High court deal for Nats and EDS

Nats to pay EDS millions of pounds to settle Oceanic project lawsuit

Nats to pay EDS millions of pounds to settle Oceanic project lawsuit

A High Court hearing lasting 44 days ended suddenly last week when airlines running the loss-making National Air Traffic Services (Nats) agreed to pay millions of pounds to computer services supplier EDS.

The settlement came minutes before the most high-profile witness in the case, Civil Aviation Authority chairman Sir Roy McNulty, was called to the witness stand. He was due to be asked about evidence he gave to the Commons transport committee when he was chairman of Nats.

EDS sued Nats and sought compensation after the air traffic organisation cancelled a private finance initiative contract to build an air traffic system to control the flights across the Atlantic.

The High Court case began in January with Nats maintaining that the contract was cancelled because EDS had missed an important project milestone, but the case ended suddenly last Thursday.

The settlement means that Nats will not face paying anything like the £42.7m sought by EDS. Computer Weekly understands that the payment to the supplier will be substantial, and will run into many millions of pounds, although the terms of the agreement are confidential.

The payment to EDS will add to the financial pressures facing Nats. It has emerged that Nats has paid Lockheed Martin up to £40m in compensation for aborted work on an air traffic control system for the New Scottish Centre at Prestwick.

The contract was terminated when the Airline Group, which part-owns Nats, decided to opt for off-the-shelf software instead of the system that was installed at the New En Route Centre at Swanwick, Hampshire.

The payment to Lockheed will be declared as an exceptional item in Nats' annual accounts which are due to be published in the next few months. When it is added to the EDS payment and the legal costs of the High Court case, believed to be about £5m, the total sum could approach the £60m figure requested by Nats from the Government and the banks as emergency aid. Nats is also seeking a 5% increase in charges to airlines.

Responsibility for the payment to EDS will ultimately fall to the airlines and so may be recouped from charges to passengers.

Last week's settlement came days after Judge Toulmin indicated he might force the Government to release documents requested by EDS solicitors in the case. Some of these documents could have revealed whether the 14-year EDS contract was cancelled 11 years early in part because it was signed under the private finance initiative which could have threatened the planned partial privatisation of Nats.

In March 2000, four months before EDS Oceanic contract was terminated, an internal Nats document said, "Oceanic represents a PPP risk - 14-year PFI locked into EDS - performance risk with non-ATM [air traffic management] supplier. HMG [Her Majesty's Government] CSFB [Credit Suisse First Boston, the Government's adviser on the partial privatisation] want these uncertainties removed".

Nats and EDS declined to discuss the settlement. Both sides said the "terms are satisfactory to all concerned".

Case notes
  • Nats is to pay supplier EDS millions of pounds to end a legal feud lasting nearly two years

  • The costs, when added to compensation paid to another IT supplier - also for aborted IT work - could total £60m which will be recouped through charges to airlines

  • Days before the settlement, the judge warned he might force Whitehall to disclose key PFI documents

  • The settlement came minutes before a high-profile witness was due to give evidence at the High Court.

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