There are three main ways to resolve disputes with your technology suppliers. IT directors should be aware of the costs and limitations of each approach
In an extract from the second edition of their book, Rachel Burnett and Paul Klinger examine the three main options for settling disputes over IT contracts.
It may take several years for some cases to reach court, and during the course of the litigation it is normal for the parties to try to reach a settlement.
Most disputes where court proceedings are issued are settled by the parties themselves without getting as far as an appearance in court. However, immediate action at the outset can expedite matters. Summary judgment - a procedure where there is no real defence to a claim - can be an effective and relatively inexpensive way of achieving a quick result.
Under English law, the losing party is often obliged to pay the legal costs of the winner as well as its own. This can act as an incentive towards settlement. Legal costs can sometimes exceed the damages being claimed.
The Arbitration Act 1996 gives the parties much autonomy in conducting arbitration and allows the arbitrator significant powers.
The parties involved in the dispute choose a neutral person or group of people to resolve the dispute by a binding and enforceable decision or award. If they do not agree a procedure for arbitration, the rules will be taken from those set out in the Arbitration Act.
The choice of arbitrator enables the parties to select a neutral adjudicator acceptable to both sides who has expert knowledge of the area in dispute. The arbitrator is required by law to act fairly and impartially.
Supporters of arbitration claim it is more flexible, quicker and cheaper than litigation, but this is by no means automatically the case. It may be more expensive and slower and with no effective right of appeal.
It used to be the case that an arbitrator who was suitably qualified and experienced in understanding the nature of computing disputes would be preferable to a judge. However, judges are now better educated about IT.
Through alternative dispute resolution, a framework is created for the parties themselves to negotiate a solution which they both find mutually satisfactory, normally with the assistance of a neutral third party mediator, sometimes also with experts. The process is relatively informal, cheap, flexible and voluntary. In addition it can be stopped at any time.
The third-party's role is based on consent, and the process stays under the control of the parties. The costs are usually divided between the parties. It is important that senior management is involved.
The neutral mediator has no authority to make any decisions for the disputing parties, but will have training in ways to help them resolve their dispute by negotiated agreement without adjudication. Unlike an arbitrator or judge, the mediator may participate in developing proposals and making suggestions for settlement.
The mediator will meet the two parties separately and perhaps redefine the main issues in the conflict, drawing out the strengths and weaknesses of each issue. In this way, each of the parties can explore different possibilities of compromise.
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This was first published in March 2005