The Effect of Specialised Courts over Time

Abstract

This paper examines the effect of creating a specialised economic court on subsequent litigation rates, forum selection, and court performance. To do so, we utilized a quasi-experimental research design and compared court decisions under two time frames: before and after the reform, and two judicial frameworks: the specialised court vs. generalist courts. Using a unique data from Israel, where an Economic Division within the Tel Aviv District Court was established in the last decade, we find evidence that specialisation fosters a fast development of a coherent and consistent body of law. This effect is driven by fast adjudication and by judges' relying on each other’s past decisions to jointly develop the case law. Importantly, although increased efficiency was not exclusively related to specialisation, further analysis suggests that the specialised division is more capable of managing a particularly time-consuming docket. Lastly, although the reform did not lead to the initiation of a greater number of lawsuits, it did cause a major shift in forum selection. We conclude that specialisation may be especially productive in developing markets like Israel, where the use of private lawsuits to promote investor protection is relatively new and growing rapidly.

Keywords: specialized courts, specialization, empirical, class action, derivative action, Israel, litigation

JEL Classification: C93, C23, G30, K22, K41, K42