Guidance Note -This clause identifies the exceptions to the no litigation or arbitration principle set out in clause 5.1 One of the exceptions to the no litigation or arbitration principle under the Agreement is where a Participant has breached a Statutory Requirement (refer to clause 5.3(d)). Any costs incurred by the Participant in respect of any claim or prosecution arising from a breach of a Statutory Requirement will not be paid as Reimbursable Costs under the Agreement (please refer to clause 17(b) of Schedule 5). This exception to the no litigation or arbitration principle is included given that, from a policy perspective, it is important that Government is not seen as releasing any entity from the consequences of breaching the law and it is a reasonable expectation that the NOPs will take individual responsibility for complying with the law.

However, it is also recognised that a strict application of this policy could work against the collective assumption of risk principle under the Agreement, in circumstances where inadvertent breaches of the law occur in the performance of the Works (e.g. an unintended breach of an Authorisation for the Project). On this basis, clause 5.3(d) entitles the Project Owner to determine that any claim or prosecution will be subject to the no litigation or arbitration principle. In these circumstances, the Participants will still need to obtain the Project Owner's approval in relation to any decisions regarding the relevant legal claim (see clause 6.10(a)) and any costs incurred in defending such a claim will only be reimbursed where such costs have been approved by the Project Owner (see clause 17(b) of Schedule 5). In making its determination, the Project Owner will consider the nature of the breach and the effect of the breach on the Project, the Works and the Project Owner.