The Mediation Act and the new Code of Civil Procedure were recently enacted. These two pieces of innovative legislation usher in a new era for litigation and arbitration in Brazil.

Overview

Among the innovations being introduced in the civil courts, the new code asserts a strong policy favouring alternative dispute resolution (ADR) in order to reduce the cost of litigation and empower litigants and market players to resolve disputes amicably.

In addition to reducing costs, the new code will help to reduce the number of suits awaiting decisions in the judicial system. According to a projection made by the National Council of Justice, the number of cases pending judgment could reach over 114.5 million by 2020.(1)

The new code will undoubtedly help the courts to improve their efficiency – in particular, as in the last five years the courts have seen a 15% increase in new cases and a growing backlog of cases which increases by 11.9% each year.(2)

The new code favours ADR and encourages parties to reach a mutual solution. Further, the code establishes an incentive policy and improves the mechanisms for conflict resolution.(3) In this sense, Article 3(3) provides that conciliation, mediation and other methods of conflict resolution will be encouraged by judges, lawyers, public defenders and prosecutors, including in the course of judicial proceedings.

Further, in accordance with the code, tribunals must create their own judicial centres for dispute resolution, focusing on conciliation and mediation (Article 165).

The ADR system is governed by the principles set out in Article 166, which emphasise the impartiality of mediators and conciliators, confidentiality, informality and mutual decision making.

Conciliation versus mediation

Although considered to be synonyms in international practice, conciliation and mediation differ in the Brazilian legal tradition to the extent that the new code provides for different situations in which each dispute resolution mechanisms should be used. According to the code, conciliation should be used in cases where no previous relationship existed between the parties, while mediation should preferably be used in cases where the litigants had a previous relationship.

The code also provides that conciliators are expected to suggest solutions in order to encourage settlement, while mediators must help the parties to work towards consensual and mutually agreed solutions.

Importance of ADR

To highlight the importance of ADR in the new procedural system, the code establishes that once a suit has been filed, a conciliation and mediation hearing must precede all litigation proceedings, unless neither party wishes to conciliate or if the rights in question cannot be transacted (Article 334(4)). In contrast with the former code, the new code does not automatically require a defendant to present a statement of defence, but rather will summon the parties to a mandatory conciliation or mediation hearing.

The underlying principle behind these hearings is to enable the parties to reach a settlement at the start of the case, and thus avoid the burdensome evidence production phase before the trial judge.

To reinforce the ADR system, many tribunals are taking measures to build their ADR capacities, seeking authorisation to compensate professionals that will take up this role. There is no doubt that the new code will help to disseminate mediation, conciliation and other ADR methods in a faster and more organised way.

Comment

The enhancement of Brazil's ADR policies is a major step towards reducing the judicialisation of disputes, which has permeated the larger procedural system as a means to resolve the structure problems associated with the judicial system.(4)

Litigation is undoubtedly an expensive and time-consuming process and, as such, companies are looking for a quicker way to resolve disputes efficiently. Conciliation and mediation are expected to be widely used in the Brazilian courts, both before and after the filing of suits.

The key to this move towards ADR is a change in Brazil's robust litigation culture, which the new code seeks to alter. Companies and law firms should be prepared for this new era of dispute resolution.

For further information please contact Paula Abi-Chahine or Jessica Silva Appel at Carvalho, Machado & Timm Advogados (+55 11 2872 4760) or email (pchahine@cmtlaw.com.br or jappel@cmtlaw.com.br). The Carvalho, Machado & Timm Advogados website can be accessed at www.cmtlaw.com.br.

Endnotes

(1) (CNJ – a.) Justiça em números 2015: ano-base 2014/Conselho Nacional de Justiça – Brasília: CNJ, 2015.

(2) (CNJ – a.) Conciliação e Mediação. Available at www.cnj.jus.br/programas-e-acoes/conciliacao-mediacao.

(3) (CNJ - b, 2015, p 484) ____ - b. Justiça em Números permite gestão estratégica da Justiça há 10 anos, 2015. Available at www.cnj.jus.br/noticias/cnj/79579-justica-em-numeros-permite-gestao-estrategica-da-justica-ha-10-anos.

(4) (Pinho, Cabral, 2010, p 99) Pinho; Humberto Dalla Bernardina de; Cabral, Tricia Navarro Xavier. Compromisso de Ajustamento de Conduta: atualidades e perspectivas de acordo com o projeto do novo CPC. Revista Eletrônica de Direito Processual – REDP. Volume VII, 2010.

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