Generalities

Our aim in this article is briefly to present basic information on how alternative methods of dispute resolution (AMDR) used in the commercial field are regulated in Latin American countries. Although in Latin America arbitration is always mentioned as one of the AMDR, this article will make reference to arbitration only insofar as it is combined with mediation in special laws and insofar as it relates to the financing of the promotion of AMDR. We will not analyze AMDR in family or labor issues and only superficially in community issues. Our focus will rather be on commercial issues, reflecting our belief that one of the chief advantages of AMDR is that it provides investors with an option for resolving disputes different from that offered by the traditional court systems. We shall not therefore discuss AMDR within the context of court procedures, but instead give an overview of the general situation of commercial AMDR in Latin America, which it is hoped will be useful to lawyers and investors alike.

Regional panorama

Honoring traditions inherited from the Spaniards and Portuguese, centralization of power has been woven into Latin American society through the creation of a rigid social order that requires every possible problem to be included in some form of legislation. The excessive formality of Latin American legal systems has made them inflexible and placed too much importance on form and not enough on the effectiveness and appropriateness of solutions available to people immersed in conflicts. The wheels of state justice in this region turn slowly, due mainly to the number of cases brought before the courts. During the last two decades citizens throughout Latin America have come to realize that governments do not have all the answers and that unless they-the citizens-actively participate, the process of change will be very slow. New forms of business and trade have accelerated the need for creative ways to find solutions to the problems that arise in the course of business transactions. This has led to a search for solutions that directly match the needs of business communities. AMDR have provided a response to the imbalance between the increasing demand for justice and the shortcomings of the court systems, and the need to [Page52:] find quick solutions with the cooperation of those involved in situations of conflict. It is common knowledge that the development of AMDR in the commercial field has been promoted throughout the continent by chambers of commerce. Although similar procedures have been established in every country, there are variations that should be taken into account when relating AMDR experiences in the region. We would venture to say that the common objective underlying all AMDR initiatives in our region is the addition of other options to the traditional methods of conflict resolution that have always been available-trial litigation or violence.

Negotiation

Negotiation is used as a tool to further communication between parties. Sometimes mediation and conciliation are described as assisted negotiation. It has not been regulated by special laws in our region as it is thought to be a technique for use in many procedures. What has happened is that the concept of negotiation has evolved with time, just as it has worldwide.

Training negotiators is crucial to the resolution of disputes by mediation and conciliation, and consideration has been given to this when establishing training programs in Latin America. One of the problems that has had to be faced on the path to successful problem solving is that lawyers who are called upon to assist in mediation procedures are litigators and not negotiators.

Justice of peace

The first attempt at AMDR to have been developed in Latin American countries was the justice of peace system. This was created in order to resolve disputes at community level and is worthy of mention because the justices of peace use mediation and conciliation techniques in their effort to encourage the disputants to come to an agreement before it is necessary for the justices of peace to take a stance. The constitutions of Colombia, Dominican Republic, Ecuador, El Salvador, Peru, Uruguay and Venezuela2 recognize this system as a way of solving conflicts at community level. The justice of peace system is an informal justice, based on common sense, experience and the stimuli of finding solutions through dialogue and conciliation.3

Not many commercial issues come before the justices of peace. However, as rural communities in all Latin American countries are founded on small enterprise, there are some disputes arising from small commercial transactions.

In Mexico, the justice of peace system has two branches, one covering civil, commercial and traffic conflicts and the other criminal justice. In Panama, although it covers a wide sphere, the system is bureaucratic and not very successful. In Argentina, the sphere covered is as broad as in Panama. In Nicaragua, where it is called 'informal justice', it covers civil and administrative cases but only those involving small amounts of money. In Brazil, where the justice of peace system was developed by region in order to give citizens access to justice without the formalities of trial, it is limited to small cases at [Page53:] community level. In the Dominican Republic, this system of justice dates back to the constitution of 1844 and covers civil, commercial, criminal and administrative matters. Similar coverage is found in El Salvador and in Venezuela.4 In Honduras, civil and criminal cases are dealt with by the justices of peace, who are placed according to population density. In Colombia, there is a very close relationship between the justices of peace and conciliation centers. In Peru, the justices of peace deal with both civil and criminal cases.5

