The blockheadedness of court procedure in solving simple disputes

Judge picturesFrom the conclusion of huge survey of courts around the world.

We present an analysis of legal procedures triggered by re- solving two speci?c disputes—the eviction of a nonpaying tenant and the collection of a bounced check—in 109 countries. The data come from detailed descriptions of these procedures by Lex Mundi member law ?rms. For each country the analysis leads to an index of formalism—a measure of the extent to which its legal procedure differs from the hypothetical benchmark of a neighbor informally resolving a dispute between two other neighbors. We then ask whether formalism varies systematically across coun- tries, and whether it shapes the quality of the legal system.

Consistent with the literature on comparative law, we ?nd that judicial formalism is systematically greater in civil law countries, and especially French civil law countries, than in common law countries. Formalism is also lower in the richest countries. The expected duration of dispute resolution is often extraordinarily high, suggesting signi?cant inef?ciencies. The expected duration is higher in countries with more formalized proceedings, but is independent of the level of development. Perhaps more surpris- ingly, formalism is nearly universally associated with lower sur- vey measures of the quality of the legal system. These measures of quality are also higher in countries with richer populations. We ?nd no evidence that incentives facing the participants in litiga- tion in?uence the performance of courts. . . .

the evidence points to extremely long expected duration of dispute resolution, suggesting that courts are not an attractive venue for resolving disputes. Furthermore, we ?nd no offsetting bene?ts of formalism, even when looking at a variety of measures of the perception of fairness and justice by the users of the legal system. Moreover, legal origin itself appears to determine judicial quality, other things equal, suggesting that formalism is unlikely to be part of an ef?cient design.

The evidence suggests that the systems of dispute resolution in many countries may be inef?cient—at least as far as simple disputes are concerned. In particular, one cannot presume in economic analysis, especially as applied to developing countries, that property and contract are secured by courts. This conclusion has two implications. First, it may explain why alternative strat- egies of securing property and contract, including private dispute resolution, are so widespread in developing countries. Second, our results suggest a practical strategy of judicial reform, at least with respect to simple disputes, namely the reduction of proce- dural formalism.

From: Djankov, Simeon, La Porta, Rafael [I love the name Rafael: NG], Lopez-De-Silanes, Florencio, and Shleifer, Andrei, “Courts”, Quarterly Journal of Economics May 2003, Vol. 118, No. 2: 453–517.

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Patrick
Patrick
10 years ago

I love Djankov’s papers, and some of Schleifers. This is one of the core paper behind the Doing Business report published by the World Bank/IFC.

Djankov, btw, is now finance minister in Bulgaria, iirc.