This is the seventh in a series of articles in which Christopher Hamel-Smith addresses some of the key legal issues arising out of the Y2K challenge. They were written in order to make a contribution to the Trinidad & Tobago business community’s efforts to prepare for the transition into the Year 2000 and to manage the associated risks. Forming part of a broader series on "Information Technology and the Law" by the same author, these articles were first published in the "Business Guardian" over the period June 10, 1999 to September 9, 1999.
Many countries are bracing themselves for a scourge of Y2K litigation. It is disturbing that many analysts believe that global Y2K litigation costs will actually exceed the total expenditure on efforts to avoid Y2K problems in the first place.
In the U.S.A. the perceived threat of Y2K litigation is so significant that American business leaders made the enactment of a new law to limit Y2K law suites one of their top legislative priorities for 1999. After extensive lobbying, they achieved this objective on July 20, 1999 when the President signed the new legislation into law. In doing so, the President described it as "extremely time-limited legislation designed to deal with exceptional and unique circumstances". (Incidentally, instead of using traditional ink signatures on paper, this was the first time that Congressional leaders used digital signature technology and e-mailed the legislation to the President. Since the legal acceptability of digital signatures is critical in electronic commerce this is a topic to which we shall return in this series.)
However, I do not believe that Trinidad & Tobago will suffer from very high levels of Y2K-related litigation. Whatever its other faults, our legal system simply does not exhibit many of the features of those systems that encourage and support massive litigation industries. Indeed, key provisions in the American Y2K legislation address features of the their legal system which already do not cause problems in ours, for example placing a cap on punitive damages and making it more difficult to file Y2K class-action law suits. Nevertheless, I do believe that Trinidad & Tobago is likely to see a number of significant commercial disputes arising out of Y2K-related disruptions. And, unfortunately, some of these will end up in litigation. One reason for this is that Y2K litigation elsewhere, particularly in England and other Commonwealth jurisdictions such as Australia and Canada, is likely to encourage "copycat" litigation, exploiting legal theories developed in those jurisdictions.
Litigation is always unpleasant and unproductive. Commercial litigation is usually extremely expensive. This is so not only in terms of the direct legal costs incurred but also because it can divert internal resources from your core business, destroy commercial relationships and negatively impact your commercial reputation. Even as we continue to hope for the best, we should therefore plan for the worst. This means using preventative legal techniques before the Year 2000 to help us to avoid the scourge of litigation altogether or, if not, to protect ourselves from the worst effects of any litigation. Despite my fairly optimistic views about the likely levels of Y2K litigation in Trinidad and Tobago, I strongly advocate that companies specifically address the risk of possible Y2K-related disputes and litigation as an integral part of their Y2K contingency planning.
Legal Prophylactics
By far the most important thing that can be done to protect ourselves from Y2K-related litigation is for senior management to exercise leadership to reduce the threat of internal and external Y2K disruptions. Additionally, management must understand the relevant legal risks posed by Y2K. They must then appropriately deploy a variety of legal risk management techniques. Previous articles in this series have tried to make some contribution to developing a wider appreciation of these issues within the Trinidad and Tobago business community. For those who came in late, these articles will all be made available on the web at www.trinidadlaw.com as soon as we have completed coverage of the Y2K legal issues. However, if you need access to any of them in the meantime, they can be obtained by e-mailing a request (with the words "Y2K article request" as the subject) to christopher@trinidadlaw.com.
However, Y2K risks can be managed and mitigated but they cannot be entirely eliminated. This is so no matter how determined we may be in our efforts. Each of us therefore needs to engage in some element of legal "CYA". Put another way, we need to make appropriate use of legal prophylactics.
In the first place, as we prepare for Y2K, we must recognise that we must not only do the right things but we must also be able to prove that we have done so. This is particularly so in relation to all areas where we may face the risk of a "Y2K mission-critical failure".
Contrary to what we see portrayed on television, the outcome of commercial litigation is less frequently influenced by a dramatic cross-examination than by the story revealed in the contemporary documents. For this reason, one important legal prophylactic is the creation and maintenance of a comprehensive and reliable set of contemporary documents that provides clear evidence of our compliance with our legal obligations arising out of the Y2K challenge. We must have a proper paper trail.
On the other hand, we must not forget that our documentation is a two-edged sword. This is because, if we are unfortunate enough to become involved in litigation, our relevant documents will have to be disclosed to the adverse party. Our own documents can contain statements that may provide damaging evidence against us. Once again, there is a tightrope to be negotiated. In my next article, we shall therefore discuss the use of legal risk management techniques that can help us across in relative safety. We then move on to consider other legal prophylactic devices, such as alternative dispute resolution clauses, insurances and indemnities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.