COURTS The Lex Mundi Project

Transcription

1 COURTS The Lex Mundi Project Professor Florencio Lopez-de-Silanes Yale University and National Bureau of Economic Research March 10,

2 Justice in some unknown place 2

3 Motivation All economics is based on contracts and their enforcement (finance, labor economics, etc..) Example: Coase theorem and Welfare theorems (which are based on people being able to contract in order to improve their welfare). Economists discuss endlessly the difficulties of negotiating contracts (e.g. asymmetric information, moral hazard), but normally disregard their enforcement. In economics (including in the Coase theorem), courts are in the background providing free and perfect enforcement. This approach sharply contrasts with the reality of Courts around the world which are slow, corrupt and often not used at all. This paper will: 1. Suggest a way of thinking about Courts as institutions of law enforcement, and 2. Provide a way of describing their efficiency and their determinants. 3

4 Introduction The Neighbor model: In a theoretical ideal, a dispute between two neighbors can be resolved by a third on equity grounds, with little knowledge or use of law, no lawyers, no written submissions, no procedural constraints on how evidence, witnesses, and arguments are presented, and no appeal (Shapiro 1981). In reality, legal systems heavily regulate dispute resolution: they rely on lawyers and professional judges, regiment the steps that the disputants must follow, regulate the collection and presentation of the evidence, insist on legal justification of claims and judgments, give predominance to written litigation, and so on. Such regulations might have profound consequences for the efficiency and fairness of dispute resolution, particularly for the simple disputes material to an average citizen. 4

5 The goals 1. To measure and describe empirically the regulation of dispute resolution around the world (procedural formalism). Focus on simple disputes. 2. To examine empirically the consequences of such regulation for the efficiency and fairness of the judicial system. 3. To interpret evidence in light of alternative theories. Specifically, we are interested in the possibility that transplantation of Western legal procedures is responsible for the observed outcomes. 5

6 The Data Measures of formalism:! Request law firms from Lex Mundi in 109 countries to describe exact procedures used to resolve 2 specific disputes: (i) Eviction of a residential tenant for non-payment of rent, and (ii) collection of a returned check. Data on several aspects of judicial quality: Estimates of expected duration of each case (Lex Mundi) Other measures of judicial efficiency and fairness (ICRG, Economic Freedom of World, Humana, Amnesty International, small firms survey) 6

7 Results of the Paper Results: 1. The Neighbor Model of courts is far from reality; nearly all countries formalize procedures heavily. 2. Empirical confirmation that procedure is more heavily formalized in civil than in common law countries (Schlesinger, Merryman). 3. Some evidence that the formalism is greater in the less developed than in the more developed countries. 4. Holding the level of per capita income constant, countries with greater formalism tend to have higher expected duration of dispute resolution, lower survey measures of fairness, and lower access to justice. 5. No systematic evidence that other determinants of judicial efficiency matter. Caution: our measures may not capture other aspects of legal efficiency, such as avoidance of errors or the adjudication of complex cases. But: The analysis does shed light on access to justice for an ordinary person 7 involved in an ordinary dispute.

8 The Neighbor Model Shapiro (1981) describes an idealized model of dispute resolution, in which a dispute between two neighbors is resolved by a third guided by common sense and custom. The root concept employed here is a simple one of conflict structured in triads. Cutting quite across cultural lines, it appears that whenever two persons come into a conflict that they cannot themselves solve, one solution appealing to common sense is to call upon a third for assistance in achieving a resolution. So universal across time and space is this simple invention of triads that we can discover almost no society that fails to employ it. And from its overwhelming appeal to common sense stems the basic political legitimacy of courts everywhere. In short, the triad for the purposes of conflict resolution is the basic social logic of courts, a logic so compelling that courts have become a universal political phenomenon. 8

9 Reasons to deviate from the Neighbor Model There are 2 broad reasons for formalism: 1. To achieve social goals. To punish undesirable conduct To establish precedents To reduce errors in adjudication To promote trade or political uniformity To prevent subversion by powerful and protect the weak Triad justice is vulnerable to economic and political power Form is the sworn enemy of arbitrary rule, the twin sister of liberty (Rudolf von Jhering) 2. To pursue narrow political objectives To favor or hurt special groups To reduce effectiveness of justice For both good and bad reasons, governments formalize procedures. 9

10 Dimensions of formalism Good reasons: Professional vs. lay judges and lawyers: Advancement of state policies and shield against subversion by powerful. Written vs. oral litigation: Increase accountability and facilitate sovereign control of judges and litigants conduct. Legal justification: To guarantee that decisions are made in accordance with legislator s rather than judge s preferences. Regulation of gathering and presentation of evidence: To prevent biased selection and harassment of witnesses. Control of superior review: To ensure that trial court is not biased and that it follows the law or line of precedents. Engagement formalities: To guarantee due, verifiable notice to defendant. Independent procedural actions: To prevent unfair advantages by manipulation of process. Bad reasons: Instruments of control by powerful (race, ethnicity, economic elite, governing bureaucracy, political party, etc.). 10

11 Comparative law literature Comparative law literature suggests the extent of formalism varies systematically across legal origins (e.g, Merryman 1985, Damaska 1986, Schlesinger et al. 1988). "Civil law countries generally formalize procedures more heavily than common law countries. Hayek (1960), Merryman (1985), Shlesinger (1988) attribute these differences to: ideas of enlightenment and the French Revolution in 18 th -19 th c. efforts to isolate judges from law-making when instituting separation of powers. more comprehensive codification Dawson(1960),Berman(1983),Damaska (1986), Glaeser-Shleifer (2002): greater formalism due to need to protect law enforcers from coercion by disputing parties through violence and bribes in 12 th -13 th c. 11

