A Law and Economics View on Harmonization of Procedural Law

2011

The law fulfils important functions in society, contributing to its institutional structure, its policies and resolution of disputes. Workers employed in the law are providing a service, and economics can be applied to analyse the nature of this service. Such analysis must recognise the characteristics of law, including the costs and nature of deliberation. This requires more than the use of theoretical approaches which assume exogenous preferences and no transaction costs. Rhetoric is important in law, and there may be a rhetorical dimension to economics itself. This theme has led to the thesis having two components. The first considers methodological issues in the application of theories and techniques. The second then assesses aspects of the law. Groups and group cultures are considered as influences on academic disciplines including economics, and professions such as the law, as well as shaping political activity and social beliefs. The interpretation of theory as analogy is developed to evaluate the application of theory and empirical analysis to real world issues. Crossdisciplinary material is then used to provide alternative perspectives on democracy. These aspects assist in identifying possible failures in the formulation and implementation of law. From this foundation, and using selected criteria to assess policy development, parliamentary debate leading to changed legislation is investigated and limitations identified. Characteristics are then identified for the services provided to consumers by the legal sector. Provision involves a mix of participants, including lawyers, court staff and other professions. Process and persuasion are important, and there can be game playing between opposing parties. The result may be misleading signals to others operating-in the shadow of the law‖. Overall, concerns are identified about research methods, the quality of laws, the cost and quality of legal deliberation, and implications for behaviour by others. This a relatively untapped area with much potential for further research. I wish to thank all those who, in exchanges through various media and over many years, have contributed to the stimulating environment from which the ideas in this thesis have developed. These include colleagues, students, conference and seminar attendees and others I have only-met‖ through electronic communication. My supervisors, Allan Rae and Srikanta Chatterjee, helped steer this work to the current point. Many others may be unaware of the part they have played through a suggested reference, a question raised, or an argument that they have presented. It would be hard to single out individuals, but there are a few with whom I have had a long association over many years, who have become familiar with several of the areas covered here, and whose views I respect. They include the late Gary Buurman, Paul Callister, Philip Chapman, Bernard Robertson and Bryce Wilkinson. I am grateful to Alan Bollard for seeing potential in this area at an early stage and Muriel Newman for providing close exposure to political processes. I would also like to acknowledge the part played by my children in shaping the paths I have followed. They are grown and have their own lives now, but they have left their mark on this.

Demands for a more comprehensive harmonization of law between legal areas are based on the assumption that legal diversity causes transaction costs and lowers economic trade and welfare, in particular by creating legal uncertainty. It is argued that legal diversity increases the transaction costs of cross-border contracting and discourages consumers and small entrepreneurs from engaging in such transactions. Consumers as well as producers tend to refrain from contracts in foreign legal systems if the costs of information (about the law, about administrative procedures, about competent legal advice) and/or the costs of enforcement (by way of litigation or alternative forms of dispute resolution) seem too high or unpredictable. This unpredictability or uncertainty about the costs of cross-border transactions may stem from the diversity in the formal legal system or diversity in judicial administration across the individual member countries. The purpose of this contribution is to make ...

Review of Law & Economics, 2007

are sound economic reasons for the failure of a system that relies on private criminal prosecution. Criminal prosecution is a public good. If private prosecutors do not receive compensation, at least when the prosecution is successful, only a few will be willing to bear the costs of such an action. If compensation is granted to such private entities, wasteful competition between competing prosecutors is likely to emerge. In addition, apprehending violators and gathering information often require the use of force, and invasion of privacy; allowing private citizens to make use of forceful measures is likely to result in abuse of power (Polinsky and Shavell, 2000). Friedman (1995) argues that the old common law system was functional because in some cases private prosecutors benefited from prosecuting. In some cases, victims had sufficient self-interest in prosecuting violators in order to prevent future offences against them (Friedman, 1995). In other cases, defendants settled the case by paying the prosecutor, and in return, the charges were dropped or not filed at all, even though such compounding of the offence was not always legal (Friedman, 1995, pp. 486-487). While such incentives could induce some private enforcement, they are hardly effective when most defendants are indigent and where many crimes are victimless. Since all modern criminal justice systems rely on public prosecutions, the following discussion concentrates only on public prosecution. Charging discretionin general Charging discretion refers to the prosecutor's power to decide whether to prosecute a person and which charges to file. In common law countries, prosecutors have the power to refrain from prosecuting when they lack sufficient evidence or when they believe that other reasons, often termed "public interests", justify such refrainment. This "opportunity principle" is in contrast to the "legality principle" which is employed in many civil law countries, requiring prosecution when sufficient evidence of guilt exists. Where charging discretion exists, prosecutors often use the power to match the caseload to their limited 6/29/2009 OREN GAZAL-AYAL AND LIMOR RIZA 4 resources. This last factor plays a major role in the economic analysis of prosecution, as discussed below. While prosecutorial discretion in non-adversarial systems is still limited, these civil law countries have increasingly conferred discretionary charging powers on prosecutors. It

The Tragedy of the Judiciary: An Inquiry into the Economic Nature of Law and Courts, 2019

This Article explores the economic nature of law and courts as an explanation for the world's endemic court congestion problem. The economic theory of goods and services is used to demonstrate that law has a dual nature-coercion and compliance-and that law as coercion is actually a club good that requires a complementary good to be useful, courts. But because courts are private goods in nature, the bundled product will behave as a private good. However, the unrestricted implementation of access-to-justice policies with the objective of increasing the people's access to courts will transform the bundled product into a common pool resource. The counterintuitive result of this transformation is that granting unrestricted access to justice might actually prevent people from accessing their rights-the tragedy of the judiciary. Two policy implications are explored: The importance of legal certainty for the tragedy mitigation, and the potentially adverse selection problem resulting from court congestion.

2009

There are strong forces who strive for harmonization of law within the European Union and beyond. For instance, in April 2008 the EU commission published a White Paper which primary objective is the improvement of the legal conditions for victims of violations of the European community antitrust rules (cf. EC, 2008). To date these victims rarely get a compensation which is mainly due to various legal and procedural hurdles (EC, 2005). Demands for a more comprehensive harmonization of law between legal areas are generally based on the assumption that legal diversity causes transaction costs and lowers economic trade and welfare, in particular by creating legal uncertainty. It is argued that legal diversity increases the transaction costs of cross-border contracting and discourages consumers and small entrepreneurs from engaging in such transactions. Consumers as well as producers tend to refrain from contracts in foreign legal systems if the costs of information (about the law, about administrative procedures, about competent legal advice) and/or the costs of enforcement (by way of litigation or alternative forms of dispute resolution) seem too high or unpredictable. This unpredictability or uncertainty about the costs of cross-border transactions may stem from the diversity in the formal legal system or diversity in judicial administration across the individual member countries. The purpose of this contribution is to make some basic considerations on the macroeconomic costs of legal uncertainty, particularly on the effects of cross-border legal uncertainty 1 on economic performance, and to ask whether legal harmonization could be an appropriate