Out-Law News 3 min. read
02 Aug 2023, 11:03 am
A raft of proposals designed to help resolve private finance initiative (PFI) disputes in the UK have been welcomed by one legal expert.
A new report into behaviours relationships and disputes across the PFI sector, commissioned by the Infrastructure and Projects Authority (IPA), found that the industry is “at a significant inflexion point”, with stakeholders increasingly concerned about the way public authorities have started to manage their PFI contracts.
The report recommended the use of evaluative mediation when parties were entrenched on principles, and the creation of a new PFI dispute resolution forum that has jurisdiction to hear any type of PFI dispute and can call for support from non-legal PFI experts. The report said the forum could hold a database of fully accredited ‘PFI mediators’ and publish anonymised versions of adjudicative decisions to create a body of ‘PFI common law’.
Dispute resolution expert Zoe de Courcy Arbiser of Pinsent Masons welcomed the recommendation. She said: “There is a great deal of merit in the proposal for a specific PFI dispute resolution forum to ensure quality of decisions based on precedent. This is something that is often hard to obtain because disputes are traditionally resolved in private.”
“There are, however, questions that need to be answered over how the forum might operate. Given, for example, that PFI contracts already contain provisions for dispute resolution processes, how will the new forum be given jurisdiction to hear these disputes? Will all parties have to enter into variations of PFI contracts?” de Courcy Arbiser said.
Zoe de Courcy Arbiser
As the findings make clear, a well-managed dispute can actually be valuable to a [PFI] relationship – not destructive
She added: “More clarity is also needed over the process. Will the PFI forum be more inquisitorial, in the civil law style – or adversarial, in the common law style? Similarly, courts have always been able to call their own experts if needed, but in PFI disputes each party usually presents their own expert evidence. How will the forum’s rules on evidence work?”
“Furthermore, privacy of adjudication decisions is a fundamental principle, and often cases do not go to court because of the commercial and reputational need to keep decisions private. Anonymisation only part of the answer, as the industry is small and word gets around. How is the right to have your dispute resolved privately to be reconciled with the proposed public publication of such decisions? We will have to wait and see,” de Courcy Arbiser said.
The recommendation comes after respondents to a survey carried out as part of the report said stretched resources meant many public authorities no longer favoured the “light touch approach” favoured in previous decades. Instead, consultees said officials often enforced the terms of PFI contracts in an “overly draconian” manner that could occasionally be accompanied by “unprofessional behaviour”.
“When this approach has been taken by public authorities, disputes have typically resulted, relationships have broken down and accompanying goodwill has been lost. More worryingly, we heard stories of how this approach has had a negative impact on the wellbeing of individuals,” the report added.
The report emphasised the importance of the Nolan principles for public procurement processes, and recommended renewed investment in contract management and consistency across the public sector on the ways in which contracts are managed.
De Courcy Arbiser said: “Ultimately, the report recognises that it is, of course, inevitable that disputes will arise during the life of a long term PFI contract. But as the findings make clear, a well-managed dispute can actually be valuable to a relationship – not destructive.”
“To achieve this, parties must seek out expert help to develop a proper disputes strategy and must think about what a good outcome looks like from the outset – whether in formal proceedings or not. Doing so will enable them to manage these issues in an efficient and pragmatic way, preserving the underlying partnership arrangement,” she added.
The report also recommended that PFI vehicles should conduct comprehensive surveys of their projects – with a time limited window for addressing any issues with relief from deductions. But de Courcy Arbiser warned that such reviews were unlikely to work in cases where there is a breakdown in trust between parties.
The report also emphasised the importance of more resource on contract management. But de Courcy Arbiser said that there was already a significant skillset shortage in the PFI industry. “Where is this increased resource to come from when both public and private sector consultees highlighted how it is becoming increasingly difficult to retain and attract staff with either sufficient experience of these complex contracts, or a desire to learn about them?”