12 Countries in the sample Eviction Check Initial sample -6-6 Law firms that did not accept our invitation to join the project and in which country we have not been able to find another law firm (Burkina Faso, Cambodia, Nicaragua, Scotland, Northern Ireland, St. Kitts and Nevis) Final sample 12

13 What did law firms do? (1) 1. Questionnaire designed by the authors with the advice of practicing attorneys (Arg,Bel,Bwa,Col,Mex,US). 2. Model questionnaire and 2 sample answers (US and Colombia) were completed by Lex Mundi members in France, Germany, Jordan, Kenya, and India. Their answers were used to improve the details of the questionnaire. 3. All law firms received the improved sample answers for Colombia, France, Germany and US. The completion required extensive interaction by telephone and At each firm, the answers were prepared by a member of the Litigation Department, and reviewed by a member of the General Corporate and Commercial Department, which created an internal check within the firm. 13

14 What did law firms do? (2) 5. Two members of each law firm, from different departments, were required to read, approve, and sign the questionnaire. 6. As an additional check, the law firms were required to indicate when a particular law governed the relevant stage of the procedure, and to provide a copy of that law. 7. The answers provided by member law firms were coded using the description of the procedures as well as the answers to the multiple choice questions. 8. In most cases, this coding was followed by an additional round of questions to the completing attorneys in order to: (i) confirm accurate interpretation of answers and step count, (ii) complete missing information, and (iii) clarify the inconsistencies in their answers. 14

15 Information about the Cases Questionnaire covered the step-by-step evolution of an eviction & a check collection procedures before local courts at country s largest city. We provided significant detail: (1) amount of claim; (2) location and main characteristics of the litigants, (3) presence of city regulations; (4) nature of the remedy requested by plaintiff; (5) merit of plaintiff s and defendant s claims; (6) social implications of judicial outcomes. Aspects of the procedure covered: (1) step by step description of the procedure, (2) estimates of the actual duration at each stage, (3) indication of whether written submissions were required at each stage, (4) indication of specific laws applicable at each stage, (5) indication of mandatory timelimits at each stage, (6) indication of the form and availability of appeal, and (7) the existence of alternative administrative procedures. Cases were specified so that plaintiff has fully complied with the agreement (100% right), and defendant has no justification whatsoever. Defendant presents a poorly justified opposition (so default judgment is not an option) and avoids voluntary payment. 15

16 Case facts and circumstances: Eviction Written lease duly executed between the parties. Monthly rent = 5% of country s GNP per capita. Residential house located in the country s largest city. The landlord has fully complied with the agreement (100% compliance). The tenant is three months behind in the payment of rent, without justification. The landlord files a lawsuit to regain possession of the premises. Tenant attempts to delay service of process but it is finally accomplished. Tenant raises some opposition to the complaint (default judgment is not an option). The judge decides every motion for the plaintiff. Plaintiff attempts to introduce documentary evidence and to call one witness. Tenant attempts to call one witness. Neither party presents objections. Judgment for the plaintiff. No appeals or post-judgment motions are filed. 16 Repossession of premises is accomplished.

17 Case facts and circumstances: Check collection Check (or invoice) value = 5% of country s GNP per capita. Lawful transaction between residents of country s largest city. Bank refuses payment for lack of funds. Plaintiff files a lawsuit to collect the check. Debtor attempts to delay service of process but it is finally accomplished. Debtor raises some opposition to the complaint (default judgment is not an option). The judge decides every motion for the plaintiff. Plaintiff attempts to introduce documentary evidence and to call one witness. Debtor attempts to call one witness. Neither party presents objections. Judgment for the plaintiff. No appeals or post-judgment motions are filed. 17 Debt is successfully collected.

18 Advantages of focus on 2 specific simple disputes: 1. Exactly the kind of contracts that are taken for granted in economics as freely enforceable. 2. Represent typical situations of default on an everyday contract in a country. Adjudication of these cases illustrates the nature of enforcement of property rights and private contracts in a given legal environment. 3. Case facts & assumptions could be standardized to make the cases comparable across countries regardless of variation in legal traditions. 4. Resolution involves lower level civil trial courts in all countries (unless ADR used). These courts are very relevant to most country citizens. Focus on such courts is appropriate in a development context. 5. Comparatively simple disputes. In more complicated disputes, multiple additional issues arise. It is not appropriate to generalize findings to such disputes. 6. Approach preferred to general codification of laws, where comparability across countries might not be achieved with similar precision. 7. Two distinct cases let us deal with different types of procedures and provided a robustness check. 18

19 Preparation of questionnaire and indices (1) Categories were defined based on books on comparative civil procedure: Blanpain, Roger (Editor) International Encyclopaedia of Laws- Civil Procedure. The Hague: Kluwer Law International. Cambell, Christian (Editor) International Civil Procedures. London: Lloyds of London Press LTD. Platto, Charles (Editor) Civil Appeal Procedures Worldwide. International Bar Association and Graham and Trotman. Platto, Charles (Editor) Economic Consequences of Litigation Worldwide. International Bar Association and Kluwer Law International. Platto, Charles (Editor) Trial and Court Procedures Worldwide. London: Graham & Trotman and International Bar Association. Rhyne, Charles Law and Judicial Systems of Nations. Washington: The World Peace Law Center. Zuckerman, Adrian (Editor) Civil Justice in Crisis. Comparative Perspectives of Civil Procedure. New York: Oxford University Press. 19

