Resolving Disputes
Although South Americans prefer to do business with their friends, they recognize that even the best of relationships may suffer from misunderstandings. Avoid an outright brawl whenever possible, as serious disputes in South America have long-term consequences and may sever even long-standing relationships.
Understanding the law
Each country in South America exercises its own sovereignty. When doing business in more than one country, you must comply with the laws in each country. It is wise to have local attorneys working with someone from your headquarters so that all interests and constraints are represented and understood. South American countries practice civil law, sometimes called code law. This is the same system used by most European and many Asian and African countries.
Applying the law
In civil law the primary authority for resolving disputes is a written code that lists guiding principles for conduct. As it is practiced in South American countries, civil law has some distinct characteristics from other regions. The law lays out a set of general principles that must be applied to specific cases by a judge. Much of a judge’s responsibility is to decide which code is most relevant for a specific case. They may focus more on choosing which rule to apply than on the actual merits of a case. Since civil law mandates specific actions, cases can be won or lost on procedural issues. The winner of a dispute is often the side that best manipulates the procedural codes rather than the one with the most compelling factual arguments.
Stages in dispute resolution
- Negotiation
Negotiation is the best option for dispute resolution in South America. It is important to recognize that contracts are not followed as rigorously as they may be in other parts of the world. You may need to make allowances for exceptional circumstances and decide whether or not you trust the intentions of your partners. Taking a rigid stance may rupture the relationship.
- Mediation
Involving a disinterested and independent third party to facilitate a discussion is not common in South America. There are no specific restrictions that prevent the practice, but neither is there much infrastructure or precedent to support it. If you want to pursue mediation you may have to educate your counterpart about the process, which will not be easy.
- Arbitration
Although there was a period of time in which South American nations prohibited international arbitration for disputes, most now encourage the practice and have adopted the major international conventions. Several countries have arbitration centers, and most recognize international associations. This can be a good option but is not the most common.
- Litigation
Stay away from the courts if at all possible. The process is extremely cumbersome and slow. Litigated cases may take a dozen years or more to work through the system. Additionally, courts at the state and local level may be heavily influenced by forces beyond the facts of the case. If you do go to court, be sure to hire a good lawyer who knows the local system and players.
TIP
Jurisdiction is always a complex issue in international dispute resolution. Agree on a venue before there is a conflict and be sure it is part of a written contract.
TIP
A contract must be managed as it is executed. In this sense it is a living document, not a stone tablet of laws. Your South American partner will expect you to be flexible and practical over the life of a contract.