Use of this clause is optional but complying with the Legal Services Directions is mandatory.
Attorney General’s Department Guidance Note No 12 (Use of Alternative Dispute Resolution) available at:
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Legal Services Directions 2017 – Appendix B – The Commonwealth’s obligation to act as a model litigant
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This clause sets out an agreed mediation process for dealing with resolving disputes that may arise between the parties during the performance of the Contract.
The Legal Services Directions 2017 (LSDs) Appendix B – The Commonwealth’s obligation to act as a model litigant provides detailed guidance that an entity must follow in relation to disputes. In particular it provides that an entity is not to start legal proceedings unless it is satisfied that litigation is the most suitable method of dispute resolution and it has considered other methods of dispute resolution.
The clause also requires the Supplier to continue to perform the Contract while a dispute is on foot.
X.1 For any dispute arising under the Contract, the Parties agree that its representatives will, at all times, act with complete propriety, fairly and in accordance with the highest professional standards. Both parties agree to deal with claims promptly, not causing unnecessary delay and act ethically and cooperatively to resolve disputes.
X.2 For any dispute arising under the Contract both the Supplier and the Customer agree to comply with (a) to (f) of this clause sequentially:
- both Contract Managers will try to settle the dispute by direct negotiation;
- If not resolved within five (5) days, the party claiming that there is a dispute under this Contract will give the other party a Notice setting out the nature of the dispute and propose a solution. The date the dispute Notice is issued will be the Notice Date.
- Within ten (10) business days of the Notice Date, each Contract Manager will nominate a more senior representative (Representative) who has not had prior direct involvement in the dispute. Unless the proposed solution is acceptable to both Representatives, the Representatives will meet within ten (10) business days of the Notice Date and try to settle the dispute by direct negotiation.
- Failing settlement within twenty (20) business days of the Notice Date, unless the parties agree to continue the mediation process for a further period agreed by the parties, the Customer will, without delay, refer the dispute to an appropriately qualified mediator agreed by the Representatives. If the parties are not able to agree on a mediator, the Customer will refer the dispute to the chairperson of an accredited mediation organisation to appoint a mediator, for mediation to commence within thirty (30) business days of the Notice Date or such other period as agreed by the parties.
- For the mediation process, both parties agree to appoint nominees who are available to attend the mediation as a priority activity and have the authority to bind the relevant party. The nominees must act in good faith to genuinely attempt to resolve the dispute.
- If the dispute is not resolved within sixty (60) business days of the Notice Date, either the Supplier or the Customer may commence legal proceedings or, by agreement, continue the mediation process for a period agreed by the parties.
X.3 The costs of a mediator will be shared equally between the parties. The Customer and the Supplier will otherwise each bear their own costs associated with the dispute resolution.
X.4 Despite the existence of a dispute, the Supplier will (unless requested in writing by the Customer not to do so) continue its performance under the Contract.
X.5 This procedure for dispute resolution does not apply to action relating to clause [X] [Termination for Cause] or to legal proceedings for urgent interlocutory relief.
While use of this clause is optional, complying with the Legal Services Directions is mandatory. It is common for contracts to include a clause of this type.
Standardisation of contractual text results in efficiencies for both Parties to a contract. Before deciding whether a particular clause is appropriate, procurement officials should carefully consider the context of their procurement.
This clause provides for a simple two stage process of initial negotiation followed by mediation. Other forms of alternative dispute resolution include a multi-stage negotiation process, arbitration and expert determination. There are also a range of Australian and international bodies that provide meditation, arbitration and other dispute resolution processes. Many of these have standard rules or procedures that apply. Care needs to be taken when agreeing to comply with these rules and procedures – to ensure, among other things, that these procedures do not conflict with Commonwealth requirements, such as under the Public Governance, Performance and Accountability Act 2013 and the LSDs (for example regarding confidentiality of any settlement).
Clause wording would generally need to be changed where the parties have agreed to adopt different alternative dispute resolution procedures.
Otherwise, where this clause is included, the clause wording should be used without change.
Terms that are capitalised may need to be changed to align with the Contract terminology.