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Carlos Roberto Siqueira Castro
Siqueira Castro Advogados, Rio de Janeiro
crsc@siqueiracastro.com.br

The development of mediation in Brazil and its laws and regulations

Currently, Brazil has more than 79 million active lawsuits in itscourts. Approximately 29 million new cases are filed annually.

As a consequence of this large quantity of lawsuits, the average duration of a lawsuit is 8 years and 11 months in Brazilian State Courts and 11 years and 4 months in Brazilian Federal Courts. Evidently, it is an unreasonable length for judicial procedures.

In this scenario, mediation stands out, alongside arbitration which has been implemented in Brazil since 1996, as an effective instrument to reduce the amount of conflict resolution in the courts.

Mediation was recently regulated in Brazil through two laws: the Mediation Act, published on 26 June 2015, which came into force on 23 December 2015 and the new Civil Procedure Code, published on 16 March 2015, which came into force on 17 March 2016.

The ever-increasing importance of mediation can be observed in the Civil Procedure Code which states that even when a case is brought to the judiciary, it must pass through a mediation or conciliation phase, before the defendant presents his/her answer. This procedure ensures the growth of usage of mediation in the judicial field.

Concerning the relevant procedures to initiate and conduct mediation, although Article 166, paragraph 4 of the Civil Procedure Code clearly states that mediation will be governed according to the free will of parties including the definition of procedural rules, the Mediation Act has a section concerning general provisions about procedural requirements, such as at the start of the mediation proceeding.

In this regard, for extrajudicial mediations, the Mediation Act determines that the party interested in beginning mediation must send a formal invitation to the other party. That invitation must state the scope of the mediation and the date and venue of the first meeting. If the counterparty does not answer this invitation within 30 days, it is considered as rejected. For judicial mediation, the parties must declare their interest in mediation in their first manifestation in the records. Following this, according to Article 334 of the Civil Procedure Code, the judge will schedule a conciliation/mediation hearing. Only if parties are not able to settle that will the defendant present his or her formal defence.

It should be mentioned that there are several areas in which mediation can be adopted as a method of dispute resolution. Article 3 of the Mediation Act states that any dispute related to disposable rights, or inalienable rights susceptible of settlement, can be mediated.

As can be seen, there is a large field for mediation. But, who can use mediation as ADR? Mediation can be used by any enterprise or person with the legal capacity to resolve disputes.

One relevant issue is which organisations and individuals can implement mediation and whether it is necessary to carry out any formal registration. Concerning extrajudicial mediation, there is no special requirement to implement it. However, for judicial mediation, the Civil Procedure Code demands that mediators and private chambers of mediation must have a formal register before a State Court and before a federal database.

There are many mediation institutions in Brazil. In the public sphere, the Court of Rio de Janeiro State is responsible for a pioneer project involving mediation through its Permanent Nucleus of Consensual Methods of Dispute Resolution. Regarding extrajudicial institutions, there are several well respected mediation centres and chambers.

Mediation clauses

Usually, parties include a dispute resolution clause within a contract in order to submit the dispute to mediation or arbitration. Mediation clauses are not unusual in private contracts.

With respect to the requirements for mediation clauses, it is worth mentioning that the Mediation Act states that a mediation clause must contain at least the provision of the minimum and maximum time limits for the first meeting to take place, the place for the first mediation meeting, the criteria for choosing the mediator and the penalties applicable when parties do not attend the first meeting.

The Mediation Act allows that, instead of describing this information, parties may simply choose to use a regulation published by a reputed mediation institution to govern the proceeding.

Mediators

The regulation regarding mediators has been harmonised with the published Mediation Act and the new Civil Procedure Code.

The Mediation Act asserts that parties will choose or accept the mediator. Concerning extrajudicial mediators, any impartial third party with legal capacity with no decisive power, chosen or accepted by the parties, can be a mediator. The mediation clause shall indicate the criteria for the appointment of the mediator. It is not required that extrajudicial mediators have to be members of any kind of council, entity or association – judicial mediators must only have legal capacity, a university degree for at least two years and a training course carried out by an accredited entity.

It should be noted, in this respect, that the Civil Procedure Code and Mediation Act provide the possibility of co-mediation, stating that the participation of more than one mediator is advisable due to the nature or complexity of the matter being argued.

The Mediation Act and the new Civil Procedure Code provide several principles that must be observed in mediation in general, such as the impartiality and independence of mediators, autonomy of parties, orality, informality, free will of parties, pursuit of settlement, confidentiality, good faith and an informed decision.

