This is the ninth in a series of articles in which Christopher Hamel-Smith addresses some of the key legal issues arising out of the Y2K challenge. They were written in order to make a contribution to the Trinidad & Tobago business community’s efforts to prepare for the transition into the Year 2000 and to manage the associated risks. Forming part of a broader series on "Information Technology and the Law" by the same author, these articles were first published in the "Business Guardian" over the period June 10, 1999 to September 9, 1999.
Every business is dependent on its relationships with key customers, suppliers and other business partners. We each face the risk of disputes about allocating losses caused by any Y2K disruptions along the supply-chain. Litigation is one way to resolve such disputes. However, it will usually be an unsatisfactory way to do so. Litigation is inherently unproductive and expensive. It damages our relationships and tarnishes reputations. When a dispute involves several parties, or is about novel and technical issues, these negatives are magnified. Much Y2K litigation will exhibit these features and therefore can easily become very protracted and nasty.
Responsible management will do everything possible to minimise the risk of becoming embroiled in Y2K litigation. This includes specifically addressing the possibility of Y2K disputes as an integral part of their Y2K contingency planning exercise. Fortunately, there are better ways to handle Y2K disputes and conflicts than litigation. Management needs to understand these options and the ways in which a variety of alternative dispute resolution ("ADR") processes can be deployed to avoid litigation.
The Mediation Alternative
Fortunately, most commercial disputes are resolved by negotiation rather than litigation. This is likely to hold true for most Y2K disputes. However, parties who are faced with a dispute about allocating Y2K losses between them will frequently find that these involve arguments about who is to blame. Such discussions can become quite heated and they may find it difficult to communicate openly and effectively. In such circumstances, parties can easily lock themselves into positions that result in an impasse in their negotiations. When this happens, litigation may seem to be the only option. However, in these situations where direct negotiations have failed to produce a result, mediation is likely to be a better alternative.
Essentially mediation is a process by which a neutral third party (a mediator) assists the parties to continue to search for a solution. The parties do not abdicate responsibility for the final outcome to the mediator, since (unlike a judge or arbitrator) he has no power to impose a decision on them. However, the mediator is given control of the process itself as opposed to the final outcome.
Experience shows that the introduction of a mediator to facilitate the negotiating process has a powerful effect. It can significant increase the chances of achieving a resolution of the dispute. The mediator being neutral and professional can view the dispute more objectively. He is in a position to earn the trust of the parties, no matter how difficult it may be for them to trust each other. He also can make use of various techniques:
- To keep the process going, even when the going gets tough;
- To assist the parties to engage in more meaningful and open discussions; and
- To break deadlocks.
For example, a mediator may use private caucuses with each party to probe sensitive areas in ways that can uncover underlying difficulties and lead to the development of appropriate solutions.
Some of the key benefits of mediation over litigation are that:
- The process is structured to minimise adversarial posturing and to preserve relationships;
- The process ensures confidentiality and avoids public disclosure of sensitive information as well as injury to reputation;
- The parties can choose a mediator who has substantive expertise that can assist them to develop solutions;
- The parties are allowed flexibility to develop creative business solutions to meet their particular needs instead of being constrained by the limited range of remedies that a court can provide; and
- The dispute can often be resolved more quickly and less expensively than is possible through the courts.
Particularly in the context of Y2K disputes between key business partners who wish to continue doing business with each other, these benefits of mediation are likely to be very important.
Proactive and Positive ADR
Alternative dispute resolution processes, particularly mediation, can be of value on an ad hoc basis after a dispute arises. However, in the context of planning for the contingency of Y2K disputes, a more systematic, positive and proactive approach is recommended. This involves communicating with your key business partners with a view to agreeing in advance that any Y2K dispute that is not resolved by direct negotiations will be submitted to alternative dispute resolution. This approach can set the right tone for your Y2K communications, demonstrating business leadership and your intention to participate with your business partners in Y2K contingency planning and joint problem solving. Once accepted in principle, appropriate ADR clauses may be introduced into existing contracts and made part of the standard terms of future contracts as well.
ADR processes provide you and your business partners with the opportunity to resolve any Y2K disputes in a flexible, professional and amicably manner but without losing the right to proceed to litigation in those (hopefully) few situations where this proves unavoidable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.