Y2K lawsuits can be better settled by mediation than court cases, a top law firm said yesterday.

Appleby, Spurling & Kempe predicted a rash of legal problems at the turn of the year because of computer systems being unable to cope with the change to the 2000 dateline.

And a top lawyer said that expensive legal proceedings -- which may still leave former associates bearing grudges -- was not the best way to deal with Y2K problems.

AS&K lawyer Kelvin Hastings-Smith said: "When the Y2K bug hits, as it most surely will in some form or another, it will result in unpaid bills and breakdowns in the supply chain among other ills -- and leave many business partners and customers, not to mention a host of insurers and reinsurers, in difficult positions.

"In the past, those parties might have sought a damages award via the more traditional dispute resolution processes -- litigation or arbitration.

"But both litigation and arbitration are costly, time-consuming and confrontational and most often leave the warring parties going their separate ways, never to do business with each other once the process is complete.'' And Mr. Hastings-Smith added that many companies would want to preserve a working relationship and return to good relations.

He added: "They will want to do so quickly, inexpensively and privately.

Mediation is tailor-made for parties with such a wish-list.

"The process is both quicker and less expensive than litigation or arbitration.

"And since the mediator, or mediation team, has no power to impose a decision on the parties, the parties themselves are able to create a solution rather than having the outcome imposed upon them by a judge or arbitrator.

"Like arbitration, mediation is held behind closed doors. No-one, aside from the business partner or customer, need know that a business failed to adequately prepare for the Y2K bug, or that the business suffered a Y2K-related problem.'' Mr. Hastings-Smith -- a trained mediator and arbitrator -- said a Y2K mediation panel might include a lawyer, a software consultant and an accountant. He added: "The expense of such a panel might seem costly -- but compared to a protracted litigation or arbitration exercise it is actually minuscule.

"The only other costs to the parties are the cost of counsel, if present, the management time of those representing the parties and the hire of facilities.'' And he pointed out: "In Bermuda, as in many international business centres, there is an added benefit to a successful mediation -- it prevents another matter from being added to an already congested court docket.'' Mr. Hastings-Smith said countries like the UK, US, Australia, Hong Kong and Singapore had already adopted a "Millennium Accord'' -- which aims to have mandatory mediation of Y2K problems.

He added that a massive legal case in England -- which went to court -- was settled outside the courtroom by mediation, with benefits to both parties.

Mr. Hastings-Smith said: "When parties sit at a table with a skilled mediator and are able to speak on an entirely `without prejudice' basis, mediation can provide the sort of result that litigation and arbitration are simply unable to duplicate.

"Businesses affected by the Y2K bug would do well to consider those benefits before deciding on the process which best suits their particular circumstances.''