Complex business processes that involve hundreds of external partners, thousands of discrete events to be recorded and tracked, and millions in funds are excellent candidates for digital transformation using blockchain. Managing a portfolio of judicial bonds and deposits, also known as judicial guarantees, is one such process.

Some countries, jurisdictions and court systems require companies being sued to post a judicial guarantee in the form of an insurance-based surety bond or, in some cases, a cash deposit. Operating a business of any size means getting sued. It’s a fact of corporate life in any industry. The larger the company, the more legal actions are filed against it, and the more complex the judicial guarantee process becomes.

While there are many types of judicial bonds, the intent is typically to protect the plaintiff in a lawsuit from default on the part of the defendant, whether the case is a civil, tax or labor dispute, or to ensure that court costs are covered. The management challenges for very large companies include tracking the changing status of litigation to identify when deposits are recoverable or bonds can be retired, coordinating multiple internal departments and systems, communicating with multiple law firms, and acquiring bonds from numerous insurance companies.

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Proven benefits of a blockchain-based solution for managing judicial bonds and deposits

Standardizing and digitizing the entire process and using a blockchain-based solution for managing judicial guarantees of all types and connecting all of the participating departments and partners can:

• Replace manual processes and spreadsheets with consolidated and fully digitized tracking of legal actions and outstanding judicial guarantees
• Speed recovery of judicial deposits once suits are resolved
• Increase efficiency by automating many tasks involved in requesting bonds or securing deposits
• Enhance security through encryption and tamper-evident distributed ledger technology
• Avoid disputes and simplify communications with a transparent process auditable by any permissioned participant
• Scale to include hundreds of legal actions and supply chain participants, including law firms, banks and insurance companies

Blockchain for managing and controlling judicial guarantee bonds and deposits: How it works

We have a replicable solution built on the IBM Blockchain Platform that allows a company to manage, contract for and control judicial guarantees issued through its network of legal firms, banks and insurance companies. Typically, a company will work with IBM Blockchain Services to adapt this solution to its processes and requirements.

The solution features a web interface for users and digital workflows to automate and control business processes. Blockchain technology provides encryption to enhance security and immutable data storage to track and control bonds and cash guarantees. Permissioned participants all see the same information stored on the blockchain.

Mining company streamlines management and recovers judicial deposits

Brazilian mining giant Vale S.A. used multiple non-integrated applications and spreadsheets to manage USD $3+ billion of recoverable judicial deposits, bonds and insurance guarantees. The complex process involved multiple internal litigation and finance departments, lawsuits under management by more than 150 law firms, and guarantees held by major banks and insurance companies. The complexity and lack of integration resulted in delays in recovering funds due back to the company after favorable resolution of legal proceedings.

The solution for managing and recovering judicial guarantees is a security-rich network built on IBM Blockchain Platform that integrates multiple internal systems along with its ecosystem of suppliers. It uses smart contracts to request, issue and track guarantees and monitor the status of related lawsuits in a single distributed ledger database. The solution also uses IBM Watson natural language understanding for reviewing legal updates to identify guarantees that are eligible for recovery. The scalable blockchain solution, implemented in nine months, helped Vale recover USD $35 million in outstanding judicial deposits with a process that is fast, efficient and trustworthy.

Transforming judicial guarantee management: Build on our experience and assets

The judicial guarantee management solution is both replicable and extensible. Because we have built it already for existing clients, we can re-create the solution quickly for other companies and their partners. Assets such as rules for insurance-based bond terms and conditions, natural language understanding dictionaries, codified workflows, templates for user interfaces, and APIs for connecting with partner systems can be customized for your particular business relationships and potential participants.

By taking advantage of an existing customizable solution and the expertise of IBM Blockchain Services, organizations can progress from design to working pilot in as little as three months. After applying learning from the pilot, you can begin to scale by adding new participants to the network.

The solution itself is built on the IBM Blockchain Platform, which is IBM’s commercial distribution of The Linux Foundation’s open source Hyperledger Fabric. The IBM Blockchain Platform is cloud agnostic, so it can run in the cloud of your choice or on-premises. Each party in the blockchain network can maintain their data on the IT infrastructure or third-party cloud vendor of their choice. The platform is GDPR compliant, so it is ready to support global business relationships. IBM Blockchain Services can help you replicate a similar blockchain-based digital judicial guarantees solution for your company.

This use case telling the story of managing judicial guarantees will be followed up by more examples of how blockchain services are being used in various industries to help solve real world problems. Be sure to read our recent articles on Trade Finance, Responsible Sourcing, Financial Netting, Invoice Reconciliation and Digital Ticketing and upcoming articles, or schedule a free one-on-one consultation to find out how you can benefit from this solution.

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