20 Check Collection (1) PROFESSIONAL VS LAYMEN General jurisdiction court Professional vs. nonprofessional Legal representation is mandatory Professionals vs. laymen United Kingdom Austria WRITTEN VS ORAL ELEMENTS Filing Service of process Opposition Evidence Final Arguments Judgment Notification of judgment Enforcement of judgment Written - Oral Elements United Kingdom n.a Austria n.a

21 Check Collection (2) LEGAL JUSTIFICATION Complaint must be legally justified Judgment must be legally justified Judgment must be on law (not on equity) Legal Justification United Kingdom Austria STATUTORY REGULATION OF EVIDENCE Judge can not introduce evidence Judge can not reject irrelevant evidence Out-of-court statements are inadmissible Mandatory prequalification of questions Oral interrogation only by judge Only original documents and certified copies are admissible Authenticity and weight of evidence defined by law Mandatory recording of evidence Statutory Regulation of Evidence United Kingdom Austria

22 Check Collection (3) CONTROL OF SUPERIOR REVIEW Enforcement of judgment is automatically suspended until resolution of the appeal. Comprehensive review in appeal Interlocutory appeals are allowed Control of Superior Review United Kingdom Austria Engagement Formalities Mandatory pre-trial conciliation Service of process by judicial officer required Notification of judgment by judicial officer required Engagement Formalities United Kingdom Austria

23 Check Collection (4) INDEPENDENT PROCEDURAL ACTIONS Filing and Service Trial and Judgment Enforcement Num. of indep. proce. Actions Independent Procedural Actions United Kingdom Austria

24 Check Collection (5) FORMALISM INDEX Professionals vs. laymen Written - Oral Elements Legal Justification Statutory Regulation of Evidence Control of Superior Review Engagement Formalities Independent Procedural Actions Formalism Index United Kingdom Austria

25 Table 2A&B: Formalism Index BY LEGAL ORIGIN Eviction Check Panel A: Means English Legal Origin (42) Socialist Legal Origin (16) French Legal Origin (40) German Legal Origin (6) Scandinavian Legal Origin (5) Mean all countries (109) Panel B: Tests of Means (t-stats) Common vs. Socialist a a Common vs. French a a Common vs. German c Common vs. Scandinavian

26 Comparisons Across Income Groups G NP pc Form alism Duration Form alism Duration (U S$ ) E viction E viction C heck C heck LOW INCOME COUNTRIES M alaw i U g an da M ozambique Peru G uatemala M IDDLE INCOME COUNTRIES New Zealand Portugal RICH COUNTRIES United Kingdom United States Austria Luxembourg

27 Table 3: Correlations of Formalism and its Components (1) Indices Formalism index Professionals vs. laymen Written vs. oral elements Legal justification Panel A: Eviction Statutory regulation of evidence Control of superior review Engagement formalities Professionals vs. laymen a Written vs. oral elements a c Legal justification a a Statutory regulation of evidence a Control of superior review a Engagement formalities a a Independent procedural actions a b b Panel B: Check Professional vs. laymen a Written vs. oral elements a a Legal justification a a a Statutory regulation of evidence a c b Control of superior review b Engagement formalities a a a c Independent procedural actions a a a

28 Table 3: Correlations of Formalism and its Components (2) Indices Formalism index Professionals vs. laymen Written vs. oral elements Legal justification Statutory regulation of evidence Control of superior review Engagement formalities Independent procedural actions Panel C: Correlations between eviction and check indices Formalism index Professionals vs. laymen Written vs. oral elements Legal justification Statutory regulation of evidence Control of superior review Engagement formalities Independent procedural actions a a a a a a a a 28

29 Table 4: Eviction and Check by Legal Origin and Income Level All Countries English Legal Origin French Legal Origin MEANS BY GNP LEVEL Eviction Check Eviction Check Eviction Check Means Low Income - Bottom 25 Pctile Medium Income - Middle 50 Pctile High Income - Top 75 Pctile Mean all countries Tests of Means (t-stats) Bottom 25 vs. Middle Bottom 25 vs. Top b 3.92 a 2.83 a 3.15 a 2.72 b 4.20 a Middle 50 vs. Top a 3.35 a 2.09 b a 2.58 b 29

30 Table 5B: Collection of a check- Indices regressions (1) Independent variables: Dependent variables: Formalism index Log GNP per capita a (0.0585) a (0.0491) Socialist legal origin a (0.1925) French legal origin a (0.1872) German legal origin a (0.2406) Scandinavian legal origin a (0.2959) Constant a (0.5057) a (0.3960) N [R 2 ] 109 [0.08] 109 [0.47] Professionals vs. laymen Written vs. oral elements b (0.0164) b (0.0185) (0.0099) (0.0099) a (0.0462) a (0.0373) a (0.0656) a (0.0343) (0.0899) a (0.0726) b (0.0952) a (0.0467) a (0.1404) a (0.1555) a (0.0845) a (0.0767) 109 [0.05] 109 [0.21] 109 [0.01] 109 [0.42] Legal justification (0.0209) c (0.0193) a (0.0852) a (0.0586) a (0.1191) (0.1684) a (0.1715) a (0.1615) [0.02] 109 [0.32]

