Guillermo Miranda Arosemena

Guillermo Miranda Arosemena

The Extrajudicial Conciliation

—A better way to Efficiency, Productivity, Peace and Development—

Every day we come face-to-face with situations of confrontation with others in which we feel we must defend our rights and interests, trying to make our concerns prevail over those of our "adversaries." This is why, far from solving conflict, we often end up in a large and vexatious judicial process, where a third person must resolve our controversy by imposing his own solution.

Gladly for us, in Peru there now exists as a new possibility the Extrajudicial Conciliation, established by the Law 26872 (January 1998), an alternative mechanism of conflict resolution that enhances harmonic and pacific coexisting. What this system provides is the opportunity for disagreeing parties to meet with a third party who facilitates communication and allows the conflicting parties to negotiate their own final solution; one that benefits and satisfies both of them.

The Extrajudicial Conciliation Law is of obligatory application in civil matters since March 1, 2001, in the cities of Lima, Callao, Arequipa and Trujillo, and it's still optional in family and labor matters. In this sense, it is obligatory to go through the Conciliation Process to try to reach an agreement with the opposing party before going to court. Only when an agreement can't be reached will a case go to trial.

The Conciliator may or may not be a lawyer, but is a person who has an ethic and moral trajectory specially trained in negotiation and conciliation in order to help solve conflicts. The Conciliator functions in an impartial and neutral way, facilitating communication between the parties, and helping them to negotiate in a proper way as to come to a solution that satisfies both of them. The agreement that they choose, and sign off on, has the same binding quality as a judicial order and is executed as one.

Extrajudicial Conciliation applies to all human activities fields, especially those that impact permanent human relationships: Commercial, societies, contracts, debts, reprograms of debts, labor, enterprises, indemnification, intellectual and industrial properties, transport, environmental, rental disputes, family matters, etc.

The principal advantages of the Extrajudicial Conciliation are:

• Both parties have the power of knowing and ensuring the result. • The agreement is just like a judicial sentence and executes like one. • There is greater possibility of access to justice that facilitates the attorney's job. • It benefits the market economy. • It lowers transaction costs, making them clear and reliable. • There are macro and micro economic benefits. • It provides a sense of stability and trust for investors. • It improves interpersonal family and commercial relationships. • It provides more efficiency and efficacy in contract execution.

The experience I share with you now showed me, more than 13 years ago, that the process of Conciliation is a better way to improve productivity, efficiency and efficacy. It allows for clearer negotiations and success that benefits both parties as well as the consumer, who receives better quality goods or services at the right time and at a better price.

Starting in 1989, as president of the automotive Industrial National Commission of Peru, I was in charge of a Public Sector Conciliation between Good Year and Lima Caucho industries, on one side, and representatives of urban, interprovincial and international passenger and cargo transporters on the other side.

There was a conflict between the alliance of the Peruvian Drivers Federation (FECHOP) and the Democracy and Freedom Institute (ILD), and Peruvian Good Year Industries because of newspaper articles critical of Good Year policies. In the articles FECHOP and ILD complained that Good Year Industries demanded that passenger and cargo transporters buy only national tires instead of imported ones. FECHOP and ILD regarded GOOD YEAR as mercenaries and the tire company saw the transporter coalition as enemies of a national industry.

Being in charge of the conciliation, I invited GOOD YEAR and Lima Caucho to meet with the transporter coalition, but they declined at first, taking a stance that they didn't have to submit accounts to anyone. I guaranteed that this wouldn't be necessary and only then did they accept the dialogue.

On other hand, the transporters alliance agreed to a dialogue with Good Year and Lima Caucho just to please me because, in prior conciliations, we had gotten along well and I had gained their mutual trust and respect. They noted however that they had already decided not to buy any national tires again.

A meeting was arranged between the national tire producers, ILD, and FECHOP to which all transporters and other interested people were invited. The first agreement to be reached was that all conversations on issues concerning these groups were to be held face-to-face and not through the familiar forum of the local and national newspapers.

In the beginning the dialogue was very strong and heated, but without a loss of respect. All parties needed the time and space to get some things off their chests. Once they had discharged all of their anger and grievances we could then move on to a very productive phase that initiated conversations that fostered a rich and conciliatory dialogue.

The president of GOOD YEAR voiced his position, telling the General Secretary of the FECHOP that the transporters his organization represented didn't want a national tire industry in Peru.

The General Secretary of the FECHOP answered him asking how he could make such a statement as their organization wanted jobs for their sons and grandsons; however he pointed out a problem. What happened was that the product had a governmentally controlled price, decided with a political judgment and not a technical one; consequently, the national tires were too expensive for the transporters to purchase and also had less of a life expectancy than tires imported to Peru.

The GOOD YEAR president answered: How could they want cheaper and longer lasting tires when they already suffered with workers who had been in the industry for more than 30 years who wouldn't retire and couldn't be fired because of the labor stability law. Additionally, because of Time of Service Compensation, every S/. 1.00 of raise in salary the government ordered, had to be multiplied by the employee's total number of years of service.

He also noted that the inseams required for making the tires couldn't be imported. They could only be purchased from Petroperu Rayon S.A. and Celanese S.A., which charged higher prices than the international rubber companies. Additionally, the only importer of rubber to Peru was the Agrarian Bank (Banco Agrario) who charged a 4% commission.

GOOD YEAR said that was why, considering their position with labor and the problem of inseam dysfunction, they couldn't buy new machinery to produce cheaper, long-lasting tires.

Because of this dialogue FECHOP and GOOD YEAR realized that they had been treating each other as enemies when the real problem was the inability, on both sides, to handle their own problems. The final conclusion was that they decided to support each other and ask the authorities for a fair rate for the transporters and to eliminate inequities to GOOD YEAR and Lima Caucho industries.

These companies decided that they would stop opposing the transporters' choice to import certain tires they required as, due to a small market share, GOOD YEAR and Lima Caucho had no plans to manufacture them in Peru.

In the same way, the transporters, who had initially stated that they would never buy national tires again, decided on a common agreement with Peruvian tire companies to buy 40% of their tires domestically and to import the other 60%. They would try to recover the extra cost of the tires with their savings on other materials.

Briefly, the conciliation allowed each party to transform their stance from an adversarial to a cooperative position through clear and efficient negotiations that left both parties satisfied, bringing as a consequence peace and great improvement in human productivity and relationships. This is an example of the manner of successful conflict resolution that CEPSCON, Centro Peruano de Prevencion y Solucion de Conflictos, has worked to establish in Peru.

The challenge for Peru and Peruvians—emerging from poverty and substandard development—is to use the Extrajudicial mechanism in which all political groups and parties, the church and society representatives participate. This will create collaborative criteria that lead to an agreement on a Basic Plan of Administration and Development for Peru over the next 20 years, a powerful and respected foundation design that is a guiding principle regardless of who gets elected to govern the country.

Such planning and commitment is what our country, Peru, needs to achieve the unbreakable maintenance and development necessary in these four fundamental areas: Environmental, Economic, Political and Social. Those who are now members of the national conciliation table have a responsibility to the country for achieving this.

President and Founder of CEPSCON
—Centro Peruano de Prevencion y Solucion de Conflictos—