In those countries where the justice of peace system has been given little emphasis, mediation has come to the fore at community level. This development depended upon which of the two received a stronger impetus when attention was first being given to AMDR. For example, in Colombia, greater emphasis has been put on mediation than on the justice of peace system, and the result is that a large proportion of disputes that are settled through mediation are of the same kind as would be brought before a justice of peace in Venezuela, for example.

Conciliation and mediation

Both terms have been used in Latin America with the same or different meanings, depending on the country. One standard commonly used to differentiate them is the status of the neutral. If the parties are assisted in their search for a solution to their problem by a public servant-whether a judge or an administrative authority-then this is regarded as conciliation. If the parties are assisted by a private neutral, then the procedure would be called mediation.6 Some countries have simply adopted the term conciliation without making any distinction over the status of the neutral.7 In others the only term used is mediation. The laws in some countries use both terms interchangeably.

Authors with a special interest in AMDR have attempted to establish differences and similarities between conciliation and mediation. One such is Gladys Stella Alvarez8 who, in an article written in 1996 in collaboration with Elena Inés Highton, studied the differences between the two, in light of the common and technical uses of both terms. She concluded that the term conciliator is to be used when the neutral has been empowered by the parties or by law to give his or her opinion and to suggest agreement proposals, and that the term mediation should be used only to refer to a non-adversarial structured procedure in which the neutral facilitates the negotiation between the parties but refrains from giving an opinion or formulating settlement proposals.

This definition clearly reflects the standard applied by those countries where conciliation is used in the context of the court system and government agencies, and the judge or highest authority acts as conciliator. It should be noted that, should the parties not reach an agreement, it is the same judge or authority that gives a ruling or renders an award. This resembles what some authors in the United States call 'med-arb'.9 It should not be confused with court-ordered mediation, where a neutral is appointed by the court to conduct a mediation before a court procedure begins, or even within a court procedure.[Page54:]

Kimberlee K. Kovach has written: 'While the terms mediation and conciliation have been used interchangeably, there are some differences worth noting. Usually mediation, while quite an informal process, maintains more structure than pure conciliation. Moreover, the term conciliation usually denotes that the disputing parties have been reconciled, and the relationship has been mended. In mediation, although maintenance of the relationship is an important factor, often the case will occur without an actual reconciliation between the disputants.'10

A publication of the Bogota Chamber of Commerce11 contains the following definition: 'Conciliation is a method used in conflict resolution that works without the need for laws to sustain it and without the intervention of the State or judges; it suffices with the presence of a third party mediator with authority.' Here, we clearly see the use of both terms in one definition, and the confusion that can and is being created.

In Stephen March's work, A Proposed Mediation Model for Civil Law Countries, mediation is described as a court-annexed or court-connected procedure that is entered into in connection with court orders and statutory guidelines. Any similar process that occurs with a neutral, but without a court order, is termed conciliation (this includes neighborhood and other mediation methods). Any process not involving a neutral is referred to as negotiation (this includes facilitated negotiation where parties hire specially trained individuals to negotiate for them).12 This definition implies that mediation is a form of conciliation.

When we consider the methods used to train and certify mediators and conciliators, we find that mediation and conciliation training programs all differ from each other as regards the amount of influence the neutral is allowed over the parties and whether or not they use caucusing. Identical training programs have been applied in different countries under different names.13 It would appear that, depending on the style of mediation developed by the mediator or the conciliator, he or she has more or less influence over the parties in decision making.

We have found that it is impossible to make a clear-cut distinction between the terms used for AMDR in Latin America. Confusion may arise from the use of different names for what in essence is the same phenomenon-a neutral helping the parties reach an agreement. For present purposes, we will refer to conciliation and mediation without attempting to draw a distinction between them. There may be as many definitions of each as there are authors on the subject.

