A new answer to an old problem

  • Brazil
  • 09/17/2019
  • laccanet.com

While many companies turn straight to hiring external lawyers to solve conflicts, LACCA investigates the rising popularity of ombudspersons as an innovative alternative to settle disputes in Latin America.

After almost 20 years working in-house as a general counsel and legal consultant at major corporate companies – including Netflix, Monsanto and Yahoo! – Jacqueline Berzon noticed that legal teams and their companies across Argentina were losing out financially from the draining costs of dispute resolution proceedings. “Companies spend a lot of money and face losses worth millions due to conflicts that could have been resolved if the leadership and senior management had known about these problems in advance and if they’d known how to address them,” she says.
One of the most common conflicts at companies in Latin America are labour lawsuits, and from Berzon’s experience employees are often afraid to talk and allow problems to fester until breaking point. “Employees feel there is a lot at stake and tend not to report or talk about their problems – but ignoring the conflict just makes it worse,” she explains, affirming that the ombudsperson – a position that is growing in popularity, albeit slowly, in the region – can help legal teams break this festering silence. “Labour lawsuits have a strong emotional component, and workers generally file legal actions because they are angry with their employer… if employees feel they can talk with someone about their problems, there’s a very good chance the issue can be resolved.”
How can an ombudsperson help?
Ombudspersons – more frequently referred to as “ombudsmen” in the past – work behind the scenes, collaborating with departments like HR, legal and compliance, to help companies prevent and resolve conflicts before having to instruct external lawyers for arbitration or litigation proceedings. “When anyone working for a company needs guidance or help in resolving an issue…or does not know where to go or which channel to take, ombudspersons can act as a first stop,” says Berzon. “They provide confidential, informal, independent and impartial assistance to individuals or companies through a variety of ways including conflict coaching and mediation.” Ombudspersons can also work with a company to analyse its activities to identify trends and bring attention to areas that pose the risk of potential disputes.
In the US and in Europe, there is more of a culture of resolving conflicts in a collaborative way within an organisation before instructing a lawyer, which helps reduce legal spend and often leads to issues being resolved far quicker for companies. In Latin America, given the more conservative views embedded in corporate culture and culture in general, ombudspersons and other alternative professionals who might replace lawyers and their dispute resolution practices are uncommon. “I think Latin America is extremely formal and a judicialised market,” notes Felipe Olivares Mercado, deputy manager of legal advice at Acciona Energía Chile. “There isn’t yet a broad perspective on the benefits of hiring mediators or facilitators… and I believe culturally, in Latin America, we do not trust the “impartial third party”, given the high rates of corruption in the region.”
Ombudspersons can either be hired to work internally at the company for a long-term basis or can be hired externally when a conflict arises. Berzon explains how both options offer different benefits: “Hiring someone internally allows the ombudsperson to have a deeper and better understanding of the company, its policies and structure, which helps them to perform their job more easily. However, hiring someone externally may reinforce the idea that the ombudsperson is independent and neutral,” says Berzon, indicating that external ombudspersons might give employees more confidence to trust that they aren’t acting on behalf of the company interests.
Mixed feelings
In-house counsel across the region regard ombudspersons and mediators in various degrees of positivity. Many Latin American legal teams simply won’t hire ombudspersons or other kinds of mediators when conflicts arise and instead go straight to hiring lawyers. “We normally won’t hire other types of professionals because we tend to rely on a lawyer with expertise on the topic to solve the dispute,” notes Olivares Mercado. “In case the negotiation does not prosper, we generally move towards a trial or arbitration.”
For some, the status quo of hiring lawyers is there for a reason. “The preferred option [to solve disputes] is to hire lawyers if meetings with the counterpart are not productive or positive,” says Juan Carlos Cruz Miranda, legal counsel for the Americas at the Federal Communications Commission. “The perception among many in business is that the position of a lawyer is more highly regarded and well respected, and so [lawyers] lead to less time wasted on further meetings with counterparts in disputes [that are not productive or positive].”
However, the fact that many companies view ombudspersons and other mediators with caution could be down to some industries in the region having relatively lower levels of professionalisation and being more resistant to change, compared to companies in the US or the UK, as Rita Guzmán, senior legal counsel at Ericsson, explains. “It wouldn’t be unreasonable to think that innovation and new ways of working are not always welcome from the law firm perspective… especially if litigation practice represents a significant portion of a firm’s income,” she says. “For companies, specifically in-house legal teams, it could just be the lack of understanding and the sheer lack of such services, which means there is an interesting, unexplored and underdeveloped opportunity at stake.”
