Media

When Mediation is better than Law

The Australian 09 October 2007
By PHILIP ARGY, ACS

TECHNOLOGY is big business, demanding a substantial budget, involving multiple vendors and requiring the integration of numerous systems not only within an organisation, but with suppliers and customers.

In any large company, the successful practice of ICT involves an intricate fusion of products and services that relies on critical relationships to maintain a balance between cost-effectiveness and performance.

These relationships typically involve a variety of suppliers who are responsible for delivering and maintaining a range of hardware, systems, networks, service offerings and more.

Even though companies typically take great care in choosing their supply partners, it is almost inevitable that at some time an issue will arise over the quality or cost of the product or service.

Although most issues can usually be dealt with without causing any ripples to the business, occasionally there will be a more serious problem that cannot easily be resolved.

So what do you do when there's a dispute between a company and a technology supplier? Hi-tech is so critical to an organisation's day-to-day operation and competitive advantage it's essential when conflict arises to have a fast and effective way to resolve the issues without affecting the business.

Companies are increasingly turning to litigation to address their concerns, but this can be a long and expensive process that results in one or both organisations terminating the supply relationship.

The ACS considers mediation a better approach, providing an effective and low-cost way of dealing with conflicts with suppliers.

To assess the extent of ICT disputes in Australia, the ACS partnered the Institute of Arbitrators and Mediators Australia and the Project Management Institute to survey the sector on approaches to alternative dispute resolution. The survey reveals considerable disagreement, with 46 per cent of contracts resulting in a dispute, of which 75 per cent require a formal dispute resolution process.

Disputes typically occur at middle management level and often escalate because of a perception by one or both parties that they need to validate their position, and any compromise on either part would reflect badly on their performance. In this kind of situation, mediation offers a range of benefits. Not only is it far more informal and much more cost-effective than litigation, but because it always involves senior decision-makers there is potential for a negotiated settlement that satisfies both parties, allowing commercial relationship to be preserved.

Let's say two parties are disputing ownership of an orange grove. One claims their mother left it to them in her will, but the other says she gave it to them before she died.

If the dispute goes to court, a judge will consider the facts and the law and rule in favour of one party. One party will get the orchard and the other will get nothing.

In contrast, a mediator will explore various facets in separate, confidential sessions, asking questions such as why each party wants the orchard, in a process designed to throw up options that might be a basis for commercially resolving the dispute. Let's say the mediator learns in confidential session that one party wants the orchard to produce and sell orange juice, and the other party is more interested in making chocolate peel. The mediator can then explore with the parties the prospect of obtaining what they each want without necessarily gaining legal control of the orchard, but so both parties achieve their desired outcome without disadvantaging the other. The first party gets the juice and the other gets the peel.

Indeed, each party is better off than if they had won the litigation, because the juice maker doesn't have to get rid of waste and the peel maker doesn't have to handle juice. They simply share the orchard, combine harvesting resources and split the oranges, with one keeping all the juice and the other all the peel.

No court could have arrived at this result, because neither party was legally entitled to this result.

Although this example has little to do with technology, it does illustrate how mediation is able to achieve a win-win, while opposing parties in litigation cannot envision that outcome.

Mediation has particular advantages for technology disputes because it allows disputing parties to appoint a mediator with expertise, who is therefore more likely to be able to suggest viable options for the parties to consider than would a judge who doesn't know the difference between a megabyte and a mozzie bite.

In instances where the parties work with a mediator and still cannot agree on a solution, there is even the option of moving the process to arbitration, in which case the mediator makes a binding ruling based on the parties' legal rights. Our study shows that using mediation enabled more than 50 per cent of companies involved in ICT disputes to resolve them for less than $50,000, and most of those for less than $20,000.

Litigation would have cost 10 times as much and taken far longer, and in most cases the companies were able to have a continuing commercial relationship. Philip Argy is president of the Australian Computer Society www.acs.org.au

We gratefully acknowledge the permission from Philip Argy at The Australian to reprint this article.