Petrobras attempted to resolve the imbroglio with Sete Brazil last year through private mediation. The state company also tried mediation with the TST(1) in the process with the oil unions, at the end of 2016. Sign of the times. In 2015, the mediation institute, a conflict resolution method among the so-called ADRs (2), was enacted in Brazil, with the new Civil Procedure Code and Law 13.140/15, the "Mediation Law". The new legislation has brought security and stimulated the development of mediation in Brazil.

With approximately 110 million lawsuits in progress and the average duration of 10 years for each suit, the “access to the justice” set out in the Constitution is a mere illusion in Brazil. Therefore, after twenty years of the enactment of the Arbitration Law, Brazil is already the fourth country in the world in number of arbitrations; the largest user of ICC (3) arbitration in the world, and São Paulo is among the ten largest arbitration sites in the world (by the ICC) . Companies are looking for speed, less bureaucracy and specialization. The costs of arbitration, however, are high, often requiring funding and making it unaffordable for minor cases.

Mediation emerges as an accessible and agile method. The secret of mediation is its infinite flexibility and informality, since it is not limited to the application of the law to the concrete case. The mediator does not judge: he is impartial and acts as a facilitator. The classic contradictory, adversarial and binary approach we call positional negotiation (right / wrong, black / white, win / lose) is replaced by a multifaceted, more sophisticated approach recognizing the complex nature of many disputes.

A subjective agenda is often the cause of the conflict and must be raised as it is considered key to the solution of the case. The process is guided by the principle of autonomy and good faith, in a collaborative position, with presupposition of co-responsibility, seeking a greater end, which is justice. The agreement is built from the first brick to the top, by the parties, through a multidisciplinary approach. Thus, the risk of non-compliance with the formatted agreement is close to zero.

In the area of energy, many companies use ADRs to resolve their conflicts. Disputes in this area often involve high values and complex technical issues; multiple parts; often multiple jurisdictions and regulatory regimes. Therefore, with the business imperative to complete a project, faster and more efficient methods of conflict resolution are required.

The complexity of activities such as drilling, exploration and production of oil and gas increases the potential for conflict. The projects in this industry involve high cost and risk, making it impractical to interrupt activities while the litigation is in course. Companies need to resolve deadlocks quickly and efficiently, and in a confidential environment, not to hinder business. And above all, they need to keep the relationship going. And this is the main advantage of mediation: prioritize the preservation of the relationship.

Mediation tends to be more successful when the mediator has expertise in the industry area, which increases her/his credibility. Ideally, companies should plan ahead and include an escalation dispute resolution clause (4) in their contracts, with a prior obligation of mediation (ad hoc or by a specialized chamber), and if mediation is not successful, arbitration, for the solution of the conflicts.

The ANP (5) provides for arbitration in its concession contracts with the oil operators and, in the new contracts for the 4th round of marginal fields, scheduled for 2017, an escalation clause is set out with conciliation (6) before arbitration. In the event of a conflict, however, nothing prevent the parties from going to mediation, avoiding going directly to arbitration. Ideally, however, for legal certainty, an express provision should already be in the contract, forcing the parties to go through this previous consensual process with the help of a neutral mediator.

Petrobras, a mixed-capital company, is subject to a private company legal regime, including civil, commercial, labor and tax rights and obligations. Thus, arbitration and mediation are applicable in disputes concerning (state) property rights. Suppliers would certainly have greater legal certainty and less risk if mediation as set out in the contracts with the state company, thereby consequently reducing the cost of their products and services.

Another important issue is the use of mediation in judicial recovery cases. We know of the flood of requests for judicial recovery in the oil sector as a result of the crisis. There is no doubt about the applicability of mediation in recovery and bankruptcy proceedings, but there are still uncertainties as to the form of its application. The contractors and companies in the oil industry, who are going through this difficult period, would gain much in being able to solve their conflicts and at the same time preserve their commercial relationship with suppliers and customers.

Mediation has the potential to unlock the court system and creates a range of opportunities for business in Brazil. However, its development depends on a profound change in the way conflicts are viewed. Just like crises, conflicts are positive if addressed as opportunities for growth and, rather than disruption, consolidation of business relationships.

Notes:

(1) Superior Labor Court.

(2) Alternative Dispute Resolution.

(3) International Chamber of Commerce.

(4) Escalation clause is also known as ‘multi-tiered’, ‘multi-step’ or ‘ADR-first clauses’.

(5) Biofuel, National Gas and Petroleum National Agency

(6) The term "conciliation" does not seem appropriate, since the prior procedure is a mere negotiation.

About the author: Julia Mota is a lawyer and mediator, partner of Seabra Fagundes, Ferraz, Mannino, Mota and Espírito Santo Advogados - SFME Advogados