Other forms of AMDR

According to our information, there have been examples of neutral evaluation used in Latin America in an attempt to resolve business disputes. However, no facts or documents relating to this subject are available, as the procedures were conducted privately through law firms. Mediation centers do not offer this service. We have no information on the use of mini-trials outside the courts and the justice of peace systems. [Page55:]

Public policy, administration of justice and AMDR

At various world forums, the idea has been advanced that it is not enough for States to guarantee legal justice through public policy, but that ways need to be found to offer the right solution for each case referred to justice. National governments have started to move towards AMDR in order to diversify access to justice and control the costs of administering the judicial system. In an effort to change their public policy regarding the administration of justice, they have committed themselves to promoting programs and actions to widen the range of options available to those in situations of conflict. In this way, the implementation of AMDR has become synonymous with the democratization of justice.14

In 1998, at the summit of presidents of supreme courts in Latin America (Cumbre Iberoamericana de Presidentes de Cortes y Tribunales de Justicia), the need to give further study to AMDR systems was recognized and a discussion on the type of AMDR to be promoted and the proper way to do so was engaged. In some countries a priority has been given to AMDR as part of judicial reform.

This implementation of AMDR through national governments raises its own challenges, since the use of mediation could become institutionalized and somewhat slower due to the bureaucracy characteristic of state justice. For governments to impose and supervise a consensual conflict resolution system could mean going against the very nature of AMDR.

The second basic problem we see in this is that it is not sufficient to have legal instruments allowing or encouraging the use of AMDR. What is most important is that AMDR is used appropriately, and that means setting up educational programs to ensure the proper use of these methods. Experience has taught us that users need to know the advantages and disadvantages of AMDR, their limitations and how they really work. The first step is to set up programs to educate judges and congressmen, who are the decision-makers, so that the proper legal framework is set up. The second step is to train lawyers and businessmen and women so that they may identify if and when these new procedures could satisfy their interests. That is the only way of making AMDR successful as a complement to traditional channels of justice.

It is worth pausing to look at the relationship between state justice and independent mediation, so as to clarify the connection between the two:

a) Independent mediation: Mediation programs that are completely independent of the courts. They result from community efforts, promoting the use of mediation instead of the traditional use of litigation. Commercial mediation is generally found here, due to the creation of mediation and arbitration centers in chambers of commerce throughout the region.

b) Mediation within the courts: Mediation centers work in conjunction with the courts, which refer to them cases for which mediation would appear to be an appropriate method of settlement. Such procedures are called court-ordered mediations.

c) Mediation dependent on the courts: A neutral is appointed by the court to act as a mediator. Should the parties not reach an agreement, the procedure will continue within the court.15[Page56:]

The reaction of the judiciary to the implementation of AMDR in each country has been varied. In some instances the traditional system has felt threatened by the appearance of these new methods. The transfer of the administration of justice into the hands of private citizens is not necessarily well received and may require much explanation and training before it is accepted. As we will see below, collaboration between the judiciary and arbitration and mediation bodies is crucial to the success of AMDR and its use by the general public. Hence the importance of promotion and training in judicial circles when first introducing AMDR in a country. As mentioned above, AMDR has sometimes been seen as a part of judicial reform, as in Nicaragua, where, after the 1995 elections, special emphasis was laid on the reform of the judiciary, with the supreme court heading efforts to include mediation in the new laws. In Puerto Rico, the supreme court laid down by-laws in 1998 to promote mediation, arbitration and neutral case evaluation.16

Constitutional regulation

As AMDR represent a fairly new legal concept for Latin America, the extent to which they have been included in Latin American constitutions varies from country to country:

Bolivia Constitution of 1967, amended in 1995-article 116

Brazil Constitution of 1988-articles 112 and 116

Chile Constitution of 1980-article 73

Colombia Constitution of 1991-article 116

Ecuador Constitution of 1998-article 118

Nicaragua Constitution of 1986-article 166

Mexico Constitution of 1917-articles 103 and 107

Paraguay Constitution of 1992-article 97

Peru Constitution of 1993-article 139

Uruguay Constitution of 1966-articles 247, 248 and 249

Venezuela Constitution of 1999-articles 253 and 258

Special laws

Some countries have regulated mediation and conciliation directly through special laws. In some cases the same instrument regulates both arbitration and mediation or conciliation. Other countries have adapted their procedural laws to include arbitration and mediation.17 This method seems to have caused less confusion insofar as it avoids any doubt as to current legal statutes.

