The contractual disputes are a common matter in the PPP contracts for many reasons, including:
• The PPP contracts are long-term contracts. Therefore, disputes may arise in unexpected conditions.
• The joint projects are complicated in their nature.
The relationship between the relevant parties shall be managed effectively in the joint project to facilitate the dispute settlement in the future. Settling the dispute inappropriately may cause damage to this relationship, a matter that may adversely affects the progress of the whole project. So, it is necessary to identify a mechanism for settling disputes arising the PPP contract. The experienced legal consultants support must be sought in this matter.
Methods of Dispute Settlement: Negotiation, Mediation and Local Arbitration
The agreed mechanism for dispute settlement is an important element in identifying the PPP contracts risks by the private partner. Therefore, it is necessary to build the relevant private partners' confidence that there is a fair system for dispute settlement in order to urge them to participate in these projects. Preferably, the disputes shall be settled by resorting to any of the available dispute settlement mechanisms which are in compliance with the international practices without resorting to legal proceedings that are long and costly in nature.
Model mechanisms of Dispute Settlement are:
a. National litigation Method (litigation before the relevant courts inside the state)
b. Arbitration (inside the state)
This mechanism is more similar to the judicial proceedings as a third party render a judgment in the dispute referred to it. The importance of the arbitration in the PPP contracts lies in the fact that it keeps the rights of the state and the investor at the same time.
As we indicated above, the project bid requirements document states that the PPP contract shall be referred to the Cabinet for approval. Thus, when the contract is awarded to and signed by the winning investor, no other actions shall taken regarding the arbitration clause that shall be valid and binding on its parties.
c. Mediation
Mediation is a mechanism for solving the legal disputes in an amicable way between two parties with the assistance of an impartial third person, who shall direct and facilitate the negotiations and assist in settling the dispute by providing acceptable and reasonable solutions. If the parties agree on a solution, the mediator shall dedicate that solution by organizing a binding contract.
d. Expert Report
This mechanism is often used for specific technical or financial matters or to give a temporary decision, and thus the litigation or arbitration may be a challenged.