31 Table 5B: Collection of a check- Indices regressions (2) Independent variables: Dependent variables: Log GNP per capita Socialist legal origin French legal origin German legal origin Scandinavian legal origin Constant N [R 2 ] Statutory regulation of evidence a (0.0103) a (0.0115) (0.0398) a (0.0355) (0.0656) c (0.0557) a (0.0861) a (0.0915) 109 [0.12] 109 [0.20] Control of superior review (0.0159) (0.0169) a (0.0456) (0.0615) c (0.0864) b (0.0940) a (0.1340) a (0.1357) 109 [0.01] 109 [0.21] Engagement formalities (0.0167) b (0.0138) c (0.0446) a (0.0482) (0.0745) (0.0852) a (0.1438) a (0.1175) 109 [0.02] 109 [0.47] Independent procedural actions a (0.0095) b (0.0097) b (0.0510) a (0.0387) (0.0333) (0.0334) a (0.0878) a (0.0819) [0.06] 109 [0.21]

32 Table 6B: Check collection - Duration in practice BY LEGAL ORIGIN Duration until completion Duration of enforcement (from Duration of trial of service of process judgment to actual enforcement) Total Duration Panel A: Means (Check) English Legal Origin Socialist Legal Origin French Legal Origin German Legal Origin Scandinavian Legal Origin Mean all countries Panel B: Tests of Means (t-stats) Common vs. Socialist c b a a Common vs. French a b a Common vs. German Common vs. Scandinavian

33 Table 6A: Eviction of a tenant - Duration in practice BY LEGAL ORIGIN Duration until completion Duration of enforcement (from Duration of trial of service of process judgment to actual enforcement) Total Duration Panel A: Means (Eviction) English Legal Origin Socialist Legal Origin French Legal Origin German Legal Origin Scandinavian Legal Origin Mean all countries Panel B: Tests of Means (t-stats) Common vs. Socialist b c b b Common vs. French Common vs. German b b Common vs. Scandinavian

34 Table 7: Other Outcomes (1) BY LEGAL ORIGIN Judicial efficiency Citizen's access to justice Panel A: Means Enforcement of contracts Corruption Human Rights English Legal Origin Socialist Legal Origin French Legal Origin German Legal Origin Scandinavian Legal Origin Mean all countries Panel B: Tests of Means (t-stats) Common vs. Socialist n.a c 2.13 b Common vs. French 2.54 b a 1.72 c 1.31 Common vs. German b c Common vs. Scandinavian c a c a

35 Table 7: Other Outcomes (2) BY LEGAL ORIGIN Fair and Impartial Legal system is Honest or Quick Affordable Consistent Uncorrupt Panel A: Means Court Decisions are enforced Confidence in legal system English Legal Origin Socialist Legal Origin French Legal Origin German Legal Origin Scandinavian Legal Origin Mean all countries Panel B: Tests of Means (t-stats) Common vs. Socialist 4.70 a 3.98 a 1.81 c b 1.91 c 2.76 a Common vs. French 4.64 a 3.50 a 3.44 a 1.80 c 3.34 a 2.49 b 1.55 Common vs. German n.a. n.a. n.a. n.a. n.a. n.a. n.a. Common vs. Scandinavian n.a. n.a. n.a. n.a. n.a. n.a. n.a. 35

36 Table 8: Outcomes and the Formalism Index Check Collection (1) Independent variables: Dependent variables: Log of duration Judicial efficiency Access to justice Enforceability of contracts Corruption Human Rights Log GNP per capita (0.0393) a (0.1355) a (0.1795) a (0.0742) a (0.1085) a (0.0686) Formalism index a (0.0538) a (0.1463) b (0.2404) a (0.0872) a (0.1547) (0.1445) Constant N [R 2 ] a 109 (0.3832) [0.17] (1.5811) a (1.8600) c (0.8121) (1.1934) (0.9503) 56 [0.55] 77 [0.54] 52 [0.79] 86 [0.62] 57 [0.46] 36

37 Table 8: Outcomes and the Formalism Index Check Collection(2) Independent variables: Dependent variables: Log GNP per capita Formalism index Constant N [R 2 ] Legal system is fair a a 65 and impartial (0.0504) (0.0619) (0.4438) [0.32] Legal system is honest or uncorrupt Legal system is quick a (0.0569) (0.0839) a (0.0639) a (0.0699) a (0.5035) a (0.7102) 65 [0.33] 65 [0.12] Legal system is affordable a (0.0472) (0.0572) a (0.3908) 65 [0.13] Legal system is consistent (0.0578) a (0.0573) a (0.4946) 65 [0.19] Court decisions are enforced c (0.0542) a (0.0566) a (0.4101) 65 [0.14] Confidence in legal system b (0.0527) b (0.0587) a (0.4688) 65 [0.14] 37

38 Table 9: Outcomes and the Formalism Index- Instrumental Variables Regressions Check (1) Independent variables: Dependent variables: Log of duration Log GNP per capita (0.0440) Formalism index Constant N [R 2 ] a (0.1089) a (0.6202) 109 [0.17] Judicial efficiency a (0.1335) a (0.2656) b (1.7951) 56 [0.51] Access to justice a (0.1820) (0.3595) a (2.2042) 77 [0.54] Enforceability of contracts a (0.0752) a (0.1552) a (0.9409) 52 [0.76] Corruption a (0.1093) a (0.2287) (1.4005) 86 [0.61] Human Rights a (0.0693) b (0.1869) (1.0457) 57 [0.41] 38

