ALTERNATIVE DISPUTE RESOLUTION REVIEW

Issues paper

November 2000

EXECUTIVE SUMMARY OF ISSUES TO CONSIDER
1.The scope of disputes to be covered by 8.2.1
  1. The role of the Dispute Resolution Adviser
  2. How to make ADR easier to understand and more accessible
  3. Streamlining notices and time periods
  4. Consistent and appropriate contact points for disputes.
  5. The constitution and power of the Dispute Resolution Panel
  6. Balancing transparency and confidentiality
PURPOSE OF PAPER

This paper is written as a part of the review of the dispute resolution procedures set out in Clause 8.2 of the Code. Clause 8.2 deals with the resolution of disputes which arise between any Code participants about the matters set out in Clause 8.2.1, which includes the application and interpretation of the Code, the payment of monies under or concerning obligations under the Code.

The review of 8.2 must be conducted in accordance with the Code Consultation Procedures (Clause 8.2.13).

The purpose of the paper is to:

  • Highlight some issues for consideration and submission in relation to the review.
  • Provide an overview of disputes that have occurred in the market over the past two years, to give participants a flavour for the type of disputes that have arisen and the issues raised.
  • To outline in more detail the proposed process for conducting the consultation.

BACKGROUND

Chapter 8 of the Code sets out a dispute resolution regime that applies to any dispute that may arise between Code Participants in relation to matters covered by Chapter 8 of the Code.

In summary, chapter 8 of the Code provides for a two-stage process for dispute resolution:

Stage 1,
known as first-stage dispute resolution processes (Clause 8.2.4 of the Code) which involves resolution of disputes through an organisation’s dispute management system (DMS); and

Stage 2
known as second-stage dispute resolution processes (Clause 8.2.5 of the Code) involves notification to the Adviser who decides if the dispute is one to which clause 8.2 applies and has the power to refer the dispute to Dispute Resolution Panel (DRP) or to another appropriate form of dispute resolution.

The Code provides that each Code Participant must adopt and implement a DMS which meets the criteria (the ‘Criteria’) determined by NECA following consultation with the Code Participants.

For disputes set out in Chapter 8 of the Code, Code Participants are obliged to use a DMS that meets the Criteria. For all other disputes, the use of the DMS is not obligatory.

The Criteria have been incorporated into a flowchart which sets out how a DMS might operate (available on request).

A. ISSUES FOR CONSIDERATION

The issues for consideration are set out in the same order as they appear in the Code.

  1. Scope of disputes to be included (Clause 8.2.1(a))

The scope of matters to be referred to the dispute resolution procedures set out in Clause 8.2 is defined by the list of matters in Clause 8.2.1.

Participants are asked to consider:

(a)whether or not the parameters of what can be disputed as set out in that clause are clear; and

(b)whether the categories provided are extensive enough.

I have dealt with each of these issues in turn.

Clarity of provisions

8.2.1(a) (2) provides:

“where a contract between two or more Code participants provides that the dispute resolution procedures under this Code are to apply, to any dispute under or in relation to that contract with respect to the application of this Code” [emphasis added].

This intention of this provision seems to be to allow Code Participants to contractually agree to use the dispute resolution procedures set out in Chapter 8.2. This would go a long way to streamline how disputes are dealt with in the market and assist participants with their internal learning and minimise the costs involved in having to implement a number of different dispute resolution processes within the organisation.

Most of the disputes over the two-year period have been brought against NEMMCO. This is not surprising because of the scope of 8.2.1(1) and the uncertainty in relation to the right to contract to use the 8.2 dispute resolution processes. Most of the disputes falling within those parameters are likely to be with the market operator.

Experience with NEMMCO suggests that participants have been willing to contract to use the Chapter 8.2 dispute process. The problem is that the words “with respect to application of the Code” makes this provision very difficult to interpret.

If participants are of the view that they should be allowed to contract to use the provisions, the words ‘with respect to the application of the Code’ should be considered. By deleting these words, the scope of the clause is widened.

2. Guiding principles for the system (8.2.1(e))

The guiding principles are set out as requiring the dispute resolution process to the extent possible to be:

  • guided by market objectives and Code objectives;
  • be simple, quick and inexpensive;
  • preserve or enhance the relationship between the parties to the dispute;
  • take account of the skills and knowledge that are required for the relevant procedure;
  • observe the rules of natural justice;
  • place emphasis on conflict avoidance; and
  • encourage resolution of disputes without formal legal representation or reliance on legal procedures.

Participants need to consider and reflect the degree to which these statements and parameters need to be embraced as they have large impact on the nature of the dispute resolution processes available in the Code.

In order to encourage resolution of disputes without the formality and cost associated with traditional legal processes, participants need to understand the options available for dispute resolution or have recourse to advice.

This is not currently the case. Participants need to consider either undertaking an extensive educational program or having someone available in the market to guide them through the options. Alternatively, if resources are not going to be made available for such a resource, then participants need to accept that disputes which do occur will need greater reliance on litigators who have an intimate knowledge of disputes and how to run them: this in turn is likely to drive a more legal approach to dispute resolution.

