Prevention and Settlement of Disputes in PPP Projects

10:34:36 AM | 12/1/2021

According to experts, although the legal basis for Public-Private Partnership (PPP) is quite complete, there must still be a mechanism to prevent disputes between the parties.

Dr. Vu Tien Loc, Chairman of Vietnam International Arbitration Center (VIAC), said that PPP projects often have great value and long implementation and operation time, so there must be a mechanism to ensure the safety and sustainability of the project. Therefore, it is very important to deal with the interests of the parties in harmony, and to take early measures to prevent disputes. Disputes in PPP projects are not only limited to administrative and commercial procedures, but also related to activities involving many parties and foreign investors, so they can escalate into disputes on investment.

Information from the United Nations Conference on Trade and Development (UNCTAD) shows that there are currently eight investor-state dispute settlement (ISDS) lawsuits in which Vietnam is a defendant.

Sharing the same opinion, Mr. Pham Thai Lai, General Secretary of the Public-Private Partnership Committee, the National Council for Sustainable Development and Competitiveness Improvement, said that PPP is long-term cooperation on the basis of harmonizing the interests and benefits and sharing risks, but if in the process of cooperation, one party does not comply with its commitments, it will greatly affect the finance and investment efficiency of the project.

Pointing to a number of causes leading to disputes in PPP projects, Mr. Le Dinh Vinh, Director of Vietthink Law Firm, Arbitrator of VIAC, said that for PPP projects in the fields of energy and infrastructure, the cause may arise from the lack of consistency and clarity of the legal corridor system in general, especially conflicts and overlaps between different legal documents. The legal system on investment under the PPP method has just been completed, so the regulations guiding the implementation of the Law on Investment under this method are still slow to be promulgated, leading to many problems that have not been promptly resolved. Currently, there is no specialized agency for PPP management at the central and local levels, the management of PPP projects is still scattered at many different focal points, lacking consistency and synchronization.

According to Mr. Doan Giang, International PPP expert of the United States Agency for International Development (USAID), disputes may arise from PPP agreements between private investors and state agencies, disputes over bidding to select investors, disputes arising from loan agreements or from contracts with subcontractors and suppliers, etc. Furthermore, disputes often arise within the first 10 years after reaching a financial agreement.

Mr. Doan Giang also raised the main cause of the dispute, which was excess construction costs, delays in the payment mechanism, clearance and land compensation, licensing problems, and changes in scope of contract.

In order to address such issues and prevent potential disputes from arising, experts say that regulatory agencies should soon institutionalize and fully enforce the legal mechanism on risk-sharing with investors in PPP projects in accordance with the Law on PPP Investment; and develop a mechanism to settle disputes and disagreements between state agencies and PPP investors.

By Huong Giang, Vietnam Business Forum