39 Table 9: Outcomes and the Formalism Index- Instrumental Variables Regressions Check (2) Independent variables: Dependent variables: Legal system is fair and impartial Log GNP per capita (0.0523) Formalism index Constant N [R 2 ] a (0.1236) a (0.5253) 65 [0.27] Legal system is honest or uncorrupt a (0.0583) a (0.1326) a (0.6266) 65 [0.28] Legal system is quick (0.0835) a (0.1459) a (0.9362) 65 [0.05] Legal system is affordable a (0.0473) (0.0942) a (0.4463) 65 [0.12] Legal system is consistent (0.0585) a (0.1207) a (0.6271) 65 [0.14] Court decisions are enforced c (0.0546) a (0.1032) a (0.4958) 65 [0.11] Confidence in legal system b (0.0533) b (0.0949) a (0.5544) 65 [0.11] 39

40 Check: Partial Scatter Plot (1) coef = ,(robust) se = , t = 5.8 Log of Dur ati on ( ort hogonal component) POL SVN ITA LBN MLT ARE COL CAN AUT MOZ LKA PRT AUS PAK HUN CYP HRV ISR URY KWT BGR BHR GRC SEN TTO JA M NGA KEN TWN GIB BGD FIN CZE EST ECU CHE ISL MEX ZMB GEO ZWE VGBTHA SWE UKRIDN BRA EGY FRADOM LUX ROM HND CHN LVA RUS DEU MAR CHL BMU ZAF HKG BLZ NZL TCA UGA GHAMYS MWI TUR BRB GRD IRL BEL CYMCIV JOR LTU PHL VNM GBR TZA NAM KAZ INDANT DNK NOR MCO KOR BWA JPN USA SLV SGP AIA NLD SWZ VCT PER BOL CRI VEN ARG GTM PAN PRY ESP TUN For malism (orthogonal co mponent) 40

41 Check: Partial Scatter Plot (2) coef = , (robust) se = , t = Judi ci al Ef fi ci ency I ndex ( ort hogonal component) HKG ZAF NZL TTO AUS JACAN KEN M GHA MYS NGA TUR IND ZWE ISR SGP GBR SWE NLD FIN LKA DNK USA CIV NOR JPN BEL CHE AUT COL EGY IRL DEU DOM PAK BRA THA JOR For malism (orthogonal co mponent) KOR FRA IDN URY KWT GRC PRT MAR ITA CHL ECU PHL MEX PER PAN VEN ARG ESP 41

42 Check: Partial Scatter Plot (3) coef = , (robust) se = , t = MWI I ndex of Access to Justi ce ( ort hogonal component) HKG BGR MLT BLZ NZL TTO BELTZA SWE NLD HUN POL FIN GHA ZWE IND DNK NOR ROM ISL KOR CHE ZAF CYPPRT SEN BWA HND AUSCAN NGA IRL ITACHL ZMB UGA FRAAUT DEU KEN USA JOR JPN URY ECU JA M PAK DOM SLV MYS CIV IDN GRC LKAISR GBR EGY MARPHL THA COL TUN TUR TWN BRA MEX CRI BOL PRY ESP PAN ARG GTM PER VEN SGP For malism (orthogonal co mponent) 42

43 Check: Partial Scatter Plot (4) coef = , (robust) se = , t = CIV I ndex of Enf or ceabi l i t y of Cont r act s ( ort hogonal component) ZAF KEN CAN TWN TUR GBR USA NGA BEL SWE NOR NLD IND CHN DNK AUS THA IRL SGP ISR IDN MYS FIN PAK VNM HUN JPN EGY BRA CHE KOR FRA DEU AUT COL POL GRC MAR PHL KAZ ECU CHL MEX LBN BOL ESP PER ARG VEN ITA PRT For malism (orthogonal co mponent) 43

44 Check: Partial Scatter Plot (5) coef = , (robust) se = , t = ZAF MWI MOZ Cor r upti on I ndex ( ort hogonal component) HKG NZL ZMB TTO CAN CHNTZA DNKSWE NOR NLD FIN NAM ISL MYS ZWE CHE BGR KEN GBR CIV HUN LUX POL VNM FRA SEN IND AUS BEL UGA GHA IRL ISR DEUCZE LKA AUTBWA SGP USA BRA JPN JOR PRT ECU NGA THA ROM GRC TUR TWN COL DOM TUN PAK MAR MLT EGY CYP HND BHR CHL KOR URY MEX ITA SLV PHL LBN JA M IDN CRI ARG PER ESP BOL GTM PAN VEN KWT ARE For malism (orthogonal co mponent) PRY 44

45 Check: Partial Scatter Plot (6) coef = , (robust) se = , t = GHA MYS VNM ZWE Hu man Ri ght s ( Amnest y 1993) ( ort hogonal component) NZL ZMB AUSCAN UGA TWN NGA TUR JOR KEN THA NOR SGP IRL GBR BEL USA SWE JPN NLD FRA DEU FIN AUT PAK CHN KOR DNK IND BRA CHE ISR IDN EGY PRT MOZ KWT GRC ITA ISL HND CHL ECU MEX LBN PHL ESP PAN ARG PER VEN COL ZAF For malism (orthogonal co mponent) 45

46 Check: Partial Scatter Plot (7) coef = , (robust) se = , t = SGP EGY NAMBWA Legal Syst e mis Fair and I mparti al ( ort hogonal component) TUN ZAF MWI THA BLZ TTO CAN ZMB ZWE MYS SWE BGD IND CHN PAK TZA SVN SEN TUR GHA GBR NGA FRA EST HUN CHL DEU PHL UGA ROM USA CIV PRT POL URY KEN BRA COL ITA DOM BGR HND LTU GEO HRV UKR CZE MEX RUS IDN SLV KAZ ECU For malism (orthogonal co mponent) ESP CRI PAN GTM BOL PER ARG 46 VEN