Argentina adopted law 24.573 on mediation and conciliation in 1995. Bolivia enacted its arbitration and conciliation law (No. 1770) in 1997. Colombia started regulating conciliation and arbitration by decree 2279 of 1989, followed by decree 2651 of 1991 and law 23 of the same year. In 1996 the Colombian Congress [Page57:] approved law 270, also referred to as the administration of justice law. In 1998, it was decided that, in order to facilitate the use of AMDR, it would be preferable to have one legal instrument comprising, in chronological order, the articles of the previous laws and decrees that referred to arbitration and conciliation. This gave rise to law 446. Ecuador has its 1997 arbitration and mediation law. Guatemala adopted an arbitration law in 1995 and Panama a statutory order (No. 5) in 1999. A proposed mediation law is due to be debated in the Venezuelan National Assembly and has been accepted for debate by the Judiciary Commission.

What all these laws have in common is their conception of mediation as a flexible, confidential, economic and expeditious procedure in which the parties are the actors and the mediator is a neutral.

Scope of AMDR

The subjects that may be submitted to AMDR are generally limited. Most laws allow disputes relating to matters where parties may make settlements to be mediated.18 This excludes those concerning public policy and functions of state. Family and labor disputes may be settled by mediation usually only if this is sanctioned by special laws or takes place in the context of court-ordered mediations.

The disputes presented for institutional mediation generally include anything that has to do with commercial contracts. Mediation centers are not free to discuss the cases brought before them because they are bound by confidentiality, so information is not readily available on the subject. Disputes we have seen solved through mediation include those relating to the construction and insurance businesses, partnerships of all kinds, sales of goods and services, joint ventures, mergers, and commercial transactions in general.

The agreement to mediate

Mediation, by essence, is the result of a free decision by the parties. There are no requirements regarding the form of the agreement to mediate. It is a principle shared by all Latin American countries that parties may not be forced to mediate. As the decision to engage in mediation is an entirely voluntary one, they are free to accept or not to accept a proposed mediation. Agreements to mediate are not binding. In court-ordered mediations, and in systems where mediation is mandatory under certain rules, the parties may be forced to be present at a mediation session but cannot be compelled to participate in it and much less to reach an agreement.

Many contracts, domestic and international, include clauses providing for mediation prior to arbitration. This means that the parties must attempt mediation before they can proceed to arbitration. Such 'mixed' clauses are valid even if there is no mediation legislation in the country concerned. As a general rule, parties are free to engage in mediation at any time, even without a prior written agreement.[Page58:]

Enforceability of mediation agreements

By mediation agreement we mean the agreement signed by the parties and the mediator at the end of a mediation. The question that generally arises is whether or not it has the same effects as an arbitration award or a judicial ruling. Most clients will want to know what are the possibilities of enforcing the agreement. In some countries the trend has been to enforce the agreement as any other written contract would be enforced, whilst in others it has been necessary, in order to promote mediation, to give mediation agreements the same characteristics as arbitration awards. Bolivia, Chile, Colombia, Ecuador and Peru have introduced into their laws provisions regulating this issue, giving mediation agreements the force of res judicata. Mexico does not have any rules on the enforcement of mediation clauses or decisions issued by mediators. If the parties agree on a settlement, within the mediation procedure, they can execute a settlement agreement, which will be enforced in Mexican courts.

