K3 Insights

April’s announcement of two new all-electric ferries for Auckland came after many months of intense negotiations resulted in a large and complex agreement being signed just ahead of a looming deadline.

The deal is a culmination of years of work for its driving force - Michael Eaglen, Co-Founder and Chief Executive of EV Maritime.  Supported by his Co-Founders David and Terry Porter of McMullen & Wing, bringing the project to life has required Michael to be inventive and relentless in order to overcome the many barriers and challenges faced.  Leading commercial lawyer, Chris Lee of K3 Legal, supported EV Maritime as the parties grappled with complex commercial issues right to the end.

As negotiations developed, a unique tripartite agreement was born between EV Maritime (designer and contract administrator), McMullen & Wing (boat builder), and Auckland Transport (customer). The project was supported by $27 million in funding administered by the Energy Efficiency and Conservation Authority (EECA) as part of the Government Infrastructure Reference Group’s COVID Response and Recovery Fund, but that funding came with a firm deadline.  Eaglen says: “After working long days and some nights for an extended period, we were relieved, and more than a little exhausted, to get the deal completed just a day or two before the deadline.” 

Chris Lee says: “The level of commercial complexity was extremely high.  The resulting contract might be a world-first for maritime procurement.  The challenge was to clearly capture each party’s responsibilities and also gain agreement on how to deal with some unmanageable variables – e.g., the impact of: the war in Ukraine on crucial materials; extremely challenging international supply chains on timelines; and the pandemic on all aspects.  These complexities meant nearly three months were spent negotiating an extremely detailed terms sheet – a document that in other deals might have taken less than a week.  Once that was achieved, there were only six weeks to conclude a necessarily large agreement - to meet EECA’s deadline and to retain quotes from key international suppliers that were crucial to the overall price.”

“This project has a number of unusual aspects,” says Eaglen. “Firstly, there is the trial element to the project – in which the Government, Auckland Transport, operators and EV Maritime all seek to examine the technical and operational implications of de-carbonising inner harbour and mid-harbour ferry journeys.  The future model for operating electric ferries potentially represents considerable change for multiple parties, and that has a further ripple effect into commercial matters far outside this agreement. Even though the argument for electric ferries can be quite compelling, these background dynamics, together with the technological novelty of the project as a whole, necessitated significant support from central government to get it moving.” 

Auckland Transport doesn’t currently own any ferries - however, it will own these and lease them to the eventual operator.  Auckland Transport is contracting EV Maritime, the owner of the ferry designs and provider of the technology package, to assist it to oversee the boat build and the commissioning, sea-trials and delivery.  However, rather than having EV Maritime, a relative start-up, as its lead contractor, and McMullen & Wing as a trailing subcontractor, this tripartite agreement gives Auckland Transport the extra security of an established boat builder as one of the directly contracted supplying parties.  But with all the focus on the important customer-provider relationships, there was a remaining challenge to incorporate the relationship between EV Maritime and McMullen & Wing into the agreement.

Eaglen continues: “I’d been working on this project since 2017.  A couple of years back I asked Julian Long, now a senior barrister at Shortland Chambers who had on a couple of other projects in the past, for a recommendation.  I wanted an experienced, commercial lawyer and he referred me to Chris.  My Chair and I met Chris and we thought he was a guy we could work with.  We’d kept in touch, but it was only in November last year that we had enough of a deal coming together that we could engage him and suddenly we were right in the thick of it. It’s always challenging starting a new relationship when the pressure is on: you’re trying to get the job done while each learning how the other works and what they need. Chris managed to strike a really good balance: he was willing to let me drive and retain the very close involvement which I need as a founder, while also knowing when to step in and take over while keeping me in the loop.”

Reflecting on the way things played out, Eaglen says: “Perhaps it was an unusual negotiation in the sense that so much more time was spent on the terms sheet than on the final agreement. But in many ways, I think it worked well: we were able to work through a lot of substantive issues in the terms sheet without being burdened too heavily by drafting. The final document was a huge amount of work too, but by then the parties had a really clear and thorough foundation which they could refer back to.”

Lee says: “It was immediately full-on: first with the terms sheet and then the main agreement.  There were so many aspects to this deal which had to considered – the relationships with AT, McMullen & Wing, EECA, EV Maritime’s suppliers and the certifying regulators - with the overriding concerns being delivering a successful project and protecting and growing EV Maritime’s IP.  Michael was such a great client to work with: scarily proficient at drafting and negotiating and juggling multiple risks, but always seeking a pragmatic solution to get the deal done.”

This is not the only headline deal that Lee and his team at K3 Legal and have worked on recently.  Last year he helped Six60’s promoter, Brent Eccles, negotiate the agreement for their ground-breaking gig at Eden Park.  “That one took a long time to pull together and also involved collaborating with multiple stakeholders and overcoming last minute challenges.  Whilst the industries couldn’t be further apart, at K3 Legal, we are very fortunate to work for phenomenal clients doing amazing projects benefitting Auckland and New Zealand.  ”