47 Check: Partial Scatter Plot (8) coef = , (robust) se = , t = Legal Syst e mi s Honest and Uncorrupt ( ort hogonal component) SGP BGD EGY NAMBWA ZAF ZMB MWI SWETHA URY ZWE PAK SEN BLZ CHN GHA TTO GBR CAN MYS FRA HUN CHL TZA SVN EST TUR NGAIND DEU PRT UGA CIV DOM USA ROM POL PHL KENBRA BGR GEO HND HRV COL UKR ITA RUS CZE IDN For malism (orthogonal co mponent) TUN LTU MEX KAZ SLV ECU ESP CRI PAN ARG GTM BOL PER VEN 47

48 Check: Partial Scatter Plot (9) coef = , (robust) se = , t = BGD SGP Legal Syst e mis Quick ( ort hogonal component) BLZ TTO ZAF TUN EGY NAMBWA MYS CHN CAN PAK GHA THA USA SWE GEO GBR MWI DEU PRT EST ZMB UKR ROM LTU UGA HUN CIV SEN MEX KAZ TZA DOM RUS TUR NGA ZWE HRV IDN POL SVN PHL HND IND FRA BGR CHL URY COL SLV BRA CZE ECU KEN ITA GTM ESP CRIPAN PER VEN ARG BOL For malism (orthogonal co mponent) 48

49 Check: Partial Scatter Plot (10) Legal Syst e mis Affordable ( ort hogonal component) coef = , (robust) se = , t = SGP EGY BWA TUN BGD BLZ HUN NAM HND CHN URY CRI SWE TZA MEX UKR EST MYSTUR COL ROM GHA THAFRA RUS CZE KAZ ZAF CAN ZMB MWI BGR CHL GTM ZWE PRT LTU SVN UGA USA GEO DOM SEN ESP NGA PAK ECU PHL GBR HRV KEN PAN TTO DEU SLV IND BRA CIV IDN ARG PER BOL ITA VEN POL For malism (orthogonal co mponent) 49

50 Check: Partial Scatter Plot (11) coef = , (robust) se = , t = SGP BGD NAM BWA TUN Legal Syst e mis Consistent ( ort hogonal component) BLZ ZAF TTO EGY THA CHN CAN MWI ZMB MYS SWE SVN EST GHA FRA HUN CHL SEN TUR PAK ZWE TZA PRT NGA POL ROM IND UGA GBRUSA CIV URY DOM HND COL BGR PHL BRA GEO DEU HRV UKR RUS CZE LTU SLV IDNITA KAZ KEN MEXECU For malism (orthogonal co mponent) ESP CRI ARG PER PAN GTM 50 BOL VEN

51 Check: Partial Scatter Plot (12) coef = , (robust) se = , t = SGP TUN Cour t Deci si ons ar e Enf or ced BGR EGY BWA BGD FRA NAM CAN TZA URY CHN SVN CHL ZMB GHA NGA PAK SEN ZAF MWI EST MYSTUR ZWE THA ROM ESP LTU HUN BLZ TTO BRA GBR CRI UGA USA IND CIV PRT DOM SWE KEN POL MEX PHL GEO UKR HRV ARG PAN GTM CZE VEN DEU ITA HND IDN RUS COL SLV KAZ ECU PER BOL For malism (orthogonal co mponent) ( ort hogonal component) 51

52 Check: Partial Scatter Plot (13) coef = , (robust) se = , t = SGP Confidence in Legal System ( ort hogonal component) BLZ BWA CHL TUN BGD IND THA CHN MYS NAM TTO CAN PHL MWI SEN MEX ZAF TUR ZWEFRA PAK EGY URY COL DOM EST GHA UGA USA SWE HUN POL HRV TZA ZMB GEO BGR SLV GBR DEU CIV PRT IDN SVN ROM ECU NGA HND KEN BRA KAZ CZE LTU ARG PER UKR RUS ITA For malism (orthogonal co mponent) ESP PAN CRIGTM 52 BOL VEN

53 Conclusion (1) I. Measure procedural formalism in 109 countries in cooperation with law firms from Lex Mundi: Describe the exact procedures used to resolve 2 specific disputes: 1. Eviction of a residential tenant for non-payment of rent 2. Collection of a returned check. Using the data obtained from law firms, we construct measures of legal structure, seen as the extent of procedural formalism. Results: 1. The Neighbor Model of courts is far from reality; all countries formalize adjudication heavily. 2. Empirical confirmation that formalism is greater in civil than in common law countries. 3. Some evidence that formalism is greater in less developed 53 countries.

