discussions to agree revised terms. CBSO has been seeking recourse for costs and delays attributable to LUL since 2007 (and repeatedly since then). LUL, however, has refused to acknowledge that an adverse event has occurred, has refused to enter into discussions on that basis, and has offered CBSO no remedy, other than termination, for the extra costs and delay CBSO has suffered.
In addition, CBSO is asking the High Court to confirm their strongly held view that these changes implemented by London Underground have resulted in an adverse event, therefore giving CBSO the right to terminate the current contract with LUL and to receive compensation for damages.
Richard Sauer, Executive Vice President and General Counsel, CBS Outdoor said: “For several years, CBS Outdoor has sought to engage London Underground in fruitful, bona fide discussions to address the extraordinary costs and delays attributable to them. Our contract with LUL contains a clear mechanism to address these issues. Consistent with its rights under the contract, CBS Outdoor is seeking a fair and equitable resolution of this matter.”