The interaction with reviewable decisions (Clause 8.2.1(h))

The dispute resolution for Clause 8.2 does not apply to disputes arising between NECA and other Code participants in relation to any decision of NECA which is a reviewable decision. This is obviously because NECA’s reviewable decisions are dealt with by Clause 8.9.

NEMMCO’s reviewable decisions fall within both the procedures under 8.2 and also under 8.9.

Participants need to consider whether NEMMCO's reviewable decisions should also be excluded from Clause 8.2

The participant fee disputes have raised this issue squarely. There was much debate in both of those disputes as to which forum would be appropriate. These disputes did not proceed to Stage 2 and so it is difficult to speculate as to whether the choice of processes was in fact a strength for participants or whether it caused a legal mine-field.

C. THE DISPUTE RESOLUTION PROCESSES

The experience over the last two years would suggest the following:

  • Most organisations have a ‘paper’ DMS but do not have extensive training or expertise within their organisations for using ADR, or resolving disputes in a non-legal way.
  • NEMMCO has an extensive DMS process including a Circuit Breaker Facilitator (CBF) available to assist with disputes in the DMS. Most participants have used the CBF rather than their own contact person or the Adviser, when involved in a dispute with NEMMCO.
  • Most participants involved in a large dispute have relied heavily on lawyers.
  • Very few participants have used the Adviser’s assistance in Stage 1.
  • Of the disputes listed in the Schedule only one dispute went to Stage 2.

The Dispute Resolution Adviser (8.2.2)

The Adviser’s skills are listed in 8.2.2(b), and include a knowledge of the industry and a knowledge of ADR.

“The Adviser may attend to any matters which NECA in its reasonable discretion determines are necessary to ensure the effective operation of:

(1)the first-stage dispute resolution process set out in clause 8.2.4 where all the parties to a dispute invite the Adviser in writing to assist in facilitating the resolution of the dispute (including through the disputing parties’ dispute management systems); and

(2)the second-stage dispute resolution process set out in clause 8.2.5.

From time to time the Adviser must select persons from each participating jurisdiction to constitute the group from which a Dispute Resolution Panel may be selected in accordance with clause 8.2.6(a).”

The Adviser’s role has two parts; the facilitation of consensual processes under Stage 1 and the decisions associated with sending the matter to Stage 2.

Stage 1 requires a contact point to assist:

  • to discuss options, both legal and non-legal, for resolving disputes;
  • to provide cost estimates for options;
  • to express complaints/dissatisfaction with processes;
  • as a quick contact point; and
  • to chair meetings and send out reminders/centralise logistics in large disputes.

Most of these tasks are necessary for the smooth running of the disputes process and provide easy access to participants and legal advisers.

In practice, the Adviser has not been involved in resolving Stage 1 disputes. This has been done through the DMS’ process; in reality NEMMCO’s DMS. The fact that Stage 1 is being done within NEMMCO’s DMS means there is no data which is independint of participant, available to evaluate the process or facilitate learning within the market in general.

Participants are asked to make submissions on:

  • the scope and role of each of the NECA/Adviser and the DMS contact point;
  • things that make it easier and more accessible to consult the Adviser
  • what services should be provided; and
  • how this should be funded.

A copy of materials from the Federal Regulatory Commission Dispute Resolution Service is available on request. This will allow participants to review an alternative model.

The anecdotal feedback is that having a resource and process facilitator available in Stage 1 is useful and necessary, at least while participants are becoming used to the processes.

It may also be useful to have the Adviser set up some infrastructure to reduce the complexity of communicating. This would include:

  • streamlined, easy to use electronic information exchange/chat sites
  • hearing room in one place with transcript and video link facilities
  • practice notes.

If the Adviser was to carry out a role in Stage 1 and 2, and set up processes, an estimate of the costs to the market is in the range of $180,000 per annum. This is an estimate based on consultancy fees of 3 days per week and administrative support. At least half of this could be recovered from participants. However, many of the services in Stage 1 are difficult to charge to participants (initial contact, advice on processes) without disincentivising them from using the system. Stage 2 is easier to provide on a user pays basis. Consider for Stage 2 a process to differentiate between using the Adviser in his / her professional capacity and the administrative support, to ensure a cost effective service.

Code participants Dispute Management System (Clause 8.2.3)

“Each Code participant must adopt and implement a dispute management system (DMS) which meets the criteria determined by NECA following consultation with Code participants.”

The NECA DMS mandates the following for an internal DMS: Establishment and advertising a point of contact.

  • Contact person/authority for direct resolution.
  • Escalation to Phase B: contact person to be able to provide notification of options available.
  • Appropriate dispute resolution processes.
  • Process for choosing a dispute resolution process.
  • System for choosing a person to facilitate resolution of a dispute.
  • Record-keeping within the organisation.

