Litigation in Paraguay

Paraguay is one of the happiest countries in the world and a major exporter of soybeans and beef. And like any country with energetic people and a vibrant economy, it has commercial disputes. I’d really like to visit to see the country’s judicial system firsthand, but sadly there are no direct flights between New York and Paraguay and changing planes is for young people. Luckily, I was able to speak with Miguel Saguier, a partner at Ferrere in Asunción, to learn more about litigation in Paraguay.

Why should you continue reading this post about litigation in Paraguay?

• You want something to read alongside a post about litigation in Guay.

• You are interested in a candid discussion about the role of corruption in a judicial system.

• You want to hear from a Supreme Court clerk, but not necessarily a U.S. Supreme Court clerk.

Miguel Saguier is a partner at Ferrere in Asunción.

Can you tell me about the kinds of disputes you handle in your legal practice? 

I represent clients mainly in civil in complex commercial cases, seeking damages for tort claims and contract breaches. I also represent clients in administrative disputes against the government, including with environmental agencies, tax authorities, customs bureaus, or the coast guard.

The country’s distribution law gives a lot of work to me and my firm. This 1993 law regulates relationships between foreign enterprises and local distributors. It is a very protective law, and it basically states that a party cannot modify or terminate a distribution contract without paying a compensation for the years the local entity distributed the product except under one of the circumstances that permits modifications. The compensation due under this law is calculated by taking the gross profit of local company and then multiplying it by a coefficient set by the length of relationship. We often represent foreign companies who do not understand this law when they agree to do business here.

Although I graduated from law school almost twenty years ago, I spent the first ten years of my career working for the courts. I started as an internal for a trial court and then I rose through the system until I clerked for the constitutional chamber of the Supreme Court.

What type of clients do you generally represent in disputes?

My clients include many large, multinational companies, such as Nestle, Unilever, Petrobras, AstraZeneca, Electrolux, and companies in the healthcare industry.

Besides Microsoft Office, what software do you use in your practice? 

We use Worksite iManage. Also, the court has its own website to that lawyers can use to check information and to submit documents, but you need to be an admitted lawyer before the court to use the site to file documents.

What books and websites do you use for legal research? 

The Supreme Court website has case law. Although the case law is not binding, it helps attorneys develop arguments.

We also use a very important legal periodical, La Ley. Most lawyers use it, not just trial lawyers, but also transactional corporate lawyers and court clerks and judges.

We also use books from legal scholars, mainly from Argentina. For a long time, from the late 19th century to 1985, the Argentine civil code was in effect in Paraguay. Paraguay only passed its own commercial code, procedural code, and civil law in 1985 and 1988. Because of this long period when Argentina’s law governed Paraguay, that country’s law is still very important. And, a little bit, the law of Spain important here, as well.

Image credit: https://es.wikipedia.org/wiki/Corte_Suprema_de_Justicia_de_Paraguay#/media/Archivo:Palacio_de_Justicia_Paraguay_by_Felipe_Méndez.jpg

Do you electronically file pleadings with the court?  Or must you send paper copies of them to the courthouse?

Before covid-19, lawyers in Paraguay mostly filed litigation documents in paper. But at the time, the court was already working to develop software to allow electronic means of litigating

When I clerked, I was the first clerk to send requests to lawyers via the new software. I was the “lab rat” of this project. But most of the trial lawyers were comfortable in using paper, so they didn’t want to adapt to an electronic system and they opposed it fiercely. With covid, though, the lawyers had no choice but to adopt the electronic system; the pandemic put pressure on the courts to accelerate already-ongoing changes.

Most filings now are made electronically; only the first filings for intervention are made on paper. In other words, I have to file new lawsuits in paper form. At that time, the court registers me and uploads my documents. The respondent gets a formal copy of the initiating documents served in paper form and files its answer in paper form. Those first two documents are filed in paper, and then everything else is filed electronically.

Does Paraguay have specialized courts that only hear commercial cases? 

No. A big issue in Paraguay is courts’ delay in issuing decisions. And part of that is due to the fact that the courts do not specialize. The same court may hear bankruptcy cases, divorces, commercial claims, and torts.

There is a bill seeking reform of the legal system, trying to introduce specialized courts for family law or divorce cases or inheritance disputes, but that bill is just sitting in congress.

Who decides the facts in a commercial case?  Is it a judge or a jury? 

A judge. There is no trial by jury here in any civil or criminal case.

Generally speaking, how many pages are the complaints or initial pleadings you see in your work?

For a simple collection claim, an initial submission could be only two pages. The plaintiff need only file a promissory note and then a brief explanation of the commercial relationship.

In a complex case, the initiating document could be 10-15 pages, although I have seen longer filings in complex contract breach cases.

Generally, I like to be brief, concrete, and specific. Some people think if you write more, then you know more. But when I was a clerk, I didn’t have a lot of time to read and analyze 45-page documents since there was a lot of other work to do. So if I have the chance to be concrete and clear, I feel I have more of a chance for people to read what I write by keeping it simple. Especially since, if you write a lot, you may end up saying something incoherent or incorrect.

