Faced with the overloading and congestion[1] of the Brazilian judiciary – which slows down the achievement of judicial relief and hinders access to justice – it is urgent to seek and use other appropriate methods for dispute resolution – such as negotiation, conciliation, mediation, arbitration, and dispute board.

In some situations, it is also necessary to evaluate the possibility of customization and implementation of a unique system to prevent, manage, and/or resolve a range of disputes, establishing specific procedure(s). This is the case of Dispute System Design (DSD).[2] This solution deals with systems designed to handle specific situations and needs and, for this reason, usually presents satisfactory, efficient, and fast results.

One of the most emblematic and well-known cases[3] of the DSD is the September 11th Victim Compensation Fund (VCF). This financial compensation program was created to serve the victims and families of victims of the terrorist attack that hit the Twin Towers in New York in 2001.

Through the program, more than $7 billion was paid to surviving victims and representatives of victims who died in the bombing.[4] The VCF was considered a great success, as the beneficiaries were treated fairly, with respect, dignity, and compassion, and the adoption rate was very high.[5]

Change of mindset

Before addressing the stages of the design of a dispute system and presenting examples of Brazilian cases and the benefits of the solution, it is necessary to emphasize that the adoption of this method requires a change of mindset.

The overloading of the Judiciary is mainly caused by the litigious mentality of our society and of a good part of the lawyers, for whom the best way to resolve a dispute is through state adjudication, with a definition by a trial judgment. Something that in the words of the illustrious scholar Kazuo Watanabe can be defined as the "judgment culture".

Admitting the possibility and use of new, alternative, customized, and even faster systems often faces resistance from the stakeholders involved. This is most likely because "Narcissus finds ugly what is not a mirror ...", in the words of the poet Caetano Veloso.

There is no doubt that one of the starting points for unburdening the judiciary is to use appropriate methods of dispute resolution. Developing this alternative requires less formalities and belligerence from legal professionals and more sensitivity, creativity, and flexibility. This is the mindset shift we are referring to.

Instead of stimulating litigation, lawyers need to act as negotiators, using purposeful communication, with the goal of gaining empathy and trust. They should also encourage the parties to use appropriate methods for dispute resolution and, when applicable, act as designers of a unique system to prevent, manage, or resolve a range of disputes.

The stages of designing a dispute system

According to the doctrine of Diego Faleck, the stages of designing a dispute system are:[6]

  • analysis of the dispute and of the interested and affected stakeholders;
  • definition of the objectives and priorities of the system;
  • consensus building and system development;
  • dissemination, training, and implementation of the system; and
  • constant evaluation of the system.

In the first phase of the process, the appropriateness of the DSD will be analyzed. To do so, it is necessary to ascertain who the affected parties are and what the interests of each one of them are. Next, it is necessary to understand what would encourage them to seek a composition rather than litigate.

Moreover, is important to identify the damages involved in this dispute and their extent.  It should also analyze the possible means or systems for prevention and/or management and/or resolution of the dispute and what the pros and cons of each of them are. Based on this information, we assess the need for and feasibility of creating a specific system for the dispute and whether this system is, indeed, the most appropriate.

In the second phase, the main goals of the system and the guiding principles to achieve these objectives are defined. Considering that the system created will be a non-binding alternative for those involved (since the judicial route, constitutionally guaranteed, will always be available), it is necessary that everyone opt for the system and, therefore, trust it.

According to Diego Faleck,[7] in order for parties to trust the system, there are six key factors:

  • transparency;
  • equality;
  • support in objective criteria;
  • efficiency;
  • dignified treatment for the parties, defining worthy values; and
  • government participation.

In the specific case of a compensation program, the following should also be analyzed at this stage:

  • admission criteria;
  • list of documents that will be required from beneficiaries;
  • pricing of compensation;
  • legal certainty in the system; and
  • measures that can be taken to mitigate and prevent fraud, among others.

In the third stage, it is necessary to build a relationship of consensus with all the interested and affected stakeholders, including the public authorities involved, such as the Public Prosecutor's Office and the Public Defender's Office. It is of utmost importance that everyone participates in the creation process and approves it.

In addition, at this stage, the system is also developed. For this, it is necessary for the designer to select, sequence, and/or combine the appropriate methods for dispute resolution that will be used.

According to Ury, Brett, and Goldberg, there is a "dispute resolution ladder" in which different methods can be selected and sequenced as steps (the lowest-cost mechanism should be prioritized):

  • prevention mechanisms (consultations and incorporation of learning from a dispute);
  • interest-based negotiation (manifested in different forms);
  • mediation, by peers, by an expert, in the different modalities as the case may be;
  • mechanisms for returning to interest-based procedures (sources of information and mechanisms involving non-binding opinions);
  • mechanisms to support the lowest cost (rights-based – variations of arbitration – and power-based – voting, limited symbolic strikes, and rules of prudence).[8]

Once the system is developed, the fourth stage begins. At this stage, the system is, in fact, put into practice, with the dissemination of information to all involved. It is explained how the system will work and who can join, among other relevant information.

