Chapter 4 – Resolving technology disputes

Parties to technology contracts generally agree the means to resolve any dispute before they sign, in the hope that the process will never need to be invoked. This will often come down to a choice between litigation or arbitration, as a final adversarial process.

Each approach has potential advantages over the other, depending on a range of factors including the location of the parties and enforcement concerns, the availability of specialist judges or arbitral tribunals, preferences for a public or confidential process and rights of appeal. Both approaches may commit parties to significant time and cost for resolution.

We asked survey respondents about their attitudes towards not only litigation and arbitration but also non-adversarial processes for dispute resolution, for both current and future disputes.

Current attitudes to resolution of technology disputes

Although arbitration was marginally the most favoured with 29% ranking it in their top two choices, there was no stand-out favourite, with similar responses across the range of processes (figure 9).

Litigation is viewed slightly less favourably at 24%. Perhaps surprisingly, negotiation without a mediator is the least favoured process with only 19% of respondents ranking it in their top two choices. This perhaps illustrates the complexity associated with technology disputes, which can make them difficult to resolve through early negotiations.

Figure 9: Preferred two methods of resolving technology-related disputes

Greater scrutiny of the survey data reveals a more nuanced picture.

Litigation vs arbitration

The relative popularity of litigation and arbitration varies across regions. In EMEA, arbitration is greatly favoured over litigation, with only 14% of EMEA-based respondents ranking litigation in their first two choices, whilst 36% favoured arbitration (probably reflecting a stronger preference for arbitration in the region generally). In other regions, the two processes have broadly equal support (figure 10).

Figure 10: Differences in the adoption of arbitration and litigation across regions

Support for faster formal processes

Expert determination and adjudication, structured processes which have the potential to offer a swift resolution of disputes, are well supported. More than half (54%) chose either expert determination or adjudication in their top two choices, whilst a similar number (53%) opted for arbitration or litigation in their top two choices.

The popularity of expert determination and adjudication may be explained by the swift resolution of disputes often during the progress of a contract. As with construction projects, they are potentially valuable processes in certain types of technology projects which require substantial investment and long-term implementation phases.

Early neutral evaluation (ENE) was, surprisingly, as popular as litigation (and nearly as popular as mediation, discussed below). This, again, is an indicator of a desire for a less adversarial way to resolve disputes. Further investigation would be needed to assess actual experiences with ENE, which is a relatively uncommon dispute resolution process in practice.

Settlement still a favoured option

Only 19% of respondents list negotiation without a mediator as one of their top two dispute resolution processes.

However, when seen in a broader context, negotiated settlement of disputes is a favoured objective, with 25% ranking mediation in their top two choices. This suggests greater confidence in a facilitated negotiation, with a mediator assisting the parties to reach a settlement.

In addition, the majority of the 25% of respondents who rank dispute resolution escalation clauses in their top two choices will likely favour a structured or facilitated negotiation process at one of the early stages, before escalation to litigation or arbitration.

New forms of dispute resolution process

Attitudes towards processes for resolving disputes evolve over time and new methods may be developed and gain popularity.

Supporting that theory is a view that new processes are likely to be required to resolve disputes emerging from new forms of technology. Almost three in five (57%) agree with the statement that new forms of dispute resolution should be used to resolve disputes arising from new technologies. This may result from a desire to move away from traditional dispute resolution processes or a view that the very nature of new technologies will require novel approaches.

With 56% expecting issues arising from the use of AI to give rise to an increase in disputes, and only a third (34%) expecting disputes arising from AI technologies to follow the same principles as non-AI disputes, there is likely to be a great deal of interest in new forms of dispute resolution for new technologies. There are emerging proposals for dispute resolution procedures specifically designed for new technologies, but these are nascent and there is little consensus (yet) as to the use of those procedures. This is a topic we will look at in future reports in this series. The quickest route to acceptance of new methods of dispute resolution will be exposure of parties to new processes and recognition of their effectiveness. This may come quickly as businesses make use of smart contracts, which may have inbuilt self-executing dispute resolution processes. Over half (53%) of respondents think that their businesses will make greater use of smart contracts over the next three years. If those expectations are correct, we can expect to see more development of dispute processes to complement those used in smart contracts.

AI as a dispute resolution enabler

As well as driving new forms of dispute resolution, AI is an enabler for the development of such processes. Data analytics can be used to predict the range of outcomes of a dispute. 

Some consumer-facing technology platforms already make use of embedded online dispute resolution processes for disputes arising out of C2C and B2C transactions, enabling a high volume of low-value disputes to be resolved at low cost. 

Increasingly, algorithms have a role to play in the management of routine stages of a dispute and, in some cases, in the resolution of the dispute. Such an approach fundamentally differs from orthodox adversarial processes and will need to be proven in single-issue, low-value disputes before being considered appropriate for disputes involving greater complexity.