In the context of the regulatory process for infrastructure services, conflicts between the parties involved are a common occurrence. Usually, these involve disputes between the regulatory agencies or authorities and the companies in connection with: tariff reviews, compensation, fines, contract breaches or returns on investments. Conflicts often also involve disputes between two companies or between the companies and their clients.
The procedures for the resolution of these conflicts involve hearing the affected parties, reviewing the evidence presented by them and submitting the conflict situation to assessment by experts who will act as prescribed by law, consistently and without bias for either party. Dispute resolution often begins at the regulatory stage. However, disputes can be resolved by either party's submission to international arbitration, mediations, special tribunals and expert panels.
Arbitration is a form of resolution for private disputes which, even though conceived and governed by the contract in place between the parties, must observe the legal framework defined by the national laws and, in some cases, international treaties.
In particular, international arbitration proceedings are the preferred option, and they are provided for in the concession agreements executed by developing countries, as they provide the concessionaires with a guarantee of expertise and impartiality as far as the arbitrator is concerned, two characteristics that are not always present in legal proceedings carried out within the national court systems.
Another institutional dispute resolution option consists in appointing a specialized, independent third party to act as an ad hoc arbitrator. This arbitrator can be a person, a panel or a commission of specialists usually referred to as an expert panel.
Expert panels can be useful in countries with recently-created regulatory agencies; the panel will act as a board of appeals for decisions made by the regulator. They can also prove useful where the ordinary justice system has no judges with specialized knowledge, where the system lacks independence or where the legal procedures available are inefficient or extend over too long a period of time. In such contexts, expert panels will generate the most trust in private investors.
Chile has vast experience in the use of expert panels for the resolution of regulatory disputes in the infrastructure sector. Such mechanisms were defined in the regulatory systems created over the past three decades to foster private participation in several regulated industries, including the energy, telecom and water and sanitation sectors.
Expert panels operating in these sectors share some common features. Their functions are broadly defined by law and include disputes between regulators and private companies. These panels coexist with other bodies that also serve as boards of appeal, including Chile's General Comptroller's Office.
Based on the Chilean experience, Jadresic A. (2007) classifies expert panels based on four variables: 1) the kind of regulatory conflicts they deal with; 2) the composition of the panel; 3) the kind of decisions they make; 4) their operational rules. These variables are usually defined in the law, the concession contract or the agreement between the parties that created the panel.
BOX 25 : Characteristics of Experts Panels
| Kind of Regulatory Conflicts | Regarding tariff reviews, conflicts may be about the tariff level itself or about specific procedures or assumptions required for calculating tariffs. Non tariff conflicts may be about the award of concessions or permits, the imposition of fines or other sanctions by the regulator, or the dictation of non tariff regulations, such as quality standards or investment obligations. Disputes between two or more regulated companies. For instance, in the power sector, conflicts may involve electricity transfer payments among generation companies in the pool or transmission fees charged by the transmission company. Regulatory conflicts may be about a wide variety of issues, such as financial compensation for additional works not included in the contract, delays in providing access to expropriated land, review of user charges, sanctions imposed for unfilled obligations, or the financial implications of events not anticipated in the law or the contract. |
| Composition and Scope of the Panel | There may be a single arbitrator or several people, ideally an odd number to make it easier to achieve a majority vote in case of disagreement and to choose a chairperson or coordinator of the panel. Some or all of the members may be required to have specific qualifications, such as a university or professional degree in engineering, economics, or law. Some or all of the members may be chosen by the parties involved in the regulatory dispute, by a third independent party, or according to some explicit and objective criteria. The panel may last just for the time needed to solve a specific dispute, have a finite lifetime, or have an undetermined time horizon, although periodic rotation of members could be considered. The panel's role may be to resolve a specific dispute involving two or more parties, or to deal with several regulatory disputes, either for specific parties or contracts or for a whole infrastructure sector. No specific constraints may be imposed or ineligibilities established regarding present affiliation or past experience of the panel members. This condition exists in order to promote the panel's independence and expertise. |
| Kind of Decisions | The panel may be constrained to make recommendations or proposals to the regulator or to the parties that are entitled to make the final decisions. Alternatively, the panel may be required to adopt the final decisions, although an appeals mechanism could eventually be allowed for specific matters (for example, if a due process was not followed) or to clarify aspects of the decisions that remain vague. The panel may be allowed to make any decision regarding the dispute, be constrained to choose among the alternatives proposed by the parties, or be required to refer strictly to issues raised by the parties or indicated in the law or the contract. |
| Rules and Procedures | The operation of the panel of experts is normally subject to regulations that promote the equal rights of the parties, the transparency of processes, and the promptness of decisions. Such regulations typically address the following aspects: ■ the way the conflict can be presented by the parties and the possible outcomes that they can propose, ■ the way the parties in the conflict and other interested agents can participate in the process, ■ the deadline the panel must meet when arriving at a decision and the intermediate steps that must be taken, ■ the need to justify the decisions made by the panel, and ■ the mechanism used to finance the costs of the panel, which can rely on contributions from the parties, the regulated companies, or the state budget. |
Source: Jadresic A. (2007). "Experts Panels in Regulation of Infrastructure in Chile". PPIAF Working Paper No. 2
Expert panels have been an effective mechanism for the resolution of regulatory conflicts in Chile's infrastructure sector, mainly in connection with issues such as tariff reviews, payments for energy transfers and the interpretation of concession contracts. Jadresic A. (2007) presents some conclusions that might inspire regulatory improvements in other developing countries.133
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133 Also Chris Shugart and Tony Balance, "Expert Panels: Regulating Water Companies In Developing Countries" Draft: June 22, 2005, includes an analysis of how expert panels can provide solutions to problems related to long-term contracts.