Samba, churrasco and football. Although these three items – symbols of happiness, joy, and enthusiasm, do comprise recurrent topics in Brazilian culture and day-to-day life, the Brazilian corporate scene commonly treats its participants in a much less loving and appreciative manner. All of the hospitality given to foreigners and the warmth provided for in social interactions tend to be replaced by aggressive attitudes, abrupt decision-making and faulty miscommunication attempts when it comes down to the Brazilian business world.
On one end of the spectrum, Brazil has a vibrant economy full of entrepreneurs, multi-national companies, and national giants, spread across all market sectors, providing its enormous internal market with goods and services which range from commodities to investment banking. If this was not enough, Brazil is one of the most significant international players having a huge take in exportation; providing goods world-wide at competitive prices, with safe, stable and secure procedures, complying appropriate standards and quality.
However, to the same extent that Brazilian market agents excel in their passion, enthusiasm, and capacities as business (wo)men, these fail miserably when disputes emerge with their peers, competitors, clients and/or suppliers.
Dispute resolution in Brazil is highly dominated by a pure litigation culture by means of which any controversy which arises from a business relationship ends up being submitted before our State or Federal Court systems.
This occurs due to two main reasons: (i) the parties involved in the dispute simply do not know any better and (ii) the advisors (especially the legal ones) have incentives which are not aligned with their clients.
As to the first reason, Brazilian agents are highly educated in regards to the business aspects of their job descriptions. From financial analysis and strategic consulting to people management and sales tactics, Brazilian officers are second to none in the world. However, the scenario is absolutely different when it comes to dispute resolution.
There are no wide-spread training programs for executives in Brazil regarding dispute resolution as a whole, let alone alternative methods of resolving disputes. Business execs simply do not have the interest nor do they put any effort into allocating time, patience or brain-space to absorb these value-creating efficient procedures.
The result of this is that the decision-makers simply are not aware of the available tools, mechanisms, procedures and consequences of alternative dispute resolution. Ultimately, this leads to more of the same endless repetition of inefficient, aggressive, and value-destructive attitudes of resorting to court whenever there is disagreement.
This leads me to the second reason as mentioned above – many market agents are purposefully left in the dark in regard to alternative dispute resolution methods due to unaligned incentives.
As a general rule, litigation provides for a more advantageous service rendering to lawyers in Brazil in comparison to consensual dispute resolution. At the client’s cost and expense, litigation provides lawyers with a steady cash-flow; manageable amounts of work; predictable (and already known) procedures and tactics; the possibility of an enormous success fee at the end of the process; and of course, the unnecessary need to update and educate themselves further.
This agency cost is a conundrum which has been around for centuries and has occupied a substantial space in negotiation and mediation theory. For more on this, refer to Mnookin, Peppet and Tulumello in Beyond Winning – Negotiating to Create Value in Deals and Disputes. In said book, this issue is highlighted as one of the three most significant tensions within the dynamics of negotiation. In Brazil, this tension assumes even greater proportions, considering the complex legal framework providing for even more informational asymmetry and the predatory competition for legal work almost guaranteeing that lawyers will push even harder for their preferences and incentives, all of which in detriment to their clients’ real interests.
Finally, although the matters above may be common and present in many jurisdictions around the world, these become significantly more severe once inserted in the Brazilian context, due to the Brazilian judicial system. Courts in Brazil are under water and judges are overwhelmed by the amount of procedures that they need to address. This has led to a chaotic situation where all client parties involved are deeply unsatisfied by the costs (bottom line: time and money) and the end results of litigating.
It can (and in many cases, it will) take more than a decade to have a final ruling in a litigation in Brazil which, will often not be of a high technical standard. Court decisions presented by Brazilian judges are highly unpredictable and unstable. Therefore, in addition to time and money, relying on the Court system in Brazil is nothing short of a gamble.
This being said, there is hope. There is an ever-growing mediation-community in Brazil led by innovative attorneys who are managing to create significant impact in Brazilian dispute resolution, one step; one punch; one round at a time.
Moreover, academia in Brazil is acknowledging and pursuing alternative dispute resolution techniques more seriously. More than ever, teachers and students are now aware of these methods and their benefits.
The next steps towards building a culture in Brazil where disputes are resolved amicably, creating value, preserving relationships, and ultimately, allowing clients to attain benefits to the fullest extent lies on us – individuals who are aware and convinced, who have, one way or another, had the opportunity to come across this valuable information and knowledge.
In a nutshell, there is an urgent need to – firstly, educate business executives, shareholders, other commercial stakeholders, as well as lawyers alike, to the existence and the benefits of mediation, negotiation and other ADR methods, and, secondly, provide good and competent services which eventually lead to concrete results for our clients.
Quality education and effective results speak for themselves, and these are the factors that will generate more and more traction and attention to this cause. We sincerely hope that all will join in this road to and for a better future.