As explained above, the governing law provision determines what system of law governs any dispute arising out of the PPP Contract, but a dispute resolution provision is then needed to determine what forum will apply that law to resolve any such dispute and, in the case of arbitration, the procedure pursuant to which such dispute will be heard and resolved.
A dispute resolution clause sets out a pre-agreed mechanism for the resolution of any disputes that may arise out of the PPP Contract. All PPP Contracts should include a dispute resolution clause to provide as much certainty as possible about where and how disputes will be resolved. Such a clause aims to ensure that parties stick to the agreed mechanism and helps reduce the risk of their wasting time and costs arguing about where a claim can be heard. A good dispute resolution clause will also reduce the risk of duplicative proceedings being commenced, and irreconcilable decisions being issued, by different courts or tribunals. These clauses may be called "jurisdiction clauses", "choice of court" or "forum selection" clauses.
| EMERGING AND DEVELOPED MARKET DIFFERENCES If there is no contractually agreed dispute resolution clause specifying how disputes are to be resolved, there will be uncertainty about where disputes under the PPP Contract should be referred. The Parties' preferred courts may not accept jurisdiction over a dispute if there is no contractual clause specifying they are to determine disputes. Disputes may be commenced and heard by unreliable courts. This can be a particular risk in new and untested markets, where local courts may be unfamiliar with resolving complex commercial disputes in a timely way. There may also be a lack of confidence in the impartiality of the process. |
The enforceability of the eventual decision will also be an important factor for Equity Investors and Lenders (see below). Given that disputes under PPP Contracts are likely to have some form of financial impact on the Private Partner and the choice of forum can impact enforceability of the respective decision, the inclusion of a workable dispute resolution clause is a key element in any assessment of the bankability of the PPP Project by the Private Partner and its Equity Investors and Lenders. See Section E, PPP Contracts in Context.
As with the governing law guidance, the guidance outlined below on selection and drafting of dispute resolution provisions and Section 8.3, Sample Drafting 8 is intended to be of general application, and to be used by Parties from civil and common law jurisdictions, irrespective of whether the selected court is a civil or common law jurisdiction or the arbitration is seated in a civil or common law jurisdiction.