Establishing and advertising a point of contact

At market commencement a contact point was advised to NECA. This list has not been kept up to date by participants.

In disputes over settlement statements there was no centralised point of contact within organisations. Where the DMS contact point or a CEO was contacted, this usually did not filter through the relevant person in the organisation causing delay. This showed that there was no process within participant organisations for collecting and notifying relevant people of a dispute once it was received.

This may be because market participants keep a number of contact points for a number of reasons (official notice for service under the Code, registration, settlement statements) making a centralised contact point clumsy.

The issue that needs to be addressed is how market participants are to be notified of disputes in the early stages. This needs to be run in a very tight timeframe (see below).

Contact person/authority for direct negotiation

Under the Criteria the contact person in an organisation is to have the skill and authority to assist, and be able to refer a dispute to the appropriate person within an organisation, negotiate it themselves, and keep records. This has not happened and needs to be reviewed.

Escalation to Phase B: Contact person to provide notification of options available

In the event that direct negotiation is not successful in resolving the dispute, the Criteria provide for the contacting party to be notified in writing of the options in Phase B of the DMS available for resolving the conflict. This includes provision for either party to have the matter referred to Phase B of the DMS. Under the criterion this notification is stated as consistent with the written notice referred to in Clause 8.2.4(b) of the Code.

The notice is mandatory for disputes between Code Participants which concern matters set out in 8.2.1.

In practice, all discussions about potential options have been notified by NEMMCO’s contact person under Stage 1.

There is very little in-depth understanding of processes available from either market participants or legal advisers, due to the infrequency with which these issues arise within any individual market participant. Participants should consider how this could be changed.

The issue of the ‘notice of dispute’ has caused confusion. There is nothing in either the Code or the Criterion, which sets out the format of a notice of dispute. It is generally thought that issues raised in the notice of dispute set the parameters of the dispute which can be referred to Stage 2 and a DRP. Accordingly, having a clear understanding of what constitutes a notice is very important.

Participants need to give consideration to the notice of dispute. Some of the factors which need to be considered include:

  • Ensuring the notice of dispute is specific enough that there is no dispute over what is covered by the notice.
  • Ensuring the notice of dispute is not delayed such that it is out of time.
  • When the notice should be issued. There is often a difference between what participants think the dispute is and what it really is. This means that the initial discussions between the parties can be used to clarify and narrow down, or widen as the case may be, the issues in dispute. Accordingly, it may be useful to hold the drafting of a formal notice of dispute until such initial stages have taken place.

Choosing a process

The DMS provides there must be a procedure to enable parties to choose how best to resolve the dispute. The options allow for either party to contact the Adviser, or for the parties to jointly agree on a process.

This has been a difficult and complex process, with most disputing parties lacking confidence in the DMS, preferring to rely on legal advisers, who have not had experience in choosing non-legal processes. The current system has also involved reliance on NEMMCO’s CBF to advise on process.

Participants need be consider what they require to choose a process and in particular

  • the role of the DMS contact person;
  • the role of the NECA Adviser; and
  • how this should be funded.

Second-Stage Dispute Resolution Processes (Clause 8.2.5)

Time periods

“If the dispute is not resolved through the first stage dispute resolution processes set out in clause 8.2.4 within:

(1)in the case of disputes about market trading, settlements, power system operation directions and metering, 2 business days after a notice under clause 8.2.4(a) (or such other period agreed in writing by each party to the dispute); or

(2)in all other cases, 10 business days after a notice under Clause 8.2.4(a) (or such other period agreed in writing by each party to the dispute)

a party (the ‘complainant’) may, provided the complainant has, in good faith, followed the first stage dispute resolution processes set out in clause 8.2.4, refer the matter to the Adviser who must follow the procedure set out in this clause 8.2.5…”

Without exception, all the disputes to date have relied on the right of the parties to extend the time periods.

The time periods need to be carefully considered, in particular:

  • which is the notice that causes the time periods to run;
Action by the Adviser

Where a dispute has been referred to the Adviser under Clause 8.2.5(a) before taking any action to resolve the dispute the Adviser must be satisfied that the dispute is one to which Clause 8.2 applies (see 8.2.5(b)). The Adviser must give notice to the parties that he is satisfied that the dispute is one to which Clause 8.2 applies. If the Adviser is not satisfied, then the procedure set out in Clause 8.2 do not apply to the dispute (8.2.5(e)).

The question of whether Clause 8.2 applies is a technical and often legal question. A number of issues arise.

  • Should the Adviser be making this determination, and is he/she always going to be qualified to make this determination, or is it better left to an expert panel?
  • If the purpose of the dispute resolution procedure is to streamline and make effective ADR, having procedural loopholes is likely to bog down the process in technical disputes. It may be preferable to widen the disputes to which 8.2 apply and also to ensure that parties are free to use the procedures in 8.2 should they choose, unless one of the parties objects for valid reasons.

When considering this issue, participants need to consider what valid reasons may look like.