54 Conclusion (2) II. Use the data to examine several aspects of judicial quality: Estimates of expected duration of each case (Lex Mundi). Other measures of judicial efficiency and fairness. Results. Holding the level of per capita income constant, countries with more formalism tend to have : Higher expected duration of dispute resolution Lower survey measures of judicial efficiency and access to justice Lower fairness, impartiality, consistency, and speed of judgments, as perceived by small firms Poorer enforcement of judicial decisions and protection of human rights, higher corruption, and lower confidence of small firms in the legal system. 54

55 Conclusion (3) III. Interpretation of results. Caution: our measures may not capture other aspects of legal efficiency, such as avoidance of errors or the adjudication of complex cases. But: The analysis does shed light on access to justice for an ordinary person involved in an ordinary dispute. Bottom line: o We did not find evidence that formalism buys justice. o Seems to be that the transplantation of legal procedures during colonization had many undesirable effects. 55

56 Conclusion (3) III. Interpretation of results. Caution: our measures may not capture other aspects of legal efficiency, such as avoidance of errors or the adjudication of complex cases. But: The analysis does shed light on access to justice for an ordinary person involved in an ordinary dispute. Bottom line: Seems to be that the transplantation of legal procedures during colonization had many undesirable effects. 56

57 Mapping with the Encyclopedia of Laws (1) Encyclopedia of Laws Civil Procedure (France) Part I. Judicial Organization 1. The Courts and Their Members 2. The Bar 3. Law Officials Part II: Jurisdiction 1. Domestic Jurisdiction 2. International Jurisdiction Part III: Actions and Claims 1. Actions 2. Claims and Defenses 3. Sanctions and Procedural Irregularities Part IV: Proceedings 1. Pre-trial Proceedings: Co n ciliation befo re trial 2. Proceedings in First Instance 3. Review Proceedings (appeal) Part V: Incidents Variables in the paper Indices in the paper Variable: Professional vs. non-professional judge Variable: Legal representation is mandatory Variable: Service of process by judicial officer required Variable: Notification of judgment by judicial officer required Variab le: Gen eral ju ris d iction cou rt Not covered: Lex Mundi Project analyzed simple local disputes only Not covered: Right to sue assumed by case facts. Collective actions outside of scope of Le x mundi Project, which analyzed simple local disputes only. Variab les: Filin g and op po sitio n Variab le: Co m p lain t mu st be leg ally ju stified Variables: Mandatory time limits Variab le: M an datory p re-trial co nciliatio n Variables: Filing, service, opposition, final arguments, judgment, notification of judgment. Variab le: Co m p lain t mu st be leg ally ju stified Variab le: Ju dg men t mu st be leg ally ju stified Variable: Judgment must be on law (not on equity) Variable: Independent procedural actions for filing and service Variable: Independent procedural actions for trial and judgment Variab le: Du ratio n o f filin g and serv ice Variab le: Du ratio n o f trial and ju dg ment Variable: Service of process by judicial officer required Variable: Notification of judgment by judicial officer required Variable: Defendant s economic situation is considered at judgment Variable: Enforcement of judgment is automatically suspended until resolution of the appeal Variable: Comprehensive review in appeal Variable: Interlocutory appeals are allowed Mostly not covered: Outside standardized facts included in questionnaire Variable: Interlocutory appeals are allowed FI: Professionals vs. laymen FI: Professionals vs. laymen FI: En gag ement fo rmalities FI: En gag ement fo rmalities FI: Professionals vs. laymen FI: Written vs. oral elements FI: Leg al ju stificatio n Other: Mandatory time limits FI: En gag ement fo rmalities FI: Written vs. oral elements FI: Leg al ju stificatio n FI: Leg al ju stificatio n FI: Leg al ju stificatio n FI: Independent procedural actions FI: Independent procedural actions Outcomes: Duration in practice Outcomes: Duration in practice FI: En gag ement fo rmalities FI: En gag ement fo rmalities Other: Defendant protection FI: Control of superior review FI: Control of superior review FI: Control of superior review 57 FI: Control of superior review

58 Appendix 58

59 Mapping with the Encyclopedia of Laws (2) Encyclopedia of Laws Civil Procedure (France) Part VI: Legal Costs and Legal Aid 1. Legal Costs 2. Legal Aid Part VI: Evidence 1. Bu rd en o f Proo f 2. Ad m iss ib ility o f Ev id en ce 3. Ad m in istration of Ev id en ce Part VIII: Particular Proceedings Part IX: Enforcement of Judgments and Preliminary Seizure for Security 1. En fo rcemen t of Do mestic Judgments 2. Protective Measures 3. Recognition and Enforcement of Foreign Judgments Part X: Arbitration Variables in the paper Indices in the paper Variable: Legal representation is mandatory Variable: Attorney fees are fixed or limited by statute, court or administrative regulation Variable: Most common remuneration of litigation attorneys V a ria b le : Q u ota litis o r c on ting e nt fe e ag re emen ts Variable: Looser pays rule V a ria b le : Fu lly co mp ensa tory in te rests Variable: M andatory legal aid available by law or by order of the court Variable: Authenticity and weight of evidence defined by law V a ria b le : Ju dg e ha s th e in depe n de nt le g a l o b lig atio n to in ve stiga te fa cts Variable: Judge can not introduce evidence V a ria b le : Ju dg e ca n no t re je ct irre le v an t e v id en ce Variable: Out-of-court statements are inadmissible Variable: Only original documents and certified copies are admissible Variable: M andatory pre-qualification of questions Variable: M andatory recording of evidence V a ria b le : O ra l in te rro ga tion on ly b y ju d ge Variab le: E v id en ce Not covered: Lex Mundi Project covered only eviction and check collection proceedings Variable: Independent procedural actions for enforcement of judgment Variable: Duration of enforcement of judgment Variable: En fo rcem ent o f ju dg m ent. Variable: Defendant s economic situation is considered at enforcement of judgment Variab le: E n fo rcem ent o f ju dg m ent is au to matically suspen ded u ntil resolution of the appeal. Variable: Transfer of debtor s property only through public auction Variable: M andatory exclusion of defendant s essential survival assets Variable: Attachment of debtor s property only after judgment Not covered: Lex Mundi Project analyzed simple local disputes only Not covered: Lex Mundi Project focused on judicial procedures Variable: Administrative procedures FI: Professionals vs. laymen Other: Attorney s incentives Other: Attorney remuneration Other: Quota litis Other: Other determinants Other: Other determinants Other: Defendant protection FI: Statutory regulation of evidence Other: Defendant protection FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Statutory regulation of evidence FI: Written vs. oral elements FI: Independent procedural actions Outcomes: Duration in practice FI: Written vs. oral elements Other: Defendant protection FI: Control of superior review Other: Defendant protection Other: Defendant protection Other: Defendant protection 59 Other: Other determinants