The sole paragraph of Article 5 of the Mediation Act states that the mediator has the duty to reveal to parties, before accepting the mission, any fact or circumstance that may give rise to any justified doubt of his or her impartiality. Following this, any of the parties may refuse the mediator.The rules of disqualification or impediment pertinent for judges are also applicable to mediators.

Mediation procedure

Article 166, paragraph 4 of the Civil Procedure Code clearly states that mediation will be governed according to the free will of parties, including the definition of procedural rules.

Nonetheless, the Mediation Act has a section concerning general provisions about procedural requirements, such as commencement of the mediation proceeding.

In this regard, for extrajudicial mediations, Article 21 of the Mediation Act determines that the party interested in beginning mediation must send a formal invitation to the other party. That invitation must state the scope of the mediation and the date and venue of the first meeting. If the counterparty does not answer this invitation within 30 days, it is considered as rejected.

Regarding the timeframe for an extrajudicial mediation proceeding to be concluded, the mediation procedural is for the parties themselves to define and it will directly determine the timeframe for the proceeding.

The Mediation Act expressly states that no-one will be obliged to remain in a mediation proceeding. The Mediation Act determines that, by the end of a mediation proceeding, there must be a written final term stating that agreement was reached by the parties or that no further attempts to settle are justifiable.

If the mediation ends without a settlement agreement, the mediation records cannot be used as evidence in the next stage of the dispute resolution.

The Mediation Act states in Article 30 that any information related to the mediation proceeding is confidential to third parties.

In addition, the mediator cannot reveal information declared by one party during a private session, unless authorised. The law forbids disclosure of information shared in a mediation proceeding in any arbitration procedure or judicial lawsuit.

Nonetheless, the confidentiality is not an absolute rule. There are exceptions which are contemplated by Article 30 of the Mediation Act: if the law demands the disclosure or if it is necessary for the execution of the settlement reached through mediation.

Any evidence obtained in contravention of the confidentiality of the mediation will not be admitted in arbitration or judicial proceedings.

The duty of confidentiality is binding for the mediator, parties, their representatives, lawyers, and any person that directly or indirectly participates in the proceeding. At the very beginning of the proceeding, the mediator shall warn parties about the confidentiality duty.

Article 6 of the Mediation Act prohibits the mediator to act as a witness regarding facts related to the same conflict that he or she has worked on as a mediator.

Mediation agreement and its enforcement by the judiciary

If the parties to the dispute reach a settlement agreement, that final settlement agreement has a binding character. In that aspect, according to the sole paragraph of Article 20 of Mediation Act the agreement will be enforceable as an extrajudicial execution instrument. If parties submit the final term to judicial confirmation, it becomes a judicial execution title.

If the parties to the dispute reach a settlement agreement about a controversy involving rights inalienable but susceptible to settlement rights, it is mandatory to submit the settlement agreement to a judicial confirmation, preceded by a State Attorney’s opinion.

The law does not require a specific form for the final settlement agreement. In practice, the final settlement agreement contains the following: the report including a briefing of the dispute, the parties’ qualification, rights and obligations of the parties, the date and place of delivery, the mediator and the parties’ signatures.

Considering that the settlement agreement is an execution title, its revision, withdrawal or challenge must be held through a formal lawsuit before the judiciary branch.

The Civil Procedure Code will govern the enforcement of the final terms of settlement agreement concluded abroad– that is, whether that settlement agreement constitutes title to execution.

Mediation and arbitration/litigation

Although arbitration is rather common as a form of ADR in Brazil, there is no mandatory combination between mediation and arbitration.

Nonetheless, parties may agree on an escalation clause that provides that any controversy will be subjected to mediation then, if parties do not reach an agreement, they will go to arbitration.

However, the law forbids the revelation of information shared in a mediation proceeding in any arbitral or judicial lawsuit. Morevoer, the mediator cannot act later as an arbitrator or a witness related to the same conflict in which he or she has worked as a mediator. For one year after the last mediation hearing, the mediator cannot assist, represent, or defend any of the parties.

On the other hand, it should be mentioned that at any time during any arbitration procedure or judicial lawsuit, parties may agree to submit the controversy to mediation. The Civil Procedure Code lays out the duty of the judge to encourage a settlement between parties at any time, preferably through mediators or conciliators.

It is important to note that during mediation the statute of limitation is suspended under Article 17 of the Mediation Act.

Conclusion

In view of the relevant aspects of mediation in Brazil mentioned in this article, it is important to point out that the regulation of mediation in Brazil removes the old objection that no laws govern mediation.

The enactment of a new code, significant law reformulations, as well as the actual usage of alternative methods indicate that the tendency is that mediation will be a very sought-after dispute resolution mechanism in Brazil.