New U.S. Chamber Reports Highlight Growing Danger of Lawsuit Abuse in Latin America

Changes to Civil Justice Systems Threaten Balance in Rule of Law, Economic Growth

WASHINGTON, D.C.—Latin American countries are systematically changing their civil justice systems in a manner that threatens a coming wave of civil litigation and negative economic and social consequences, according to key findings in two new reports released today by the U.S. Chamber Institute for Legal Reform (ILR). The reports provide a comprehensive examination of new and proposed changes to civil legal systems across Latin America and their likely impacts.

Following Each Other’s Lead: Law Reform in Latin America examines the expansion of class action lawsuits in 13 countries, and Class Action Evolution: Improving the Litigation Climate in Brazil examines changes to Brazil’s civil justice system and the influence that the largest nation in South America has on similar changes in neighboring countries.

Both reports identify troubling trends in the region that include making it easier to file lawsuits with questionable merit, creating financial incentives to bring mass litigation, and unbalancing the civil justice system to tip the scales between plaintiffs and defendants.

“These reports can serve as warning signs to the governments and people of Latin America to guard against misguided legal avenues that could turn into highways to abusive litigation,” said ILR President Lisa A. Rickard. “If implemented, current proposals could have costly, unintended economic consequences for many Latin American countries.”

Following Each Other’s Lead found that countries in Latin America are lowering their standards for filing class action lawsuits by trying to pursue “access to justice” for consumers through seemingly well-intentioned proposals. But many of these policies or proposals hand power over to outside groups to head class action lawsuits and in many cases even compensate them, removing existing safeguards that protect ordinary citizens, such as clear standards for certifying class actions and protecting victims through reasonable limits on attorney fees. These policies can easily disregard the true interests of plaintiffs and could distort justice by incentivizing the filing of baseless claims and undermining basic fairness and due process.

Meanwhile, the Brazil-specific report found that recent legislative proposals, while perhaps meaning to expand fairness in its civil justice system, can lead to undermining it. Among other dangers, the proposals would create financial incentives for outside groups to file class actions by allowing them to receive legal fees no less than 20% of any award. Reforms could also unbalance the system to pick winners and losers rather than let justice play out in the courts.

Ultimately, both studies should serve as warnings and guides for how Latin American countries can most successfully construct their civil justice systems.

“Certainty and fairness should be hallmarks of Latin America’s legal systems in order to benefit all of society and further long-term economic stability and job creation,” Rickard said.

ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the global, national, state, and local levels.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.