08/12/2025
Written by Sarah Wilson and Ffion Benham
This article summarises some of the key issues raised in our recent Points of Connection webinar – Strategies to avoid and resolve disputes in the district energy sector. Points of Connection is our series of webinars, articles and newsletters to support anyone operating in, or coming into, the district energy sector to learn more about heat networks. You can view our full Points of Connection webinar series or visit our Points of Connection hub.
Avoiding and Resolving Disputes
Organisations are often required to work together in the District Energy sector, and sometimes things go wrong. However, disputes are not inevitable and there are steps you can take to manage them. In this article we discuss the common causes of disputes, how these are resolved formally and informally, and how you can protect yourself.
Common causes of disputes
One measure to prevent a dispute is understanding of what the common causes of disputes are. Some examples include:
- Failure to serve payment or a pay less notice - if this happens, it can lead to a ‘smash and grab’ adjudication, meaning the party applying for payment is entitled to the sum straight away.
- Lack of preparation - resulting in starting the works too early. Parties are keen to start work, but it’s important that they wait until everything is in place, to avoid delays and additional costs.
- Letters of intent - which agree to start work before a contract is in place, leaves both parties open to possible disputes and uncertainty, and should be avoided, if possible. Picking the bidder with the lowest price for that reason can lead to a lack of expertise and problems.
- A lack of collaboration - often the cause of defects. These aspects should be considered from the outset and steps implemented to avoid them.
Resolving a dispute formally
Once a dispute arises, you need to decide how to deal with them; this means assessing the nature of the claim and it is also helpful to consider how such an issue will be resolved if agreement cannot be reached.
Either arbitration and the usual court proceedings are the usual options for defect and procurement claims but you need to factor in the cost and timescales (it can take around 12 months). Parties will have to adhere to the pre-action protocol as a pre-cursor to court proceedings, allowing the issuing party a send a letter to the other party setting out the claim. The other party can then respond, and the parties can meet to discuss the issues. This meeting can be a mediation. This may well promote a resolution and avoid the court/arbitration proceedings.
If the dispute relates to a contractors account, then adjudication is generally available. It is a quick process, designed to be complete in 28 days (or thereabouts).
Mediation is another available option, where the parties negotiate a settlement as opposed to the above where a 3rd party determines the dispute. It is a surprisingly successful process, assuming both parties go into the process with the genuine aim of reaching a settlement.
Protecting yourself
Pre-contract
Protecting yourself pre-contract can be straight forward by devising a simple (yet thorough) contract review process covering the key commercial, legal and procedural provisions in the contract; this aids negotiation and can assist handover to the team once the works start.
It can then be used (and developed) through the works stage and finally to assist in negotiating any settlement.
Post contract
Documentation is critical to support claims; record everything in writing and especially meeting minutes (and if you have not prepared them, please do remember to check them for accuracy)
The documents generally produced are as follows:
- Correspondence including emails, letters, texts, reviews etc
- Programmes, drawings and plans
- Photographs
- Minutes of meetings
- Internal notes
It is very rare that a dispute does not require any of the above documents
If a party can show a maintained, understandable record, then this can support numerous aspects of the claim and promote a settlement (whereas a claim without any supporting documents is unlikely to be successful).
Strategies to resolve disputes informally and detailing a claim
To resolve a claim, generally one party needs to commence the negotiations
This is often best done within a wider strategy which takes account of what will happen if the matter is not settled
To put pressure on the other party and persuade them that the claim is good, and the documents support it, a letter of claim is often useful, setting out all aspects of the claim and also supplying the supporting documentation. Reference to contract clauses and the dispute resolution process shows that you are planning ahead and will often achieve a meeting
At any without prejudice meeting ensure the individuals attending have authority to settle, plan for the meeting, an agenda sets the tone and well directed questions can often have more impact than simply stating your case (again!).
When drafting a letter of claim, consider its purpose and what you are trying to convey. Include the nature of the claim followed by a brief history of the dispute (not the whole project) and explain who did/said what. This shows you have spent time researching the claim and can proceed if required. The relevant contract provisions supporting the claim should also be provided, along with confirmation that the relevant time limits have been complied with.
All relevant evidence should also be provided, including receipts and proof of payment.
It is important to include what you want the other party to do and time scales, such as making full payment or agree to meet within 7 days.
To conclude, disputes can arise from simple mistakes which should have been avoidable.
If one does arise, you should consider what outcome you want and the best route to get there. If timing is critical, then adjudication may be more appropriate than court, but if a less formal procedure is desired, then mediation is best. Simple steps can be taken to protect yourself both pre and post-contract and a letter of claim or informal meeting can help resolve the issue before taking the next step, saving parties time, money and resources.
If you would like to discuss any of the issues raised in this article, please contact Sarah Wilson who will be happy to discuss. Or visit our District Energy web page.
Stay switched on with all our Energy and Resource Management news by following our dedicated LinkedIn showcase page.
