Long-term contracts need long-term dispute resolution. The ‘project neutral’ could be the answer, but he would have to prove he’s more than just a project passenger
I have previously mentioned in Building the publication of a dispute resolution procedure for PFI and long-term contracts by the Centre for Effective Dispute Resolution. One aspect was the appointment of a “project neutral”. This person could be appointed before or during the project, and requested to do a number of things, including advising on the interpretation of the contract and any subcontracts, assisting in resolving problems that arose, and advising on the avoidance or resolution of any dispute, including making a recommendation as to the form of dispute resolution procedure to be adopted in any particular circumstance.

The project neutral must, of course, be independent of the parties and act impartially. The CEDR suggested that on each occasion the project neutral is consulted their fees and expenses are borne by the parties in equal shares. It follows that the project neutral is not to be appointed as a mediator, adjudicator, expert or arbitrator in any dispute under the contract.

I discussed the idea with arbitrator, adjudicator and mediator Michael Joyce. He has been musing on his ideal form of dispute resolution mechanism to ensure that disputes are caught at an early stage and resolved as swiftly and cost-effectively as possible. He included what he calls an “independent neutral” in this mechanism. This individual is not dissimilar to the CEDR project neutral, although he anticipates that the independent neutral would be kept informed of progress on the project generally to ensure that if he were required to act, he would have a working understanding of the project from the start.

So is there a role for the independent neutral in a high-level mechanism for resolving disputes on larger or long-term contracts?

In ADR Principles and Practice, Henry Brown and Arthur Marriott discuss what they call “second-stage neutral dispute management”. This could include monitoring the dispute resolution process, helping to appoint an arbitrator or adjudicator, keeping the issues focused and watching for settlement opportunities.

Is this something the independent neutral could undertake? Much time has been spent considering the development of individual dispute resolution processes such as adjudication or mediation. Should we now be considering how these various processes could be co-ordinated at a higher level to provide a flexible and effective dispute resolution mechanism?

There are obvious objections to the concept of the independent neutral and high-level dispute management: yet more administrative expense, another person involved in the project who doesn’t do anything constructive and more time and money spent on disputes that may not arise. The use of an independent neutral clearly is not necessary on all projects and is only likely to arise on larger, more expensive or more complex undertakings.

But it seems to me that not enough thought has been given to the manner in which disputes should be resolved on such projects, particularly PFI/PPP jobs where the parties will have a continuing relationship for decades. This mechanism ought to emphasise the need to retain flexibility and to recognise that the manner in which the dispute is resolved might alter depending on the circumstances of the parties at that time.

Clearly, it is more expensive to appoint a neutral dispute resolution manager, but this expense may well be recovered if it results in a swifter and more cost-effective resolution. They would be appointed only when the need arose, but they would be most effective if, as Joyce suggests, the person has a working knowledge of the project from the start.

These are just preliminary thoughts on my part and I would welcome readers’ views.