Globalizing Commercial Litigation
73 Pages Posted: 7 Apr 2009 Last revised: 11 Jun 2009
Date Written: April 6, 2009
The quality of national judicial systems varies widely from country to country. In some jurisdictions, the courts resolve commercial disputes quickly, fairly, and economically, while in others, they are slow, inefficient, incompetent, biased, or corrupt. These differences affect not only litigants, but nations as a whole: effective courts are important for economic development. A natural implication is that countries with underperforming judiciaries should reform their courts. Unfortunately, judicial reform is both difficult and slow. Another way to deal with a dysfunctional court system is for litigants from afflicted nations to have their domestic commercial disputes adjudicated in better-functioning foreign courts. In this Article, we explore the potential advantages and limitations of such extraterritorial litigation and conclude that its promise is strong, particularly in light of a revolution in communications technology that permits litigation in a remote court without travel by parties, witnesses, or lawyers.
Private arbitration is another alternative to ineffective local courts, and its role in resolving commercial disputes will surely continue to expand. Public courts, however, have important advantages over private arbitration in resolving commercial disputes. Consequently, broader international access to well-functioning public courts holds unique promise.
Presently, the volume of extraterritorial litigation is small. A set of basic legal and practical reforms could, however, change that situation dramatically. To motivate those reforms, it is essential that jurisdictions with strong courts have an incentive to attract foreign litigants. The best way to achieve this is through higher court fees for foreign litigants who lack substantial ties to the forum state. This may require important adjustments in legal culture.
Keywords: adjudication, arbitration, courts, competition, choice of forum, international litigation, choice of law, contracts, rule of law, regulatory competition, development
JEL Classification: F13, K12, K33, K41, O19
Suggested Citation: Suggested Citation