BANGALORE: Mediation is finding substantial favour and popularity over arbitration to resolve a variety of disputes involving outsourcing, according to an international legal expert in business law.

Presenting his views during a panel discussion on "Contentious issues in outsourcing contracts" at the Second International Asian Conference of Computer Law Association here on Thursday, Stephen N. Hollman, Attorney, Business and Technology Law Group, California, said the benefits of mediation include its voluntary nature, well-earned reputation for prompt resolution of claims and the capacity to preserve relationships among parties.

Mediation clause

The mediation clause in a contract must provide for participation in the mediation as a precondition to litigation.

There must also be a clause provided for the recovery of attorney's fees to compel participation in the mediation by a recalcitrant party, Mr. Hollman said.

Barriers

A well-experienced mediator was best situated to facilitate negotiations and sensitise the parties to a settlement and can overcome psychological and strategic barriers to settlement through eliciting withheld information from parties by developing trust, Mr. Hollman said.

Invaluable exercise

He said that mediation can be an invaluable exercise and will save the parties hundreds of thousands of dollars in litigation or arbitration costs, if properly handled.

It can satisfy the parties by saving their time, energy and resources arguing about a problematic outsourcing project.

The parties could re-rally the project, future business development and other ongoing projects, he said.

Reasons

He pointed at five major reasons resulting in contentious off-shore deals — unrealised cost savings, loss of productivity from outsourcing, poor commitment and communications, cultural differences and lack of off-shore expertise and readiness.

Contention

An early warning system, enabled by business judgment vision, can avoid contention in outsourcing, he said.

Some of the panellists raised the issue of sub-contract as one of the reasons for outsourcing becoming contentious and there is nothing wrong in sub-contract as outsourcing itself is a contract, provided the sub-contract was brought to the notice of the vendor.

The other panellists included Poojitha Rao from Brown Raysman, New York, James Kunick from Mayer Brown, Frankfurt, Mike Rebeiro from Norton Rose, London, Vishal Gandhi from Gandhi and Associates, Mumbai, and Bjorn Krouthen, Vice-President, Off-Shoring, OMX Technology, Stockholm.

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