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The Economics of Access to Justice

Final Report Summary - ECO4A2J (The Economics of Access to Justice)

The aim of the project “The Economics of Access to Justice” was to develop a comprehensive law and economics theory of access to justice (A2J) and litigation in order to assess the benefits of different policies. Balancing a full A2J and the necessary limitation of expensive litigation is a crucial issue not only from the perspective of justice but also for socio-economic and safety purposes.
By interfacing techniques coming from legal scholarship, game theory and policy impact analysis, this research sheds light on some of the most relevant mechanisms underlying A2J and litigation. By taking into account A2J issues into law and economics models of litigation, the present theoretical contributions make it possible to study the potential tradeoffs between favouring A2J and saving costs related to litigation. Furthermore, the theoretical investigation focused on a number of policies with respect to their effects on A2J and litigation rates. The main results of the theoretical part of the research are summarized below:
• Some of the usual results found in the law and economics literature on litigation and settlement should be reconsidered: higher litigation costs discourage both settlement and litigation; the value at stake ambiguously affects settlement; for claims in the shadow of the court effects of changes in costs and amounts at stake depend on the elasticity of the demand for legal remedies.
• It is efficient to improve A2J, as long as the claimant’s marginal propensity to litigate remains smaller than the social opportunity-cost of A2J. A tradeoff between promoting A2J and discouraging litigation emerges in relation to policies that result in larger litigation costs for claimants or an increased amount at stake (e.g. punitive damages). With respect to legal aid, it is efficient to subsidize litigation as long as the standardized rate of litigation is lower than the social opportunity costs of A2J.
• The analysis on fee-shifting rules shows that when symmetrically uninformed parties simultaneously submit settlement bids, neither the merits of the case nor the fee-shifting rule affects the parties’ decision to settle or litigate. Therefore, enlarging the scope for fee-shifting—for instance, moving from the American rule to the English rule—does not reduce the rate of litigation.
• Considering the role of legal precedent and subjective beliefs of parties, the research shows that though plaintiffs learn from precedent through a Bayesian process, A2J does not always follow a desirable (efficient) path. Under some circumstances, meritorious causes of action hardly proceed through the court system, even as frivolous claims continue to flourish.
The research has also included empirical analysis. Particular effort has been devoted to data collection in order to assess legal needs and obstacles in dispute resolution both for ordinary people and for some categories of disadvantaged people (migrants and inmates). Although most part of the empirical analysis is still preliminary, some interesting evidence seems to emerge:
• Emergency measures aimed at solving urgent legal needs may displace ordinary measures with adverse effects (an effect observed in the case of migration regulation);
• Inmates typically suffer a significant exclusion from access to legal remedies. In prison, they face several legal issues, especially related to family law, administrative law, and fundamental rights. They experience difficulties in managing their legal needs and entrust problem resolution either to the family or to the criminal lawyer; the institutional response in supporting a full access to justice for inmates is often insufficient.
• Preliminary results concerning the behaviour of ordinary people (in an experimental setting) seem to indicate that the “sense of justice” matters both in the decision to proceed legally against an offender and in the willingness to compensate the victim/settle the case by the offender; the credibility of the threat of legal action crucially determines the response of a prospective defendant.
Finally, the highly inter-disciplinary nature of both the project and the related results contributes to the cross-fertilization of the legal, socio-economic, and law & economics approaches by disentangling the complex relations between legal disputes and their resolution as a critical social and economic phenomenon.