Development of institutions dedicated to AMDR

The chambers of commerce of the most important cities in every Latin American country have established mediation and arbitration centers. These centers have not only begun to administer mediations but have been essential to the development of commercial mediation in their respective countries insofar as they constitute a source of information and training and a nucleus towards which all interested persons gravitate. Initially these centers were developed as a way of reaching into the business community. The early pioneers came up with two essential tasks to be undertaken by the centers: first, they had to educate the potential market as to what mediation is and what it offers, and second, they had to provide a seedbed of successful dispute resolutions. When planning these centers it was important to be able to focus on both elements and to realize the critical importance of early education and experience that would open the way for others.

Educational efforts can take place at several levels and adopt various approaches, but will need to have certain common characteristics. They should all focus on the fairness, confidentiality and 'free-seeking' nature of mediation (agreed seeking of the parties' best interests). Programs that have tried to focus on other possible benefits (such as 'friendly' forums for a particular type of party) have been the cause of their own downfall. In educating the market, it is important to reach three groups: those who are in a position to recommend mediation, those who already know what mediation is and who need to know that it is available, and the would-be consumers of mediation services on a regular basis.

Many efforts have been made by institutions other than chambers of commerce to promote mediation, but none on such an organized basis or according to such consistent principles throughout the region. [Page59:]

Choosing a mediator

Mediation centers have adopted the system of a closed list of mediators. The center in this case has a corpus of trained mediators whom it assigns to cases depending on the characteristics of the case and the availability of the mediators. Should several mediators be suited to the case, there will be a draw from the list. Mediation centers build their reputation on their mediators' ability to mediate, which is why training programs are essential. Such programs usually take place in two stages: following basic mediation, at which the mediators are observed, those who have the required qualities are asked to participate at a second, advanced level. It is only then that they may be invited to join the center's list of mediators.

In the case of independent mediation, the parties are free to choose any mediator they consider suitable.

Financing the promotion of AMDR

The Inter-American Development Bank (IDB) has adopted a plan to promote the creation of centers dedicated to solving conflicts through AMDR. This policy was based on the belief that the cost of trade has risen due to the inefficiency of the court systems, and that this has a direct influence on the lack of economic growth in Latin American countries. The ultimate objective of financing AMDR projects is to create secure legal conditions for investors in developing countries unable to offer adequate legal conditions to attract foreign investment. The creation of a system for conflict resolution in commercial matters will necessarily have an impact on the amount of foreign investment in each country. Arbitration and mediation centers connected to the principal chambers of commerce in the region have received grants allowing them to start developing systems of administered arbitration and mediation.

By establishing alternative methods for the resolution of commercial conflicts, these projects are designed to promote private investment in the region. They aim to improve the business climate by spreading information on the effectiveness of alternative methods of dispute resolution. A few centers for mediation and arbitration will oversee the training of arbitrators and mediators who will handle business disputes. The result will be a decrease in the number of cases brought before the courts and increased negotiation and candid discourse among entrepreneurs. The institutional and administrative framework of the arbitration and mediation centers in the chambers of commerce will be consolidated, with a view to providing adequate and reliable AMDR services. This will be achieved by drawing up a strategy for the development of AMDR, leading to the consolidation of a market for such services. The projects provide for the training of arbitrators, mediators, and the administrative personnel of the chambers of commerce concerned. In addition, they are intended to strengthen the ministries of justice and existing laws and to disseminate information on the range and advantages of alternative methods for settling business disputes.

The table on the following page lists the projects that have been approved and either have been or are being performed. [Page60:]

[Page61:]

Conclusions

AMDR in Latin America has started to be used in many different ways and in several fields. The business community is clearly interested in the development of these new methods. There is a constant search for ways of modernizing the countries in the region, and one of the chief means of achieving this is to create an appropriate climate for investors. It is very difficult to provide a comprehensive survey of all the work that is being done in Latin American countries because, although-Brazil excepted-we all speak the same language, our approaches to the same problems are often very different.

The use of mandatory mediation has brought more problems than solutions. Most countries were not prepared for the ensuing avalanche of mediations and so did not have the necessary resources-human or material-to comply with the laws. They also found enforced mediation a contradiction in terms and source of further confusion. Countries in which special legislation has been introduced have advanced further in the use of AMDR, since is easier to market these methods when there are legal statutes endorsing the system.

