A legal opinion from a South African lawyer on the legal worth of compliance letters/statements:
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PR-Assurances-Illusory
South African Press Association's PR WIRE SERVICE
Issued by: Dave Gray Publications
Attention: Financial Editors
For immediate release:
MILLENNIUM COMPLIANCE LEGAL ASSURANCES "ILLUSORY"
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"Millennium compliance" letters in which corporates request suppliers
and associates to declare that they are Year 2000 compliant, will in
many cases prove to be unenforceable in law, a leading South African law
firm has warned.
They generally fail to properly define what year 2000 compliance means
in the context of the enquiry. Yet there appears to be a blind belief
that they were "panaceas for all Y2K ills" and that a signed statement
of compliance conferred some magical legal rights on the sender in the
event of a Y2K mishap.
Mark Heyink, a partner in the Johannesburg law firm Hofmeyr Herbstein
Gihwala Cluver & Walker Inc., describes the scenario as the "Compliance
Letter syndrome".
Heyink says most such letters are vague and request that the responding
company be "year 2000 compliant" at a particular date, but do not define
compliance and do not request assurance that such compliance is
maintained beyond the millennium."This indicates scant understanding of
the true problem," he says.
"Many will believe that they are placing themselves in a position to
enforce a legal right. However in most instances that I have seen,
little care is taken as to who signs the letter and whether that
individual has the correct authority to bind the recipient organisation.
"In many cases, even assuming the rights created by the letter are
enforceable, the signatory may not have the requisite authority.
"Even if the signatory were to incur personal liability as a result of
his or her actions, this will serve as cold comfort in the case of a
large claim.
"In such circumstances, one can only warn the perpetrators of this
shotgun approach that any comfort they may take out of their efforts is
probably illusory.
"Clearly insufficient consideration is being given to the objectives
that the senders of all but a few of these compliance letters wish to
achieve.
"Further, little care is being taken by the senders in ensuring that the
objective is being correctly achieved.
"A more constructive approach would be for executive management to
exercise their responsibility properly in assessing those relationships
important to the enterprise¹s business continuity. In most instances
these critical business relationships should be confirmed by proper
communication and where necessary negotiation.
"The often "threatening" tone of compliance letters and the fact that
the recipient may have no legal duty to give the information let alone
the warranties that are often demanded, is not conducive to the
co-operation that the year 2000 phenomenon demands .
"On the other hand, on the recipients side, the prevailing tendency is
to automatically refer the compliance letter to IT for reply, only
emphasising the point that these letters are being dealt with
incorrectly.
"Furnishing a warranty at the best of times demands prudence
particularly when there may be no good legal reason for doing so. At
least however, in the case of, say a motor vehicle warranty, the issuer
of the warranty understands his commitments and it is a legally
enforceable agreement which has precedents.
"In the case of Y2K warranties, for that is what they are, not only do
these letters fail to spell out the meaning of compliance, they
essentially ask IT to undertake that they will do their job properly
without considering the potentially disastrous consequences of their
possible failure to do so.
"This is an unfortunate abdication of responsibility on the part of
management and proper consideration by management of not only the
technical issues but any others that may influence their ability is
essential and in fact the duty of management .
"Moreover, according to an international study by the Gartner group as
much as three trillion dollars of litigation will flow as a result of
non Y2K compliance.
"Given the magnitude of this scenario, much greater emphasis should be
placed on addressing some of the legal issues, before compliance letters
are issued willy nilly and accepted with equal alacrity."
"Compliance letters may well have there place in a year 2000 strategy
but their use must be carefully considered if they are to achieve their
goal."
For further information call Mr Heyink at 027 11 286-1100
(from the South African Press Association's public relations wire
service) |