Subsequently, the system is implemented and everyone who has an interest in participating joins it. Then, the procedure created is executed.

In the case of compensation programs, after entry, the legal analysis will take place. If eligible, a proposal for an agreement will be submitted, which may or may not be accepted by the interested party.

The last and fifth phase is the continuous evaluation of the system, which allows improvements to be made based on the experience with various situations that may arise during the procedure.

Cases in Brazil

After this theoretical introduction with the step-by-step to design a dispute system, we present the Brazilian cases of the DSD. All of them illustrate in an extremely satisfactory way the many benefits of a system for resolution and/or management and/or prevention of disputes for those involved – whether based on the principles of access to justice, saving time, or efficiency.

 The main cases of success of the DSD in Brazil – all out-of-court compensation programs – can be divided up based on the event that led to their design:

  • aircraft accidents;
  • dam collapse;
  • involuntary eviction; and
  • socioeconomic isolation.

1) AIR ACCIDENTS

TAM Case: Compensation Chamber 3054 (CI 3054)

  • Context: aircraft accident occurred on July 17, 2007 (Flight 3054, which was en route Porto Alegre – São Paulo).
  • Nature of damage: moral damage and material damage.
  • Public agencies involved: Public Prosecutor's Office of the State of São Paulo, Public Defender's Office of the State of São Paulo, Procon/SP Foundation and Department of Consumer Protection and Defense of the Bureau of Economic Law of the Ministry of Justice.
  • Acceptance of agreements: 92% acceptance (55 proposals accepted, 3 withdrawals, and 1 proposal rejected).
  • Highlight: First Extrajudicial Compensation Chamber implemented in Brazil.

Air France Case: Compensation Program 447 (PI 447)

  • Context: aircraft accident occurred on May 31, 2009 (Flight 447, which flew the route Rio de Janeiro – Paris).
  • Nature of damage: moral damage and material damage.
  • Public agencies involved: Public Ministry of the State of Rio de Janeiro, Ministry of Justice and Procon/SP Foundation.
  • Acceptance of agreements: 95% acceptance (19 proposals accepted and 1 withdrawal).
  • Highlight: the complexity for directly involving a foreign company and the relevance of having the participation of the Ministry of Justice.

2) DAM COLLAPSE

Vale Case: Brumadinho Compensation Chamber (CIB)

  • Context: collapse of the Fundão dam in Mariana (MG), which occurred on November 5, 2015.
  • Nature of damage: moral damage, material damage, and economic damage.
  • Public agencies involved: Public Defender's Office of the State of Minas Gerais.
  • Acceptance of agreements: 93% acceptance (12,136 proposals submitted and 11,497 proposals accepted).[9]
  • Highlight: national relevance of the accident due to the number of people affected by the disaster.

3) INVOLUNTARY EVICTION

Subsidência Maceió (AL): Financial Compensation and Relocation Support Program (PCF)

  • Context: eviction occurred in five neighborhoods of Maceió (Pinheiro, Mutange, Bebedouro, Bom Parto, and Farol), due to the geological phenomenon that generated the subsidence of the soil and cracking in properties in the region.
  • Nature of damage: moral damage, material damage, and economic damage.
  • Public agencies involved: Federal Public Prosecutor's Office, Public Prosecutor's Office of the State of Alagoas, Federal Public Defender's Office, and Public Defender's Office of the State of Alagoas.
  • Acceptance of agreements: 94% acceptance (19,501 proposals submitted and 18,356 accepted).[10]
  • Highlight: the first preventive extrajudicial compensation program in Brazil, with recognition from the National Council of Justice[11].

Madre de Deus Case (BA): Eviction Program for Environmental Treatment (PDTA)

  • Context: eviction occurred in Madre de Deus/BA, due to the need for environmental remediation of land owned by Colloidal Carbon Company (CCC)
  • Nature of damage: material damage and economic damage.
  • Public agencies involved: Madre de Deus City Government, Bahia State Prosecutor's Office, and Colloidal Carbon Company (CCC).
  • Acceptance of agreements: 100% acceptance (240 proposals submitted and accepted).[12]
  • Highlight: the first extrajudicial compensation program in Brazil that obtained 100% acceptance.

4) SOCIOECONOMIC ISOLATION MACEIÓ (AL)

Flexal Case: Flexais Urban Integration and Development Project

  • Context: the involuntary eviction of the neighborhoods affected by the geological phenomenon (which originated the PCF), led to the socioeconomic isolation of the neighborhood of Flexais.
  • Nature of damage: moral damage, material damage, and economic damage.
  • Public agencies involved: Municipality of Maceió, Federal Public Prosecutor's Office, Public Prosecutor's Office of the State of Alagoas, Federal Public Defender's Office.
  • Acceptance of agreements: 97% acceptance (1,578 proposals submitted and 1,533 proposals accepted).[13]
  • Highlight: in addition to compensating those affected who suffered from socioeconomic isolation, the program also aims to revitalize the area, with the development of actions to promote access to public services and stimulate the region's economy and thus reverse socioeconomic isolation.

