In the US on 20 July 1999, President Clinton signed into law the Y2K Act -- legislation which attempts to deal with some of the issues raised by the spectre of the millennium computer bug.It is a worthwhile law that should be replicated in some fashion in the UK, so that British businesses know where the goalposts stand regarding possible claims.The US Act is predicated on it being in the national interest that producers and users of technology products concentrate their resources on assessing, fixing and testing and developing contingency plans to address the bug.

Furthermore, that Y2K failures could cause a significant volume of litigation which would strain the legal system and threaten to waste resources that are better devoted to curing the possible disease caused by the bug.

The Act seeks to address these problems by introducing procedural rules, by restating existing legal principles and by discouraging speculative litigation.

There are several key features of the Act: there are financial caps on the level of punitive damages which may be awarded against small businesses -- previous drafts of the Act placed caps on punitive damages for all businesses; for tort claims, economic loss which does not flow from physical injury to persons or property is excluded; class actions are restricted to cases where there are 'material' defects in the provision of a product or service; and small businesses are given a degree of protection from fines should the millennium bug prevent them from complying with regulatory requir ements.

However, of greatest significance for UK businesses which trade with US business partners are two other provisions in the Act.

The first is a 90-day 'cooling-off' period where the parties are required to set out their positions and consider resolution before going to court.

The claimant must first send a notice to the defendant detailing the claim.

This notice can be given by e-mail.

The defendant has 30 days to respond.

Having met that deadline, the defendant has another 60 days in which to negotiate or remedy the claim.

Therefore, the defendant can have up to 90 days grace before proceedings can be started.

However, if the defendant who receives the notice does not respond to it or fails to respond in the correct way, that defendant loses the benefit of the extra 60-day period.

UK businesses served with these pre-litigation notices should act promptly to protect their position.

The second provision specifically affecting UK businesses is the exclusion or limitation of damages where losses could have been avoided had the claimant taken heed of any disclosure or other information of which the claimant should have reasonably been aware.

During the passage of the Act through Congress, it was stated that this 'duty to mitigate' arises before a breach occurs.

This is an extension to the duty to mitigate which normally arises only after the occurrence of the tort or contractual breach.

So, UK businesses that may need to bring Y2K actions in the US should comply with this higher duty.

The checking of suppliers' and trade associations' Web sites for disclosure of Y2K information would be a starting point.

This Act, together with the Year 2000 Information and Readiness Disclosure Act passed last year, contrasts with the UK position where no legislation has been passed to deal with the millennium bug.

The government, through Action 2000, has concentrated on providing information to businesses and encouraging co-operation to fix the millennium bug.

This is an area where the UK government could take legislative steps to help prevent or deal with Y2K disputes, as the US has done.

Ministers have recently indicated that the government has no intention of introducing such legislation leaving businesses exposed to widespread litigation.

Time is running out for a change of policy -- if Y2K legislation is to have any effect in this country, it is important that it is introduced quickly so that businesses know where they stand before the millennium bug strikes.