One hundred and seventy five countries have signed up to a framework allowing firms to take legal action against application service providers (ASPs) in other countries that fail to meet their service level agreements.
The World Intellectual Property Organisation (Wipo) and the Application Service Provider Industry Consortium (Aspic) have drawn up a set of standards by which ASPs around the world will be held to account.
They have also constructed a complaint mechanism which kicks in when the client company lodges a complaint with Wipo.
Traever Gruen-Kennedy, Aspic chairman, said small companies do not have the time or resources to pursue foreign companies through the courts.
Also, some disagreements may involve several countries. "The contract may be written in the framework of English law, but if the software was written in Spain, the ASP is in Australia and the branch office is somewhere else, you could end up with four or five legal systems in front of a judge who has never heard of ASPs," said Gruen-Kennedy.
Sean O'Reilly, marketing director at ASP Netstore, said the system would give the service providers greater credibility. "It's probably the most valuable piece of reassurance that could be projected to the marketplace - that there is a mechanism for dispute management that is independent of any consortium or organisation or country."
Once a company has lodged a complaint Wipo will try to facilitate a settlement. If this fails Wipo will make an independent judgment. If the ASP is found to be in the wrong and refuses to abide by Wipo's judgment, it will decide on a penalty, such as a fine or even imprisonment for executives, which will be imposed by the authorities in the host country.
Companies doing business with ASPs will be advised to ensure that contracts include the requirement that any disputes must be resolved under the Wipo scheme.