Courts prepare for high demand for judicial reorganizations.

Between March 16th and the 20th of this month, 180 lawsuits were filed in the three business courts of the São Paulo capital alone.

Courts of Justice have been adopting measures to cope with the surge in demand expected in business and bankruptcy courts due to the Covid-19 pandemic. At least three courts — from São Paulo, Paraná, and Rio de Janeiro — have been mobilizing efforts to create a pre-trial stage that allows indebted companies to attempt to reach an agreement with their creditors.

This new approach could help revive the economy with quick and low-cost solutions, while simultaneously preventing a collapse of the judicial system.

Between March 16th and 20th, 180 lawsuits were filed in the three business courts of the São Paulo capital alone. “We are talking about a period when everything stopped. Deadlines were and are suspended. When things return to normal, there will be a flood. We are equipping ourselves for this type of trauma,” says Judge Carla Germano, who works at the São Paulo Court of Justice's Inspectorate. The body published a provision for the creation of a pilot project for conciliation and mediation for business disputes arising from the current crisis.

The initiative by the São Paulo Court of Justice (TJ-SP) was launched on Friday and will operate for up to 120 days after the end of the remote work system (date still undetermined). It covers not only companies—as is the case in bankruptcy and recovery processes—but also economic agents in general, such as individual micro-entrepreneurs. Interested parties must send a request by email (cerde@tjsp.jus.br), listing the request, reason, parties involved, and documentation.

The conciliation hearing will be scheduled within seven days of the request date and will take place online. It will be conducted by one of the judges participating in the project—all of whom are heads of business courts. If no consensus is reached, the case will be referred to mediation. The agreement, if finalized, will be approved by the judge and will have the force of a judgment.

“We are reversing the logic. Normally, lawsuits are filed by those who want to receive payment, that is, the creditor. Here, however, the debtor is the one who will seek payment, say that they want to pay, and try to negotiate. This is a great step towards a culture of justice,” says Judge Carla Germano.

In the Court of Justice of Paraná (TJ-PR), the model is slightly different. Negotiations will take place in a Judicial Center for Conflict Resolution and Citizenship (Cejusc), created specifically to assist companies in crisis. It is called Cejusc for Judicial Recovery. It is the first unit in the country with this format.

In general, these centers function as a pre-trial stage. The parties meet in conciliation or mediation hearings. If they reach an agreement, the document is approved by the judge and has the force of a court ruling.

These centers exist in virtually all courts. Most people seek to resolve consumer disputes and family disagreements (paternity recognition, child support, and divorce). But there are also thematic centers. The TJ-SP (São Paulo State Court) and the TJ-PR (Paraná State Court) have units for resolving banking and tax debt issues, for example.

The Judicial Recovery Center of the Court of Justice of Paraná (TJ-PR) begins operating this week in the district of Francisco Beltrão. One of the reasons for the choice is the fact that there is already expertise in debt negotiation in that location. According to the court, the intention is to implement the project in other districts soon.

However, only companies that are authorized, under Law No. 11,101 of 2005, to participate in judicial reorganization and bankruptcy proceedings will be able to use the unit. “The Cejusc will serve to try to prevent companies from entering the conventional procedural circuit. It will prevent them from requesting judicial reorganization or from eventually being declared bankrupt,” says the coordinator of the new center, Judge Antônio Evangelista de Souza Neto.

Interested companies will have to demonstrate their crisis situation and state their intention to negotiate with creditors. Those already undergoing judicial reorganization, he adds, may also use mediation or conciliation to resolve conflicts.

Neto says there is a possibility of building a new payment plan within the Cejusc environment. The National Council of Justice (CNJ) approved a series of recommendations to judges of judicial reorganization and bankruptcy — one of them to allow the presentation of new plans.

“Lawyers have been warning us. There is a backlog of cases. Partly because the full impact of the crisis, which is expected to deepen, is still unknown, and partly because of the new routine of the courts [procedural deadlines are suspended],” says Judge Cesar Kury, president of the Permanent Center for Consensual Methods of Conflict Resolution (Numepec) of the Court of Justice of Rio de Janeiro (TJ-RJ), referring to new requests for bankruptcy protection.

The idea in Rio is to implement a project similar to the one in Paraná. However, it is not yet defined whether it will be a service within the existing Cejusc structure or a new center.

The judge says he will summon the Public Treasury, the Brazilian Bar Association (OAB), and the Public Prosecutor's Office to discuss the matter. If the decision is to offer the service within the existing Cejusc (Special Civil Court), implementation could occur within a week. If the option is to set up a new center, it may take longer and might coincide with the end of the pandemic period. "Which wouldn't be a problem because it will help relieve the burden on judges who will be overloaded," says the judge.

The Rio de Janeiro courts already have a success story. The recovery process of Oi, the largest in Latin America in terms of the number of creditors, is being handled by the 7th Business Court of Rio, and the operator was granted permission by Judge Fernando Viana to use consensual methods.

Agreements were reached with more than 50,000 creditors through mediation. Most of them held credits of up to R$ 50,000. Lawyer Samantha Mendes Longo, partner at Wald, Antunes, Vita, Longo e Blattner Advogados, the judicial administrator of the Oi case, says that these mediations took place through an online platform developed by the Getúlio Vargas Foundation.

Mediation hearings were also held with major creditors, but in person. Oi, for example, met with its main suppliers and attempted to reach an agreement, also through mediation, with the National Telecommunications Agency (Anatel) — which holds more than 15% of the company's total liabilities, R$ 65 billion. No agreement was reached, but the lawyer says it was worthwhile, as it was the first time a regulatory agency had participated.

For Samanta Longo, the Oi case is "a watershed moment." "People have difficulty accepting that mediation is useful for business matters. Everyone has the idea that it's only for family disputes. And it's not. Business mediation exists and is a success worldwide."

By Joice Bacelo, Valor — Brasília