When analyzing these cases, the success of Dispute System Design in Brazil is evident, especially when we observe the following points:

  • the acceptance rate of the agreements is above 90%, which demonstrates the satisfaction of those involved and the efficiency of the systems;
  • speed is another highlight, especially if compared to the time of processing of cases in the Judiciary[14];
  • the reputational damages of the companies involved in using the DSD are mitigated, as the company, in general, assumes the strict liability that is due to it by force of law (regardless of the actual cause of the events). This demonstrates attitude, proactivity, and good faith, which are added to the quick action in the extrajudicial solution of the conflict – always considering parameters consolidated in the case law of the Brazilian courts;
  • irrevocable and irreversible discharge, as well as full compensation of the damage suffered – it is, therefore, a definitive solution;
  • predictability of the amount of liability involved, since the metrics and values to be compensated are based on objective and pre-defined parameters.

The instruments of agreement entered into in the DSDs mentioned above have already been tested and endorsed by the Judiciary. Although annulment actions for a few agreements were filed, none of these actions were successful in the Judiciary – which, upon confirming the seriousness of the compensation programs and correction of the values and parameters used, accepted the solution adopted and ratified the validity of the extrajudicial agreements.

Considering all the above, although the use of a Dispute System Design in Brazil is still in an early stage, the results of the existing programs are extremely satisfactory and demonstrate efficiency, speed, and several other benefits for all involved.

Because we believe that slow justice is not justice, we are not satisfied with the statistics: they indicate that, on average, the lawsuits take around five years. This prognosis motivated us to deepen our studies in alternative and appropriate methods for dispute resolution and in Dispute System Design. Therefore, we have become enthusiastic about applying these methods, recommending them whenever appropriate.

 

[1] According  to the Justice in Numbers Report 2022 prepared by the National Council of Justice, the congestion rate (percentage of cases not resolved in relation to the total in process, fewer new cases, plus pending cases) in the Judiciary is 74.2%. The average processing time for pending cases is four years and seven months.

[2] This is how Stanford professors Stephanie Smith and Janet Martinez define it in the article An Analytic Framework for Dispute Systems Design: "A dispute system encompasses one or more internal processes that have been adopted to prevent, manage, or resolve a stream of disputes connected to an organization or institution."

[3] The movie "How Much Is It Worth?" on Netflix tackles the subject. Trailer is available on YouTube.

[4] Information taken from the book Dispute system design: preventing, managing, and resolving conflict, written by Lisa Blomgren Amsler, Janet K. Martinez, and Stephanie E. Smith, as follows: "The VCF was closed in 2004, having paid over $7,049 billion to surviving personal representatives of 2,880 people who died in the attacks and to 2,680 claimants who were injured in the attacks or the rescue efforts . . . thereafter."

[5] Information taken from the book Dispute system design: preventing, managing, and resolving conflict, written by Lisa Blomgren Amsler, Janet K. Martinez, and Stephanie E. Smith, as follows: "In retrospect, Feinberg concluded that the VCF was very successful under the circumstances but that he would not hold it out as a standard model for no-fault public compensation. The several success factors he highlighted seem relevant to other circumstances. Claimants were treated fairly and with respect, dignity, and compassion. Participation was very high."

[6] Brazilian Arbitration Magazine -v1, n. (jul/Oct 2003) – Porto Alegre: Synthesis; Curitiba: Brazilian Arbitration Committee, 04 -v.6, n.23. Introduction to Dispute System Design: Indemnity Chamber 3054.

[7] Revista Brasileira de Arbitragem -v1, n. (jul/Oct 2003) – Porto Alegre: Synthesis; Curitiba: Brazilian Arbitration Committee, 04 -v.6, n.23. Introduction to Dispute System Design: Indemnity Chamber 3054.

[8] URY, William L Brett, Jeanne M; Goldberg, Stephen B. Getting Disputes Resolved: Designing Systems to cut the Costs of Conflict. Cambridge: PON Books, 1993, p.41.

[9] Numbers updated Aug. 1. The program is still ongoing, so the numbers are subject to change.

[10] Official figures in news published by Braskem on August 10. The program is still ongoing, the numbers mentioned are therefore subject to change.

[11] https://www.cnj.jus.br/caso-pinheiro-a-maior-tragedia-que-o-brasil-ja-evitou/

[12] Numbers updated Aug. 21. The program has already been finalized, the result, therefore, is definitive.

[13] Numbers updated Aug. 21. The program is still ongoing, so the numbers are subject to change.

[14] According to  the Justice in Numbers Report 2022 prepared by the National Council of Justice, the average processing time of pending cases is four years and seven months.