Contentious Issues

With alternative dispute resolution mechanisms growing in popularity across Latin America, GC asks how in-house counsel expect corporate conflicts to evolve.

The belief that strategy is critical to dispute resolution is one of the few things that businesses across Latin America have in common.  Everything else, from an organization’s appetite for conflict, to its preferred method and forum are all up for grabs.

Even on the question of where responsibility for resolving a dispute sits within an organization, GCs are divided: just 61% of respondents to our survey said that disputes were the responsibility of the general legal team, with others saying responsibility should fall either to a dedicated disputes attorney/team (25%), to external counsel (11%).

Given the large range of approaches towards dispute resolution across Latin America, what can be gleaned from the insights of in-house counsel working throughout the region?

Current Disputes

To gauge how much time and attention disputes and contentious issues are taking up on the agenda of Latin American in-house counsel, survey participants were asked  about how their disputes volume has changed over the past two years, and how they felt it was likely to change in the coming months.

Our survey shows dispute volumes have been stable over the past 24 months, with 62% of in-house counsel reporting that their portfolio of disputes has been consistent over this period. Just under a quarter (24%) reported an increase, while only 12% said that the level of disputes within their business had decreased.

However, when asked to look ahead and state their expectations for the future, GCs painted a very different picture. Well over half (65%) of respondents said they expected an increase in the number of disputes that their business would be involved in over the next 24 months, with just 3% predicting a fall in disputes over this period. Around a third (31%) expected no change.

Disputes aside, the impact of current events was clear: 81% of respondents reported that their team had become more likely to be consulted on employment matters within the past twelve months, and it seems likely that employment actions in the wake of COVID-19 was the main driver of this.

Further, 66% of counsel reported that their company has entered into discussions with their business partners to help renegotiate each party’s obligations due to the COVID-19 pandemic; 71% said that COVID-19 had made them more likely to do so.

Again, this suggests an increase in the level of contentious issues being dealt with by the legal team in the present time, either resulting from a failure to meet payment obligations or other failures to meet contractual obligations. On the other hand, such willingness to enter discussions with partners in the supply chain suggests an amenability on the part of in-house teams and their businesses to taking a practical, lenient approach to commerce during the pandemic. Many businesses are feeling the crunch, and with reduced capacity in courts and dispute resolution venues across the globe, there may be little to be gained from a steadfast insistence on contractual rights.

Methods of Disputes

When asked what type of dispute resolution methods they or their team had employed in the previous 12 months, in-house counsel across Latin America showed a tendency toward litigation, with 64% having been involved in a major litigation over the past 12 months. Arbitration was the next most common answer, at 38%, followed by mediation at 27% and ‘other’ at 11%.

But one common sentiment to come out of the interviews conducted for this report has been that alternative methods of dispute resolution – the likes of arbitration and mediation – are beginning to become a key part of the in-house toolkit.

‘I really think that mediation is a great way to solve disputes,’ says Sandra Gebara, Legal, Compliance, Risks and Corporate Affairs Director at Via Viejo in Brazil. I am using mediation very often in my company, in [matters such as] civil, labor or property disputes and the results are more efficient in terms of costs, time and the mood of the parties involved. It is an effective and, usually faster dispute resolution than litigation. It works better in certain jurisdictions of Latin America than in others.’

Similar sentiments were expressed in favor of arbitration.

‘Our organization firmly believes in the benefits of arbitration as a means of conflict resolution,’ shares Ana Maria Florez, general secretary and corporate legal director at the Cardiovascular Foundation in Colombia.

‘So much so that 90% of the contracts the company enters into have an arbitration clause. Its permanent use has led to the establishment of this practice as a mandatory institutional policy.    Therefore, disputes are resolved in the arbitration courts.’

However, efforts to avoid disputes were clearly just as important to in-house teams as which forum might be best suited to the resolution of conflict. This has become an especially pressing consideration given the stress on the court system and other dispute resolution venues in the wake of the COVID-19 pandemic.

‘At 3M we work a lot in preventing [a situation] getting to a conflict that would need a third party “court” or an “alternative form of dispute resolution”,’ says Ivan Loynaz, general counsel at 3M Mexico.

