More IT firms seek non-court legal resolution

With lower costs and greater understanding of technical issues, increasing number of IT firms seeking mediation and arbitration to resolve legal disputes, says specialized agency under United Nations.
Written by Tyler Thia, Contributor

SINGAPORE--Once a dispute resolution platform used mainly to resolve patent and trademark issues, 30 percent of cases undertaken by World Intellectual Property Organization (WIPO) now involve IT companies seeking redress in matters pertaining to contracts, outsourcing or service agreements.

Ignacio de Castro, deputy director of the United Nations' WIPO Arbitration and Mediation Centre, revealed that a growing number of IT firms, both MNCs and SMBs, are turning to the center for help in resolving legal issues not only because the associated costs may be lower, but also for its legal counsel's expertise in the fast developing technology world.

"What we see is that the development of technology, in areas such as cloud computing, privacy, data protection and in the telecoms industry, is evolving so fast that some really expert [counsel] is needed," said de Castro, who was in town Friday to discuss the complexities of dispute resolution in ICT.

On outsourcing disputes, he shared that most cases involved contracts that became obsolete very quickly. "The contract which was signed originally did not respond to the conventional needs of the party, that's really the main problem," he said.

Richard Tan, a lawyer and member of WIPO's panel of arbitrators, explained that the technical issues pertaining to some IT disputes may be difficult for judges who are not savvy in ICT issues to understand.

Tan explained: "I think it is important to get a tribunal that knows the domain. Sometimes lay judges or lawyers don't quite understand or appreciate these things. By having specialists or arbitrators, things tend to move along quicker than if you were to go to a court."

He highlighted the example of Germany where judges have a good grasp of technical issues, allowing businesses in IT disputes to seek redress quickly even in normal court proceedings.

As a guide, de Castro said the WIPO center recommends parties involved in dispute to undergo mediation, during which a trained mediator will help both parties work toward a mutually beneficial resolution before heading for arbitration if a resolution cannot be obtained.

During arbitration, both parties will explain their positions in front of an active judge or experienced lawyer who is an expert in the issue, following which he will render a legally binding decision which both parties must honor.

de Castro revealed that in 20 percent of dispute cases, parties move from mediation to arbitration, after failing to reach a consensus.

"What we're also seeing is companies that are involved in court proceedings, half way through the proceedings, both parties submit the dispute to mediation or arbitration to prevent confidential data from going public, or simply a case of preserving reputation," he shared.

While the decision to turn to local courts or mediation and arbitration centers for legal disputes have to be based on various factors, such as local jurisdiction and binding treaties, expertise of judges and legal costs, many IT firms already have "mediation and arbitration" clauses in their contracts, he added.

"These firms have put it in black and white that in the event of disputes, both parties will head for mediation and/or arbitration, as well as appoint a neutral arbitrator from a third country if need be," he explained.

While lower costs are a key incentive for companies to remain in mediation, he cited an unusual dispute which involved an art gallery and an artist, where the associated mediatory costs were much higher than the disputed amount of just USD$20, 000. De Castro, who is also a Spanish lawyer and solicitor in the United Kingdom, said the art gallery specifically demanded for the three neutral arbitrators to "preside" over the case, leading to significant arbitration costs.

Singapore a "favorable" center
While Japanese firms were the main users of WIPO's dispute resolution services in this region, the last few years have seen an increase in Asian firms resorting to mediation and arbitration.

As such, its Singapore office is poised to handle a rising number of cases. WIPO established its second center here last year at the Maxwell Chamber, five years after the first office opened in 2005. Operated by the Singapore government, Maxwell Chamber features a list of partners--including Geneva-headquartered WIPO--which companies can approach to access dispute resolution services.

"Singapore is really becoming a leading place for arbitration in Asia, and what I find very interesting is that the government is very proactive in this area," de Castro said.

"I think the legal regime which applies in Singapore is very favorable to arbitration. The judiciary in Singapore is also very supportive, so when we were contacted by the Ministry of Law to set up a center here, we thought this would be perfect opportunity for us."

The deputy director of WIPO added that the center has engaged in a couple of projects, such as the signing of a Memorandum of Understanding with Singapore's Media Development Authority in the area of film and media dispute resolution, as well as a new collaboration with the Singapore Infocomm Technology Federation.

There are various mediation and arbitration associations handling disputes in Singapore, the including the Singapore International Arbitration Centre (SIAC) and International Centre for Dispute Resolution, all of which are non-profit organizations.

More information about mediation and arbitration in Singapore is available on Maxell Chambers Web site.

Editorial standards