Y2K disputes
need not end in lawsuits
Paris, 20 March 1999
- What can companies usefully do about the Millennium bug as the countdown to
the year 2000 ticks away the last days of the 20th century? Aside from calling
in the bug exterminators, companies must evaluate their legal exposure.
The problem is that nobody knows exactly what is
going to happen. Heads, the days of civilization as we know it are numbered
– Tails, we are heading for a prolonged New Year hangover aggravated by
software glitches!
Reality will probably be somewhere in between:
problems of varying magnitude, but nothing approaching Doomsday. The challenge
will be resolving a multitude of anomalies that occur at the same time.
Here are some points to ponder for people in business,
and particularly small companies short on technical resources and with no corporate
lawyer to hold their hands.
Experts fear the domino effect of computer failures
and so should businesses. One supplier’s failure could cause another company
to miss delivery dates for no fault of its own. And if that is not bad enough,
some techies are saying that it is too late now to do anything. This suggests
– quite erroneously – that fatalism is the only remaining option.
Managers should immediately check out the Y2K conformity
of suppliers, utilities, service providers and the hardware and software used.
If
business partners are unsure of their ability to deliver on time, then back-up
arrangements for the worst-case scenario should be in place.
Precautions will not be a waste of time, even if
the bug turns out to be no more than a passing irritation. In a competitive
environment, companies that are Y2K compliant are regarded as reliable. Reports
coming in every day to the International Chamber of Commerce indicate that many
companies are refusing to do business with partners who have not adjusted their
computer systems.
Keep your cool! Even if disruptions are minimal,
panic and scare-mongering will generate their own problems and distort normal
business. On the other hand, indifference could be commercial suicide.
American lawyers have led the charge in filing
bug-related class actions well ahead of the fateful date and courts are braced
to deal with a wave of lawsuits. Companies are well advised to examine their
liability to customers, scrutinize their contractual obligations and the obligations
that their own equipment suppliers have assumed towards them.
In many cases, long-standing relationships with
valued business partners should tip the balance against going to court if things
go wrong. Money is best spent on fixing the bug not on litigation. And there
are ways of settling disputes without costly court actions in the glare of publicity.
Alternatives available to businesses are arbitration,
mediation, conciliation or recourse to expert opinions. Leading arbitral institutions,
like the ICC International Court of Arbitration, provide all these services.
Business partners can agree to a clause in their
contract providing for disputes to be settled by commercial arbitration under
internationally recognized rules. Whatever the size of the companies, it is
wise to be as specific as possible about such matters as the number of arbitrators,
place and language of arbitration, and which rules of law are applicable.
An even more consensual approach than arbitration
is mediation or conciliation, both of which have the virtue of leaving a profitable
business relationship intact. The bug’s legal bite can even be neutralized
by bringing in a single expert or panel of experts if the parties agree.
There is a great deal of
talk about vertiginous sums at stake in a tidal wave of law suits whose dimensions
could be as terrifying at the bug itself. But the new century does not have
to begin that way, and whether that sorry spectacle can be avoided will depend
on people, not computers.