‘Getting to the point in which a discussion turns into a legal fight [is a bad outcome]. We work a lot in prevention, and we work a lot in partnering with the business to avoid or mitigate the risk of getting to a moment in which we have to go to court or arbitration. Of course, we cannot [always] avoid it. But we do everything in our power, and again always observing the right ways and the law, to not get there. To negotiate and to enter into an agreement over the contract and to keep our commercial process as clean as possible from all of that. Most of the time we get it: we do not have a lot litigation and we do not usually take or choose arbitration as the means to resolve a conflict. That is because we do not get into those conflicts at the end. We solve those conflicts before. There are just a few cases in which a situation would end in court. That is the way we see it. This does not mean that we do not believe other alternative ways of solving conflicts. We do believe in them, and we have participated in dispute processes around Latin America.’

Remote Access

The disputes sphere has been under particular pressure to adapt and reinvent itself over the course of 2020. With entire populations quarantined indoors for large chunks of the year, courts have had to find a way to deal with the growing backlog of hearings while balancing the risks associated with gatherings in public spaces. For example, Colombia postponed all but the most urgent of proceedings and introduced videoconferencing for judges; Chile has introduced remote hearings and prioritized cases relating to pandemic management; other countries throughout the region have introduced similar measures.

But as the normal dispute resolution infrastructure buckles under the pressure of varying levels of isolation and quarantine across the region, there may be an opportunity for in-house counsel to explore other avenues of dispute resolution: taking your place in a long queue to embark upon litigation that will be heavily disrupted by COVID-19 is not likely to be enticing for businesses and their legal teams, especially if an alternative is available.

Judiciaries across the region have implemented remote-access policies for pandemic-era dispute resolution, albeit to varying degrees. The case for this makes itself: the courts will not be able to cope if every potential party to a dispute waits for a future time where the pandemic will not be a factor. However, there have been a number high-profile incidences of video conferencing software being compromised (be it through user error, software bugs or something more sinister altogether), so how do in-house counsel view the prospect of remote dispute resolution?

When asked how comfortable they were in using remote-access courtrooms and alternative dispute resolution services (such as remote arbitration during the pandemic, for example), answers were mixed. 63% were at least somewhat comfortable with the prospect, although 39% in total were only ‘somewhat’ comfortable – the single most-common answer. 21% reported being somewhat uncomfortable with the idea, and 2% said they were very uncomfortable.

When asked what, to the extent that they are uncomfortable with the idea of remote dispute resolution, was their biggest concern, the most commonly cited reason was a lack of face-to-face time with the opposition, followed by cybersecurity concerns. Privacy, confidentiality and a lack of infrastructure were the next three most common reasons given.

‘Any dispute resolution mechanism works upon negotiation and therefore, the lack of face to face time decreases the possibility to read the opponents reaction,’ explains Melania Campos, legal director at Grupo Garnier in Costa Rica.

Choosing a Venue

Another factor comes from the fact that the region is made up of closely connected but independent economies and governments. It means that senior counsel in the region often oversee very distinct yet geographically close jurisdictions, so their opinions on the viability of alternative methods of dispute resolution will likely depend on the infrastructure available to them in their jurisdictions.

‘One of my biggest concerns is about local arbitration/dispute resolution mechanism in highly corrupted countries, where there is lack of objectivity during the process,’ says Michelle Canelo, legal director at Cargill in Honduras.

‘In that sense, for certain countries we have decided not to use arbitration. On the other hand, when we use arbitration as a dispute resolution mechanism, we may feel more confident using an international headquarters.’

For example, those counsel who were based in the United States (yet having responsibility for countries within Latin America) were almost all very comfortable with using remote access dispute resolution infrastructure, whereas those based in Colombia were most likely to have reservations about using remote dispute resolution. Similarly, when asked where their preferred seat of arbitration would be, the most common answer for GCs across Latin America was the United States, with Chile a close second.

‘On some other occasions, we may choose formal arbitration within an arbitration centre,’ explains Loynaz at 3M Mexico.

‘Generally speaking, we would only choose centres we trust and only in cities within which we have a presence. In some occasions where the issue is more global, you might be pulled into the next stage, but that is not very common. As I said, we spend a lot of time making sure we do not get to that point.’