Commentary: Tunnel dispute will run and run

With all the depressing predictability of a Sylvester Stallone Rocky sequel, the Channel tunnel project yesterday lurched into The Great Financial Crisis, part 94.

The question is whether the latest deadlock in the cost dispute between Eurotunnel and Transmanche Link, and the subsequent sabre-rattling on both sides, will delay the December 1993 opening of the tunnel.

Considering that the target opening date has already slipped three times, the question may be academic. But if one accepts that Eurotunnel is determined to open next Christmas, then the answer may depend on which party has the capacity to deliver the knock-out blow.

Eurotunnel, led by its fiery chief executive Sir Alastair Morton, has certainly had the best of the recent skirmishes.

Its worldwide banking syndicate has guaranteed funding for the tunnel until May 1994, the independent arbitration panel ruled against TML in the most recent payments dispute with the contractors and interest rates, a key factor for such a debt-laden project, are moving in the right direction.

On the other hand, what is in it for the 10 British and French contractors to finish the project in accordance with Eurotunnel's timetable? Under the existing contract, TML is eligible for bonus payments of varying amounts depending on whether the tunnel was completed in June or August of 1993. Both dates have long since been consigned to the dustbin.

If one believes the contractors, then even if the pounds 1.27bn cost dispute was settled tomorrow and a modified contract signed the tunnel would not open until January 1994 - and then only operating a skeleton freight service. Limited passenger services would not start for a further four weeks and a full service would not be operating until summer 1994.

But if the contractors are to make any of their time-extension claims stick and avoid the threat of liquidated damages, then clearly it is in their interests to complete the project as quickly as possible.

On balance, neither side has a decisive advantage. The further away the opening date drifts and the longer Eurotunnel has to wait to start earning revenue then the higher its interest charges become and the greater the amount it will need to raise from a fresh share issue.

However, the nearer the tunnel reaches completion, the more the contractors' most precious bargaining counter, time, is depleted.

The project has been here on countless occasions before. The denouement will probably have to wait for the arbitrators' ruling on TML's global claim next spring. But it is possible the two sides will be in dispute long after the first shuttle has crossed beneath the Channel.