Two thirds of the UK's top 500 firms do not have a formal dispute-resolution policy

Survey says IT chiefs have a key role to play in the formation of a dispute-resolution policy.

Survey says IT chiefs have a key role to play in the formation of a dispute-resolution policy.

Over the past two years, 96% of the UK's top 500 companies have been involved in some form of dispute, according to the results of the Dispute Resolution Survey published in November by law firm DLA. Of these, just 35% have a formal dispute-resolution policy that covers the management of risks in this area.

The first statistic is perhaps unsurprising, given the size of the UK's leading companies by market capitalisation, and the fact that disputes are an unavoidable aspect of commercial life. However, that about two-thirds have no formal policy for the resolution of disputes provides cause for concern. It may go some way towards explaining why, on average, 21% of cases end up in court, despite the pain and suffering often associated with the litigation process.

Disputes that could arise in the IT area of a business include:

  • A dispute with an IT supplier about whether software supplied meets a specification
  • A dispute over service levels and relating financial compensation related to an outsourcing contract
  • A dispute over the terms of a software licence
  • A dispute over the time it has taken to perform a website development contract and whether compensation should be paid
  • A dispute with an internet service provider over getting access to information, such as an IP address, to enable a security breach to be traced.

Forming a dispute policy

A dispute-resolution policy outlines the approach that a business takes in seeking to avoid, manage and resolve disputes. It will combine procedures to manage risks, best practice and an approach to the management and resolution of litigation, arbitration and other forms of adjudication.

IT directors have an important role to play. They will have an interest in developing the approach to the avoidance, management and resolution of disputes that concern their department, for example, a dispute with an IT supplier over system performance and any resulting financial compensation.

In many organisations the IT director will be responsible for ensuring that electronic documents have been retained and centralised in an orderly manner.

The IT director will also be the main point of contact when those documents are required in connection with disputes and legal proceedings. They should therefore ensure they are happy with the policy and that it ties in with the business's overall approach to document management.

The first step will be to get board approval for the preparation of a formal policy. Next, responsibility for the preparation and implementation of the policy needs to be allocated. This is likely to involve IT, finance and commercial directors, as well as in-house lawyers.

An examination of the business as a whole should be carried out by all concerned and the policy formulated. It should cover areas such as pre-contract due diligence, dispute-resolution clauses in contracts and project management and document retention.

Once agreed, the policy should be implemented and kept under constant review. It will need to evolve in line with the growth and development of the business as well as external factors such as changes in the law.

Michael Bywell is a partner at law firm DLA

This was last published in November 2003

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