There are several modifications to the Canadian justice system in aboriginal communities along those lines, actually - iirc, the term is something like "circle justice".
"Seemed" to thrive on blood-feuds is kind of the key term, though - even the ancient and various Germanic law codes were massively focused on at least trying to avoid the feuds. We studied a couple in my mediaeval history class. It's where "weregild" came from - you paid in accordance with your crime, particularly in terms of murder. And if you couldn't, you had to sell stuff until you could. And if you still couldn't, you called on your family. And if they couldn't/wouldn't, you called on your friends. And then showed up at the Thing (the name of the gathering) for something like three consecutive gatherings. And basically if, at that point, you STILL couldn't pay, the relatives got to kill you.
However, at that point, everyone else had completely given up any right to avenge you, by hanging you out to dry when you were asking for help. So theoretically, the blood-feud stopped there.
Which leads me to my second caution: just because there's a wonderfully reconciliative system of justice set up . . . .don't assume it works all, or even most, of the time.
It's a paradoxical situation, really. If the peaceful solution always worked, then it wouldn't have existed. It existed (and was considered necessary) precisely because it could fail, and because the consequences of its failure was almost guaranteed to be quite bloody.