Derbyshire County Council and Derby City Council pay out £93.5m in out-of-court settlement after waste dispute

Resource Recovery Solutions, which was a partnership between infrastructure firm Interserve and waste management company Renewi, was awarded a contract by Derby City Council and Derbyshire County Council in 2009 to manage the councils’ residual waste, and design, build, commission, and operation of a waste treatment facility in Sinfin, Derby.

A Derbyshire County Council spokesman said RRS paid for the facility – which under the county and city councils’ contract with RRS was to be designed, built and completed in 2017 – to divert 190,000 tonnes of waste per year away from landfill.

But the county council stated that after RRS failed to pass commissioning tests by an agreed date, the authorities lawfully terminated the contract in August 2019.

However, following termination, the councils and RRS began a process to determine the Adjusted Estimated Fair Value compensation of the contract to be awarded to either RRS or the councils.

RRS and the councils were contractually required to go through the AEFV process, and all parties were expected to make every effort to negotiate a settlement outside a formal litigation process in order to avoid unnecessary costs to either party.

At respective cabinet meetings earlier in July, both councils resolved to accept the settlement and pay RRS £93.5m to protect council tax-payers from the risk of further significant costs.

If a sum had not been agreed, the dispute would have been resolved through the courts with formal litigation which would most likely have been a lengthy process with unknown outcomes and additional costs.

The total sum of £93.5m has been shared by the councils in accordance with an agreed split with £36.57m paid by the city council and £56.93m paid by the county council.

In anticipation of litigation, or a settlement, finances were earmarked as part of Derby City Council’s Medium-Term Finance Planning process for 2023/24, and Derbyshire County Council has earmarked reserves to cover the settlement costs.

The settlement – which marks the end of the litigation and RRS’s involvement with the councils – comes after several months of negotiations between the councils and RRS’s administrators, who were claiming £187m was owed which the councils disputed.