There's no need to argue anymore

Effectively resolving problems is the goal of Alternative Dispute Resolution (ADR). Niall Lawless explains how this American trend can be put to good use within the IT industry to sort out conflicts.

Every IT project involves a contract and from time to time issues arise which become disputes. Many in the industry are increasingly using Alternative Dispute Resolution (ADR) approaches such as mediation, adjudication and arbitration as effective alternatives to litigation.

IT projects are often complex and require managers who are able to deal with a wide range of project issues, such as the availability and level of resources, schedules, priorities, standards, procedures, costs, quality and people. 

Conflict in contractual relationships can be avoided, controlled or minimised through negotiation.

Although almost universally recognised as an important project management skill my experience is that about only one in ten IT professionals have ever had formal training in successful negotiation; that is satisfying their needs by agreement with others.

Where negotiation fails to resolve differences amicably the parties often become adversarial and when differences become disputes these have traditionally been resolved through the courts using the legal system. 

However, litigation is expensive in both emotional and financial terms, it's risky and time consuming and diverts valuable company resources away from core business activities therefore reducing profitably.

ADR originated in the USA in an effort to find alternatives to the traditional legal system and it is constantly evolving, driven by the need to find effective, reasonable, efficient and inexpensive ways to resolve conflict in both domestic and international IT contracts.

Developments in the last ten years include the introduction of statutory adjudication for UK construction contracts, court support for mediation prior to litigation, the rise of arbitration in domestic contracts but more importantly in those involving an international dimension.

The main ADR approaches are:

Mediation

The goal of mediation is settlement of disputes through compromise. Over 70 per cent of mediated disputes are resolved; with the benefit of acting as mediator in about 60 disputes I believe that there are two main reasons for this.

The first is that mediation facilitates real communication; this requires not only listening and speaking but also understanding.

The second is that through the mediation process the mediator is able to work with the parties privately, having access to confidential information. This is often the only time someone can assess if a zone for compromise and agreement exists and guide the parties towards it.

Mediators do not give the parties advice or make decisions for them. However, competent mediators will have dispute resolution experience and be able to use technical and commercial expertise to engage the parties in early 'reality testing', exploring the strengths and weaknesses of their position.

The mediator should help the parties examine interests and needs; negotiate the settlement agreement and define a relationship which is mutually satisfactory and which meets their standards of fairness.

Mediation is often effective in commercial disputes because in working out the settlement terms the parties can be creative and go beyond the strict terms of any legal contract involved. 

Compared to other methods of resolving disputes mediation offers the benefits of speed, privacy, flexibility and cost saving. It's not a formal process and the parties have personal control. 

Adjudication

In the UK adjudication is often used as a statutory procedure by which any party to a construction contract has a right to have a dispute decided by an adjudicator.

It was introduced to the construction industry in the UK through Part II of the Housing Grants, Construction and Regeneration Act 1996 and it's intended to be quicker and more cost effective than litigation or arbitration. 

Adjudication is working very well and it's often the case that supply chain innovations successfully applied in one industry are subsequently applied in other market segments.

The norm in the IT industry is for bespoke client drafted contracts and I have acted as adjudicator in non statutory non construction adjudication, for example in multi million pound technology transfer disputes. 

It's normal for the contract to require the adjudicator to reach a decision within twenty eight days or other timescale agreed by the parties.

The adjudicator's decision is binding until the end of the contract, and where disputed is usually upheld by the Courts. 

Adjudication is an interim procedure and although not intended to achieve final settlement of a dispute, experience shows that of the disputes that have been referred to adjudication in the construction industry the last seven years, relatively few are referred to arbitration or the courts as the majority are either accepted as final or as the basis of a negotiated settlement.

Arbitration

Mediation is very often effective, but where the parties find themselves with an intractable dispute they have two formal dispute resolution options : arbitration and litigation. It has been said that arbitration is litigation in the private sector, but it's much more. In domestic disputes arbitration has unique advantages but if the parties come from different jurisdictions it's without equal.

Arbitration is powerful formal justice, in that the award is enforceable across international boundaries. But is also less formal, as the parties can choose the arbitrator or the organisation that will choose the arbitrator and they can decide what arbitration procedure they want.

Because of this, arbitration should be more flexible and cost effective than litigation. Arbitrators may be selected for their special skills to suit the particular dispute. Arbitration awards present the losing party with less opportunity to appeal the decision and it's particularly valuable in some disputes because confidentiality can be preserved.

ADR approaches are flexible and offer the potential to deliver effective solutions which may vary from business sector to business sector.

The BCS undertakes a wide range of learned society activities ranging from producing information services and acknowledged industry good practice publications and providing extensive networking activities through a series of regional and special interest groups. 

The BCS Law Specialist Group holds meetings addressed by experts on: computer contracts, internet law, business to business communications, data protection, IT contracts, service level agreements, intellectual property in software and hardware, the use of computers in support of litigation, the arbitration of computer disputes and expert support in computer disputes

Niall Lawless is an experienced chartered arbitrator.

www.arbitrari.eu

January 2007