Home Office wins appeal against £224m Raytheon payment over e-Borders cancellation

The Home Office has won an appeal against a tribunal decision to award £224m to supplier Raytheon over the cancellation of its e-Borders contract.

In court judgments on 19 December 2014 and 17 February 2015, both made public today (17 February 2015), Mr Justice Akenhead upheld the appeal, and said the original damages award to Raytheon was “tainted by serious irregularity”, according to law firm Pinsent Masons, which represented the Home Office.

The judge ruled that the claim by Raytheon should be set aside and reheard by a new tribunal.

In a statement, the Home Office said: “We are pleased with the judgement handed down today by the court. However, the legal process is ongoing and it would be inappropriate for us to comment further at this time.”

According to Pinsent Masons, the Home Office appealed on the grounds of a "failure by the tribunal to deal with all the issues that were put to it". The judge ruled that the tribunal failed to asess the seriousness of the contractual defaults alleged against Raytheon in determining whether it was reasonable for the Home Office to cancel the deal. 

"Had the tribunal considered the issues there was a real likelihood that it would have had to reconsider some of its key findings, which may have led to a different outcome," said Pinsent Masons, in a statement.

The judge ruled that the Home Office complaints were “at the more serious end of the spectrum of seriousness” and that the tribunal failed to "apply its mind to a very large amount of the evidence before it", despite the fact that it took 16 months to make a decision after hearing evidence.

He said it would be "invidious and embarrassing" for the previous tribunal to try and re-determine the issues that were the subject of the successful challenge, and also given that it was likely that much of the evidence presented to the original tribunal would be used again at a new tribunal.

The judge has, however, granted Raytheon the right to appeal against his findings (see update, below), which means the case is likely to drag on for some time, unless Raytheon decides to accept the latest ruling. Any second tribunal would only take place after a Raytheon appeal, or if the company decides not to appeal. The original tribunal took nearly three years to hear evidence and reach a conclusion.

The US defence contractor won the damages in August 2014 following a four-year legal battle, after the Home Office terminated a contract to supply an immigration computer system for the UK Border Agency in 2010. The government was widely criticised over the loss and the scale of the payment at a time when it was cutting costs across the public sector.

The government decided to sack Raytheon in 2010 after it had concerns about the running of the £750m e-Borders contract, which had been seriously delayed.

The e-Borders programme was first commissioned in 2003 to improve the use of information to track people moving in and out of the UK’s borders. The aim was to conduct checks on travellers at the point of embarkation to the UK rather than on arrival in the country.

In 2011, the supplier began legal proceedings to sue the UK government for £500m. The arbitration tribunal's ruling concluded in 2014 that RSL delivered substantial capabilities to the UK Home Office under the e-Borders programme.

“Key milestones had been missed and parts of the programme were running at least a year late. The contract, signed in 2007, had already cost the taxpayer £259.3m and yet wasn't delivering," minister for immigration and security James Brokenshire said when the damages award was announced in August 2014.

The £224m in damages ordered to be paid to Raytheon were outlined at that time in a letter written by the Home Secretary, Theresa May:

• £49,980,807 for damages
• £9,600,851 for disputed contract change notices
• £126,013,801 for the IT assets created by Raytheon between 2007 and 2010
• £38,000,000 in interest payments

Many of the functions that were intended to be delivered by e-Borders - such as exit checks for people leaving the UK - have still not been implemented. 

Update 19 February 2015 - Raytheon has confirmed it intends to "pursue vigorously" an appeal against the judge's decision. "We believe that the Arbitral Tribunal considered and decided all relevant issues before it. Raytheon Systems Ltd (RSL) is determined to pursue an appeal of this decision, to enforce the Tribunal's award and to recover the sums due to RSL for wrongful termination of the e-Borders contract," said Raytheon in a statement.