The Economic Impact of Civil Justice Reforms

Abstract:
Quality, independence and efficiency are the key components of effective justice systems, a crucial condition to ensure the proper functioning of important drivers of growth in the EU. This paper focuses on judicial efficiency and investigates the impact of certain structural reforms affecting the civil justice system on selected economic outcomes, such as business dynamics and foreign direct investments (FDI). In doing so, the role of efficiency of justice systems (measured by disposition time and the ratio of pending cases to population, both referred to litigious civil and commercial disputes) is highlighted as a transmission channel linking judicial reforms to economic variables.

The work draws upon a dataset based on the reports by the Council of Europe's European Commission for the Efficiency of Justice (CEPEJ). The results support the growth potential of judicial reforms rationalising the organisation of courts, fostering investment in in-court ICT and introducing incentives to reduce excessive litigation rates (for instance by enhancing the use of alternative disputes resolution methods), which are all found to positively affect the efficiency of civil justice. By increasing the efficiency of the justice system, these reforms can enhance entrepreneurial activity (as measured by firms' entry rates) and FDI.

European Commission: DG Economic and Financial Affairs:European Economy: Economic Papers No.530, September 2014:The Economic Impact of Civil Justice Reforms http://ec.europa.eu/economy_finance/publications/economic_paper/2014/ecp530_en.htm

---