Setting a precedent
In March this year, Berzon founded Jackie Berzon – Ombudsperson, a professional training company that offers external ombudspersons to companies as well as conflict resolution training and mediation, and conflict coaching services. So far, her main clients are medium and large companies in the health, energy and technology industry that want to take a more efficient and constructive approach to problems they face with employees and their own clients. “Companies want to give their employees and leaders new resources and tools to handle conflicts… they want to promote a culture of openness, transparency and respect,” she says.
When Berzon was training to become a mediator, she was surprised to discover that in Argentina, contrary to other countries like the US or the UK, mediators are seldom hired by individuals or companies; instead, mediators in Argentina, and many Latin American countries, are simply considered a preliminary step before legal action is taken over a dispute. “Mediators are members of a public registry and they intervene in conflicts just because mediation is a mandatory first step needed to be taken before filing a legal action,” notes Berzon. “Usually, their participation is a mere formal, bureaucratic step.”
Although a relatively new trend, Berzon believes there is an increasing need for, and interest in, ombudspersons working with a company’s legal team to prevent workplace conflicts. From her experience, many companies in Brazil, Chile and Colombia – often from the pharmaceutical, oil and gas, and banking sectors – have hired ombudspersons to help quell conflicts internally. In jurisdictions where labour disputes are high, an ombudsperson could be the innovative and unprecedented tool needed to disrupt the legal landscape. “Due to labour policies and old labour and union laws, among other factors, the relationship between employees and companies can be poor, and this results in a lot of labour conflicts, litigation and, ultimately, costs,” Berzon says. Ombudspersons, therefore, are not just a short-term fix. “I think companies will find ombudspersons a useful and trusted resource to bring employees closer to them as well as improve communications, break down barriers and help them find common ground. It will improve their results and reduce their costs.”
Of course, labour disputes and other conflicts within a company are sometimes only resolvable through arbitration or litigation proceedings, with the help of instructed external counsel. However, ombudspersons can certainly help cultivate a workplace environment with less tension between employer and employee. “It would be very naïve and romantic to think that all workplace conflicts will be solved by hiring an ombudsperson, but I think many issues will be resolved,” affirms Berzon, adding that the very act of offering employees an impartial aid who they can seek out if they do have concerns at work is very tactful. “Often, people just need to talk and be listened to; even if their problem cannot be resolved, having someone to talk to changes it all.”
Break the status quo
Many in-house lawyers told LACCA they would be interested in hiring more ombudspersons than they currently do when conflicts arise. Some companies, like Acciona in Chile, have already taken steps to include more mediation processes. “We have incorporated, in some contracts, clauses in which the parties agree to hire an impartial third party with a technical profile, with the purpose of resolving certain disputes between parties,” says Olivares Mercado, adding that there are economic benefits to using these alternatives too. “I think a mediator or facilitator could reduce dispute costs for both parties, compared to the high cost of lawyers during a trial or arbitration.”
Legal teams are cautiously optimistic about incorporating ombudspersons into their forms of defence when disputes arise. “I’d definitely consider hiring them if, after a detailed assessment of all aspects needing to be considered, I found it to be the best way forward and in the company’s best interests,” says Guzmán. “Hiring [ombudspersons and mediators], when feasible… is taking a proactive and efficient approach to a conflict or dispute.”
The success of alternative conflict resolution mechanisms in the last two decades shows that companies are willing to work with new tools and take new approaches that might bring efficiency and reduce cost, which, in the long run, benefits the business. This willingness might remain a little on the sluggish slide in Latin America compared to other regions in the world, but it’s clear regional legal teams are voicing their consent to seeing some disruption in the legal market to make way for more ombudspersons.
The discussion on ombudspersons needs to go hand-in-hand with more exposure of the work these professionals do. Jackie Berzon – Ombudsperson is one of the few ombudsperson agencies currently operating in Latin America, but it is likely more will appear in the coming years as the US and European trend infiltrates the region. It wasn’t easy for Berzon to leave her comfort zone as an in-house lawyer to embark on a new journey to found her ombudsperson company, considering these kinds of ventures are relatively non-existent in Latin America. “It’s difficult to start something from scratch, especially when the service I am offering is relatively unknown and not usual in my country… but I strongly believe in the value of the ombudsperson and how they can help companies support their people,” she says. “I think companies will gradually realise that there are many things they can do to avoid having to call a lawyer every time a conflict arises.”