60 Other determinants of judicial efficiency Statutory defendant protection measures might be valued by society, even at the expense of speed of adjudication, since they might increase fairness and reduce disparity between rich plaintiffs and poor defendants. Patterns of compensation of attorneys may create incentives to delay the pace of proceedings (hourly fees and per-activity compensation), or to pursue futile litigation (contingent fee agreements). Mandatory time-limits for litigants and judges at various stages of the procedure may deter dilatory tactics. Indexation of claims and loser pay rules may incentive early settlements by defendants with little chances of winning the case. The availability of alternative administrative procedures may liberate judicial resources by reducing court filings. 60

61 TABLE 11B: Check - Defendant Protection BY LEGAL ORIGIN - CHECK Manda. legal aid avail. law or order of judge or admin. office Attor. fees fixed or lim. by stat. court or adm. reg. Judge has indep. legal oblig. investigate facts Attach. of defend. proper. after judgment Transfer of defen. proper. only through public auction Manda. Exclu. defendant's esen. assets Index Defen. Protec. Panel A: Means English Legal Origin (39) Socialist Legal Origin (16) French Legal Origin (39) German Legal Origin (6) Scandinavian Legal Origin (5) Mean all countries (105) Panel B: Tests of Means (t-stats) Common vs. Socialist a 5.62a Common vs. French -2.07b b 7.35a -1.94c -1.80c Common vs. German Common vs. Scandinavian -2.62b a

62 TABLE 11B: Check - Common Way to Remunerate Attorneys BY LEGAL ORIGIN - CHECK A percentage of the judgment. Hourly rate. A lump sum for the entire proce. Panel A: Means English Legal Origin (39) Socialist Legal Origin (16) French Legal Origin (39) German Legal Origin (6) Scandinavian Legal Origin (5) Per activity performed. Mean all countries (105) Panel B: Tests of Means (t-stats) Common vs. Socialist Common vs. French 2.59b -2.29b Common vs. German Common vs. Scandinavian

63 TABLE 11B: Check - Quota Litis or Contingent Fee Agreements BY LEGAL ORIGIN - CHECK Allowed without restriction. Allow. law subject to legisl. ceiling or restric. Prohib. only remu. allow. when ancillary or supplem. other valid form of remun. Prohibited in all cases. Panel A: Means English Legal Origin (39) Socialist Legal Origin (16) French Legal Origin (39) German Legal Origin (6) Scandinavian Legal Origin (5) Mean all countries (105) Panel B: Tests of Means (t-stats) Common vs. Socialist -3.21a b Common vs. French -2.14b b Common vs. German Common vs. Scandinavian

64 TABLE 11B: Check - Mandatory Deadlines BY LEGAL ORIGIN - CHECK Term admission of lawsuit Term present evidence Term present defense Term judgm ent Term notifi. Judgment Index: Manda. Time Limits Admi. check collec. proce. Fully compen. Inter. Panel A: Means English Legal Origin (39) Socialist Legal Origin (16) French Legal Origin (39) German Legal Origin (6) Scandinavian Legal Origin (5) Mean all countries (105) Panel B: Tests of Means (t-stats) Common vs. Socialist -3.94a a -1.83c -3.47a Common vs. French -3.56a -1.94c a -1.86c -3.81a Common vs. German a Common vs. Scandinavian b a

65 Table 12: Correlations Between Outcomes and Indices Indices Log of duration Judicial efficiency index Access to justice Enforceability of contracts Corruption index RDR index Panel B: Check Index of defendant protection Index of mandatory deadlines Index of administrative procedures Debt indexation Remuneration hourly rate Judicial efficiency index Access to justice a Enforceability of a a contracts Corruption index a a a RDR index a a a Index of defendant protection Index of mandatory a deadlines Index of administrative procedures Debt indexation Remuneration: hourly rate Quota limits prohibited all cases a

66 TABLE 13A: Check - Outcomes and Indices Independent variables: Dependent variables: Log GNP per capita RDR index Defendant protection Mandatory deadlines Administrative procedures Remuneration rate Quota prohibited Debt indexation Constant N [R 2 ] Panel B: Check Log of duration (0.0489) a (0.0660) (0.3683) (0.2894) (0.1648) (0.1646) (0.2162) (0.1759) a (4496) 105 [0.20] Judicial efficiency a (0.1529) b (0.2077) (1.0779) (1.1121) (1.0582) (0.5179) (0.4402) (0.5007) (1.8131) 54 [0.56] Access to justice a (0.1827) (0.3438) (1.4744) c (1.3983) (0.9868) (0.7965) (0.7443) c (0.6911) a (1.9922) 75 [0.59] Enforceability of contracts a (0.0799) a (0.1316) (0.5804) (0.5899) (0.4753) (0.3491) (0.2984) c (0.2555) (0.8577) 51 [0.80] Corruption a (0.1102) (0.1799) (0.8627) (0.7730) (0.4482) a (0.3271) (0.3338) (0.3531) (1.1147) 83 [0.69] 66