Mediation of IT Disputes: Avoiding the Pitfalls

March 1, 2004

Mediation is now used as a means of dispute resolution in many different types of dispute. It is particularly well suited for IT disputes for a number of reasons:

  • IT disputes may be very costly to fight through to a conclusion, since there is often voluminous documentation and expert evidence is likely to be required
  • there is often fault on both sides, and a negotiated settlement may reflect this more fairly than a decision by a judge who, as a result of the nature of the legal remedies available, may not be able to reach a decision which sufficiently reflects the fact that there is fault on both sides
  • where there is some degree of fault on both sides, it may be difficult to predict the outcome with any degree of confidence, especially if the technical issues are difficult to explain to a judge whose skills lie in other fields.

For these reasons, parties to IT disputes often resort to mediation. In 2003, CEDR Solve arranged 17 mediations in IT and telecommunications cases. Approximately 75% of CEDR Solve’s commercial mediations result in settlement on the day of the mediation or shortly thereafter.

There is a dilemma in choosing the time at which a mediation should take place. The temptation is to arrange a mediation at an early stage, before substantial costs are incurred. But it is usually a pre-requisite for a successful mediation that each party has sufficiently set out its case to enable the other party to reach an informed assessment of the strengths and weaknesses of its own position. If when the mediation take place there are too many cards lying face down, the mediation may not be successful. Where there are complex technical issues involved, as is often the case in IT disputes, it is particularly important that each party has a sufficient understanding of how the other side is putting its case on those technical issues.

The IT Disputes Interest Group’s second meeting will cover the advantages of involving a neutral third party to assist parties in reaching a consensual resolution of an IT dispute. It will also focus on the various reasons why mediations may fail, and the steps which may be taken by the parties prior to the mediation to minimise the risk of the mediation failing.

The purpose of the present article is not so much to offer suggestions for making mediations of IT disputes more effective, but to stimulate a discussion of the types of problems which tend to occur, and of the various ways in which these problems may be addressed. A second article, which will be published after the Group’s second meeting has taken place, will focus on practical suggestions which may assist parties and their representatives when they prepare for a mediation.

Readers are invited to consider the points raised in this article before attending the Group’s meeting on 29 June 2004. Readers who are unable to attend the meeting (and indeed readers who can attend the meeting) are invited, if they wish, to e-mail their views on avoiding pitfalls in mediations of IT disputes to me at

It must be remembered that each of the parties to the mediation is present only during the joint sessions and the private sessions between the mediator and that party. Much of the mediation takes place behind closed doors during the private sessions between the mediator and the other party. It may therefore be impossible for one party to know what factors are preventing the other side from coming forward with proposals which will assist in bridging the gap between the parties.

I have compiled a list of possible reasons why mediations of IT disputes may fail, despite both parties being genuinely interested in reaching a settlement. They are all capable of being found in mediations of other types of commercial dispute, but some may be particularly relevant to IT disputes – such as those which relate to there being complex technical points which need to be explained to a customer (and its legal advisers) who may not have IT expertise. The purpose of making this list is not to imply that many mediations fail for these reasons – on the contrary, over three-quarters of commercial mediations are successful. My aim is to assist in making the success rate higher still, by increasing awareness of the pitfalls to avoid.

The experienced mediator will try to overcome difficulties which arise on the day, but this is not always possible in the time available and with the information available during the course of the mediation. It may however be possible to avoid pitfalls such as those listed by taking appropriate steps prior to the mediation, like arranging for particular documents to be disclosed or for experts’ reports to be exchanged. Discussions with the mediator or the mediation service provider prior to the mediation should assist in identifying points which require particular attention. (There is a degree of overlap between some of the points in the list.)

IT Mediations: Reasons for Failure

1. Timing of the mediation

· The mediation occurred too early, before the parties had spent sufficient time analysing the issues and setting out their case sufficiently clearly on paper.

· The mediation occurred too late, when the costs already incurred by the parties were so high that it was not possible for the parties to reach settlement.

2. People involved in the dispute

· One of the parties (or, as is the case with virtually all of these points, both of the parties) was represented by a director or employee who failed to adopt a commercial approach to the benefits of reaching a settlement.

· One of the parties was represented by a legal adviser who encouraged that party to press on with the litigation to enforce its legal rights.

· One of the parties was relying on an expert witness who, it was suspected, failed to adopt an independent and objective approach.

· The mediator failed to adopt, or appeared to fail to adopt, an effective approach to assisting the parties in reaching a settlement.

· One party’s negotiating team did not have sufficient authority to accept the terms proposed or to make a proposal which would have enabled the gap between the parties to be closed.

· One party’s principal decision-maker was not sufficiently involved in the process on the day (eg left early or arrived late, or was only available by telephone).

3. Issues in the dispute

· The parties were too far apart in their assessment of the factual issues.

· The parties were too far apart in their assessment of the legal issues.

· One of the parties had not yet obtained sufficient legal advice to enable a proper assessment to be made of its prospects of success.

· One of the parties was unable to explain the legal basis of its claim.

· One of the parties had not yet consulted an independent technical expert.

· One of the parties was unable to explain its case on technical issues sufficiently clearly for the other party to be able to address it.

· The parties were too far apart in their assessment of the technical issues.

· The claimant had not provided sufficient details of the amount of the claim and of how the claim was calculated.

· One of the parties believed that the other party had internal documents which had not yet been disclosed and which would support its (ie the first party’s) case.

4. Preparation for the mediation, and expectations

· One of the parties had not prepared sufficiently for the mediation, eg had not given sufficient thought to the form a possible settlement might take.

· One of the parties had not been sufficiently briefed on what to expect from a mediation.

· One of the parties needed more time to get used to the realisation that its prospects were weaker than it had previously thought.

5. The parties’ financial resources

· The defendant stated that it lacked the resources to make a better offer, but the claimant did not believe this.

· The claimant believed that the shareholders of the defendant or a third party would in due course fund a better offer.

· One of the parties had insurance which covered its legal costs, and therefore had less incentive to settle.

Clive Freedman, of 3 Verulam Buildings, is a Barrister, CEDR Registered Mediator, and Chartered Arbitrator: