G.  Consider the full costs of escalating a dispute and the chosen dispute resolution mechanism

The guidance set out above in this chapter details how the likelihood of disputes can be proactively mitigated. However, given the complexities and long-term nature of PPPs, disputes are not uncommon and the remaining guidance in the chapter provides detail on managing disputes for a select number of specific dispute resolution mechanisms.

The first step to be taken is to assess what the objectives of the Procuring Authority are and how to reach those objectives. Considerations include the following:

•  Which dispute resolution mechanism offers the greatest value for money, including considering which avoids interruption to the services?

•  What are the full costs implications for the potential dispute resolution mechanisms?

•  How can a win-win solution be reached amicably?

•  How does the dispute resolution mechanism best preserve the terms of the PPP contract so that the project can continue as agreed at financial close?

•  What are the time and cost implications and the impacts on the long-term operational and maintenance obligations?

•  Will the decisions made through the selected dispute resolution mechanism be binding and enforceable?

•  Does the dispute have an impact on the government's contingent liabilities?

In the interests of maintaining good relations it is important for both parties to have sufficient internal governance in place to control the triggering of a dispute resolution mechanism. The exact procedure for carrying out dispute resolution may depend on the mechanism defined in the contract or the underlying legal framework. And the relevant workflow, personnel and strategy will depend on which dispute resolution approach is adopted. Some of the processes set out below are lengthy and expensive, particularly when using legal practitioners. The best approach will depend on the specific circumstance and, before selecting such an approach, careful consideration should be given to the key advantages and disadvantages of each approach.

There is additional potential area for disagreement on the precise path chosen for dispute resolution. As the selected process will have an effect on the outcome both parties are likely to approach the decision strategically. If the PPP contract is not clear as to what dispute resolution option is to be used in a given situation there is a risk of delay caused by arguments regarding the mechanism to be used.

The following table and the guidance that follows provide a snapshot of the potential time and cost implications of different dispute resolution mechanisms.

Note: The above table multipliers are based on estimates from a disputes practitioner in Europe and are provided as an indicative comparison only between the different options. Ultimately, each dispute is different and market pricing will vary and so actual numbers may vary widely.