How important is ADR to Latin America?

Dispute Resolution Journal, Feb-Apr 2003 by Ponieman, Alejandro

Almost all Latin-American legal, economic and political systems have been undergoing a crisis of one kind or another. International investments and other business transactions have been affected by currency fluctuations and the uncertain legal and political climate, with the result that loans and other business transactions have been delayed or cancelled. Courts in Latin America are bureaucratic, overloaded and slow to respond; consequently, the public's opinion of lawmakers, judges and lawyers has declined. (In the last years, different polls showed that justice and lawmakers rank far below 25% in the list of credible institutions). It may be that Latin-- American legal systems created under the light of candles two centuries old cannot well serve modern societies without changing. What is apparent is that these legal systems are failing in some way to carry out the role that modern society requires. We can see this in the area of dispute resolution because, with the increased dissatisfaction with the judicial system in Latin America, interest in ADR has mushroomed.

In the last decade, ADR centers in Argentina and Colombia have been actively promoting and teaching arbitration and mediation. Brazil has become receptive to arbitration now that its 1996 Arbitration Law has been held not to violate the country's constitution.

This is a radical and para d i g m a t i c change, since for decades Brazil was reluctant to resign state jurisdiction by permitting arbitration. Even though there has been backward momentum in the latest presidential election the country seems to be com- mitted to maintaining its achievements in ADR. Other South American countries, including Ecuador, Peru, Chile, Venezuela, Uruguay, Bolivia and Paraguay are experiencing slow but steady growth in the use of ADR. There are ADR centers in all of them and new arbitration laws in Peru and Ecuador following the UNCITRAL model law and arbitration courts in Chile and Argentina showing significant amounts of cases.

There is also great interest in ADR in Central America, notably Costa Rica, Panama and Guatemala. Mexico is an interesting case. As a member of the North American Free Trade Agreement (which provides for arbitration of disputes), Mexico is a party to several NAFTA arbitrations with a longstanding tradition of skilled arbitrators. But it is showing some resistance to the use of mediation, probably due to a deeply rooted litigation culture. The Interamerican Development Bank is supporting mediation and this may well influence the growth of this process. Likewise, in Arequipa, Peru, in 1999, the Interamerican Commercial Arbitration Commission accepted my proposal to add institutional mediation to its rules.

It is important to try to understand the forces that have led to the interest in ADR in Latin America in order to determine if it will become an integral part of the dispute resolution system, what direction it may take in the future, and its effect on the development of commerce.

Clearly, the social, political and cultural changes that have occurred are a major factor. For a long time policies of protectionism and "order publico" (public order) prevailed in most Latin American countries. Due to the growth of trade agreements and regional pacts, these policies have been relaxed, giving way to greater personal autonomy and greater liberty of contract. In addition, the 1990s showed a new political attitude, a sort of silent revolution, in which state monopolies in communications, energy, transportation, postal services, airports, etc., were privatized. This has allowed for new business enterprises and mega joint ventures and partnerships, within and across national boundaries. Borders seem to be melting away because of the increase in global transactions and technological advances in communications.

In some countries, the philosophical concepts of justice have also changed, such as from an individualist scheme to "nova justicia" in Brazil, and from the adjudicative concept to one of impartiality and giving more importance to sustaining relationships. The reappearance of ADR was instrumental to these changes and to alleviation of the overloaded courts. Moreover the law is struggling to meet new frontiers - the Internet, bioethics, genetics, new financial instruments, new kinds of disputes. Even while it is still analyzing the judicial consequences of contracting by fax, the Internet is introducing new puzzles.

These developments have created a greater need for fair, faster and impartial dispute resolution and institutions to administer them, particularly for international disputes where the parties wish to stay out of local foreign courts. For example, an American company may not wish to have its case litigated in the local courts of another country, and even less will a Latin American company wish to have the courts of New York or Moscow deciding over its rights.

The challenge facing Latin America is to harmonize existing judicial institutions with new private dispute resolution options. These processes are faster and more efficient than litigation and they harness micro- and macro-economic benefits. They reduce the expense (legal costs included) of dispute resolution. They enable the parties to select the neutral third party who is independent of the parties and the government, who will either decide the dispute (arbitration) or help them resolve the dispute themselves (mediation). The neutral's expertise is often preferred over a decision by a judge who usually is not expert in the area in dispute and may not be able to understand highly technical information or issues. ADR processes embody what are perhaps the most personally important values of our age - autonomy of the person and freedom of contract. For citizens of Latin American countries, they signal the liberation of state interventionism.