Generally speaking, how long does it take for a case to go from complaint to judgment?

A simple collection claim could take 12-18 months. Complex cases take an average of 3 years.

Generally speaking, how is evidence exchanged between the parties before trial? 

We do not have a discovery process in Paraguay like in the United States. Generally, the only evidence a plaintiff has is what it initially submits with the claim. Parties have six days to challenge documents submitted by an opposing party.

There is, however, an evidentiary stage of 40 business days that can only be extended in exceptional circumstances for 20 days. During this stage, all parties can collect evidence besides documentation (since documentation needs to be filed with the claim or the response.). The evidence exchanged in this stage is the summoning of witnesses and the filing of expert reports.

You can ask the court to subpoena another party or a third party to produce evidence and, if that party does not comply, the court will assume that the party is withholding good evidence and make an “adverse inference,” but this adverse inference alone will not be sufficient to support a judgment.

Do you get to interview the opposing witnesses before the trial?

In the evidence phase of a case, a litigant can file a list of witnesses it wants to see in court and the court then decides which to summon. Additionally, after an expert witness files a report, a litigant can request the court to summon them to testify and clarify the points in their report. At trial, these witnesses must appear and that is the opportunity that the parties have to examine them.

The lawyers can ask witnesses questions verbally or they can file a questionnaire and the court can then pose the questions. The judge can also ignore questions on the questionnaire and the other party can object to the questions.

Trial, however, may not resemble trial in the United States. For civil cases, the trial may be spread out over several hearings with individual witnesses.

If you win, does the other side reimburse your attorneys’ fees?

Yes, generally, the judge will decide who will pay costs and, as a general principle, the party who loses pays both sides’ lawyer's fees. But the court may decline to award fees if the case is complex, the case presents a new issue, or if the defense was in good faith. The new issue exception arises rarely, though.

To determine the amount of reimbursement, we have an attorney’s fees act in Paraguay. The basic principal to determine fees is that you take the amount involved in the case and apply a percentage to it. The bigger the amount at stake, the lesser the percentage rate that applies. Even so, there are minimum and maximum awards; the minimum is 5% + Value Added Tax since the law says that attorney’s fees are free of taxes and cots and the maximum is 20% of the amount involved in a first instance case and 30% of the amount contested on appeal. There are similar rules in Argentina and Uruguay.

In some of my other interviews with lawyers from the Spanish speaking world, I learned about Amparo proceedings. Do those exist in Paraguayan commercial disputes?

Yes. An Amparo is like the equivalent of a writ of mandamus in the United States. It is an action to protect constitutional rights that may be infringed during a separate dispute.

There are two kinds. The first is an action against the government and it proceeds in writing. The second one is against a private party and it is an oral proceeding. These often arise in the context of challenging the physical possession of real estate.

Are the Paraguayan courts open to the public?  Can ordinary people watch a commercial trial?

Yes they are, but it is not common to see ordinary people attend hearings.

I am familiar with the Supreme Court of the United States, which publicly announces the cases it will hear so people can attend. We don’t have a system like that here. A regular person could go to court on any day and never know what cases the court will be hearing. As a result, it is not so common to have citizens attending a hearing.

Further, judges don’t decide matters right away. Once the hearings are finished, the parties then file closing arguments. Then the court has 40 business days to file its decision. Without an immediate decision, spectators may not be interested in watching the proceedings.

Do you believe that courts in Paraguay have a particular strength for resolving commercial disputes? 

They have improved in the basics, such as deciding basic commercial cases and the enforcement of promissory notes. But there have been a lot of changes recently, and in some ways the judiciary has been worse than it was before.

One strength, however, is the quality of clerks and judges.

How about a weakness? 

One major weakness is delays. For example, my firm handles a lot of trademark cases. In one of them, we filed a request to recognize a trademark related to martial arts. The other party admitted it didn’t have any basis to oppose our request. Despite the lack of opposition, the court took about a year to decide the issue since it didn’t have the ready expertise to know what to do.

Another major weakness is corruption. We are a young democracy, founded in 1989. There have been generational changes, but up to a few years ago, many of our judges trained under a dictatorship. So many of our judges are not very democratic or liberal; many are very conservative and are quick to reject any innovation.

How often do you go to the courthouse? 

At least twice per week. Fortunately, recent changes to the system have made things easier since we can have hearings via electronic means, so we don’t need to go to court as often.

I used to go to court four times per week or every day. Before the recent changes, lawyers had to go to court to request papers or to see the status of cases, but now they can do these things online. Now, a lawyer need only go to court for evidentiary hearings. Since there is a lot of delay, doing these hearings in person is a good thing since, by putting a human face to the case, judges may remember that there is a real problem that needs their attention and that prompts a solution.

When you are there, do you need to wear a special robe or wig?

No. The Supreme Court issued something like a rule on the subject in the 1980s. But the court really only requests male lawyers to wear a suit and tie, which is ridiculous since we are tropical country. It was 38 degrees Celsius here today (100 degrees Fahrenheit).