Regardless of your field of business in Papua New Guinea, you need to know what to do when there is a dispute over a contract. Veteran commercial disputes lawyer, Erik Andersen, looks at the major avenues for dispute resolution in PNG.

Gadens’ Erik Andersen

The rapid increase in economic activity in PNG over the last several years has inevitably resulted in countless contracts, understandings, dealings and agreements, including those strange PNG creatures—the MOU (memorandum of understanding) and MOA (memorandum of agreement).

These contractual dealings could arise in any form, from major project document suites a metre high which have taken armies of lawyers to construct, to the most apparently casual conversation between relatively new acquaintances.

Equally inevitably, a proportion of those dealings will become contentious, and it is probably fair to say the proportion that becomes contentious is likely to be higher in environments such as PNG where getting things can take a degree of persistence and flexibility unfamiliar to people and organisations only recently drawn to the country.

Commercial court

The National Court is PNG’s original court of unlimited jurisdiction and the court’s form and format would be familiar to practitioners in Australia.

Two particular aspects of the court process should be noted. The first is that there is a ‘Commercial Track’, which equates with the Commercial Lists maintained in Australian jurisdictions.

At present mediation is too often simply another expensive and time-consuming hoop which must be negotiated.

Unsurprisingly, the judges in this track tend to have both wider and deeper commercial experience than many on the bench (who may have come from a primarily criminal-law background) and generally speaking commercial matters, even quite difficult ones, can be progressed satisfactorily in this track.

PNG court lists contain a larger number of nuisance claims than are likely to be found elsewhere and inevitably some quite fierce contests arise when nuisance claimants desperately seek to avoid this track.

Compulsory mediation

The second point I would mention is that mediation rules have been introduced prima-facie requiring all matters to go through a mediation process before trial.

The reasoning behind the introduction of compulsory mediation is not necessarily unsound, and to an extent it reflects a Melanesian dispute resolution methodology. (For anyone interested, there is an excellent exposition of traditional tribal dispute resolution and the differences between common law and customary law in Francis Fukuyama’s The Origins of Political Order).

However, for the National Court in 2013 mediation is very much a work in progress. Judges’ attitudes to mediation vary considerably from some who will absolutely insist on it to others who are very happy to bypass it—and everything in between.

Further, there is not yet a reasonable pool of qualified mediators, nor are many practitioners genuinely helpful or practised in guiding their clients through mediation. At present mediation is too often simply another expensive and time-consuming hoop which must be negotiated.

Arbitration

Arbitration is the other principal mode of dispute resolution. Domestic arbitration is all but defunct.

The Arbitration Act is of very elderly vintage and while there have been attempts from time to time to develop a stronger local arbitration capacity, those efforts have generally been ineffectual to date.

International arbitrations are preferred and many larger contract documents submit the parties to arbitration under one or other international rules such as UNCITRAL.

The selection of an arbitral body and process at the time of contract negotiation is not necessarily straight-forward as there are some peculiarities in PNG’s enforcement regime which need to be understood and appropriately finessed at that time. Failure to do this can lead to considerable difficulties if the parties do become antagonistic.

By way of final observation, effective dispute resolution in PNG depends upon the advisor having a long and deep appreciation of PNG.

Erik Andersen is a Partner in Gadens Lawyers Litigation Group and has practised in PNG for more than 20 years.