The implementation of AMDR implies a cultural change in our way of managing conflict and confrontation. It involves a search for pacific solutions requiring the use of techniques such as marketing, education and sensitization in order to be successful. It is pointless having laws that promote the use of AMDR if they are not accompanied by the right social environment for their application. Independent evaluation and the interchange of ideas are keys to the success of AMDR, as is the possibility of monitoring through appropriate and reliable methods of collecting and processing information.

Urged on by worldwide trends, the use of AMDR in Latin American countries has come a long way since its initial proponents first took an interest in the subject. Nonetheless, there is still much work to be done.

1
The title of this article reflects the expression generally used in Latin American legislation to refer to ADR (Mecanismos Alternos de Solucion de Controversias in Spanish and Formas Alternativas de Resolucao de Litigios in Portuguese).

2
Constituciones Latinoamericanas (Caracas: Academia de Ciencias Políticas y Sociales, 1997).

3
Alirio Abreu Burelli, 'Justicia de Paz en Venezuela', Perfiles Liberales No. 38 (Santa Fe de Bogotá: Friedrich Naumann Foundation, 1994).

4
Ley Orgánica de la Jusiticia de Paz, Official Gazette of the Republic of Venezuela No. 4.817, 21 December 1994.

5
See Carlos E. Ponce in Ley Orgánica de la Justicia de Paz, Sistemas alternativos y justicia de paz en el mundo (Caracas: Editorial Jurídica Venezolana, 1996) 181.

6
Venezuela uses the term conciliation in its code of civil procedure and other special laws when the procedure takes place before a public servant. Venezuela has no mediation law, although mediation is used privately. The same applies in Mexico.

7
e.g. Colombia, see its 1991 constitution, art. 116, and law 446 of July 1998.

8
'Diferencias entre conciliación y mediación' [October 1996] La Ley (Dispute Resolution Supplement). Gladys Stella Alvarez is director of post-graduate negotiation and mediation studies, University of Buenos Aires, Argentina.

9
See Jaqueline M. Nolan-Haley, Alternative Mechanisms for Resolving Disputes (West Publishing, 1992) at 200ff.

10
Kimberlee K. Kovach, Mediation, Principles and Practice (West Group, 1998) at 12ff.

11
Cámara de Comercio de Bogotá, Métodos alternos para la solución de controversias, Series No. 6 (Chamber of Commerce of Bogota, 1997) at 21 (our translation).

12
See Stephen R. Marsh's mediation and dispute resolution resources web site at: adrr.com

13
Consultants from the IDR Group in Spain have trained mediators in Venezuela and conciliators in Ecuador following the same method.

14
Carlos Peña González in 'Sobre la necesidad de las formas alternativas para la resolución de conflictos' (paper presented at the international seminar on ADR held at Viña del Mar, Chile, in September 1994) [unpublished].

15
See Ana Maria Sanchez Duran, 'Mediación y la Administración de Justicia: Nuevos retos frente al siglo XXI' [Mediation and the Administration of Justice: New Challenges for the 21st Century] (paper presented at the first world congress on arbitration, Panama, 18-22 October 1999). The Spanish text of this paper may be found on the web site: www.servilex.com.pe. Ana Maria Sanchez Duran is president of Foro Mundial de Mediación in Spain.

16
Mildred E. Negron Martinez, 'Mediación y Administración de Justicia en Puerto Rico' [Mediation and Administration of Justice in Puerto Rico] (paper presented at the first world congress on arbitration, Panama, 18-22 October 1999). The Spanish text of this paper may be found on the web site: www.servilex.com.pe

17
In 1993, Mexico amended its commercial code and codes of federal and local civil procedure to introduce new arbitration rules similar to those of UNCITRAL. See Official Diary of the Federation, 22 July 1993.

18
Bolivia, Colombia, Ecuador, Peru and Venezuela's proposed mediation law .