Unbundling commercial contractual conflicts: Opinion

After a few years on a multi-year IT joint project, a customer and an IT vendor are at an impasse. Project delivery has become an issue because of some sub-contractor problems. The client and the IT vendor have each already sunk in capital for the project. They cannot afford to have the relationship break down or to sue each other. What choices do they have?

In this particular case, the parties and their lawyers managed eventually to resolve the issues. But in many other instances, I did think that all parties could have been well served if a respected, neutral industry veteran had been at hand, if only to give their inputs on possible solutions and to express their views. Having someone “in the room” to benchmark and give everyone a reality check on technical issues and options would have helped immensely.

A new dispute resolution approach 

A new method of resolving contractual disputes in multi-year, high-value IT contracts is available and might just be the ticket to keep parties from driving off the litigation cliff.

Integraf – which stands for Integrated Appropriate Dispute Resolution Framework – is an innovative approach to managing complex commercial disputes. The scheme is sponsored by the Singapore Mediation Centre, in collaboration with the Singapore Computer Society.

The framework gives parties the opportunity to access neutral industry veterans and significantly de-escalate disputes. It is designed to reduce adversarial conflict and preserve relationships by having the parties appoint a panel of neutrals either as a standing conflict-avoidance board or on an ad hoc basis as and when issues arise.

Integraf works alongside traditional alternative dispute resolution mechanisms such as mediation and arbitration and can be used at any stage of a dispute, leading to enforceable resolutions to close off disputes and allow parties to move on. It can be adopted simply by using standard clauses that refer to and provide for the framework to apply.

Multi-year, high-value IT contracts

In the opening scenario, there were three parties – the customer, a main contractor and a sub-contractor. They were mired in a cycle of litigious allegations. The main contractor needed cooperation from the sub-contractor, who was in financial difficulties. The customer was faced with a growing backlog of outstanding service tickets.

Lateral-thinking solutions were also needed. Source code escrow deposits arrangements needed to be established. New forms of financial security could be provided.

Parties needed to re-calibrate work scope and roles and prioritise delivery times within a restructured payment scheme.

All parties needed to talk.

This meant rewriting and renegotiating the contract.

After all, while contracts can help to reduce ambiguity, allocate risks, and anticipate future dispute flashpoints, there is a limit to how it can “dispute-proof” a relationship.

Furthermore, IT contracts operate in the context of industry standards. What is reasonable or fair in the IT world may well be less clear without seasoned IT professionals sitting alongside legal counsel, committed to resolving disputes.

Integraf, had it been around, could have come in handy.

Industry neutrals and unbundling disputes over time

Often the best neutrals are those who have had personal experience in tackling disputes, having worked alongside the parties and their legal counsels, are well aware of the mindsets and risks involved and can come up with proposals and alternatives. Seasoned IT professionals can often tell what resolutions will be sustainable, and tell which party has “crossed” the proverbial “line” of professional conduct in the industry.

A dispute board in this case could have unpacked the problems faced by the parties, issue by issue. All sides were not that far apart on many issues. Collectively, the gaps on all issues seemed daunting. But solving each issue with the cooperation of each party, one at a time, would have helped.

If each issue had been tackled as and when they arose, perhaps the parties could have triaged their disputes early on before they festered into full-blown conflicts.

No one wants to be mired in the zero-sum minefield of a legal dispute, but it can happen, especially over a long-term project. When it does, everyone needs to aim at the target of a speedy resolution that manages disputes and preserves working relationships.

Integraf would be a useful arrow in that quiver.

The writer is an IT lawyer specialising in IT contracts, disputes, data privacy, cybersecurity and AI. He is also a legal adviser to the Singapore Computer Society (SCS), and member of the SCS AI Special Interest Group.

Source: Business Times © SPH Media Limited. Permission required for reproduction.

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