Commercial Dispute Resolution: Unlocking Economic Potential Through Lighthouse Projects

This chapter positions commercial dispute resolution as a major enabler of economic development. Going one step further, it argues that commercial dispute resolution also makes for good ‘lighthouse’ judicial reform projects, due to its focused scope and the quick impact potential in an area where competition between countries requires urgent action. Success requires a comprehensive approach around five building blocks: the legal basis; organisational and physical setup; people excellence; communications; and overall strategy and change management. In its second half, the chapter moves from today to setting out four hypotheses for the future: Firstly, courts of the future will be a service rather than a location, with courtrooms of the future being virtual and customer centric providers capturing the market. Second, commercial dispute resolution will become far more differentiated, as well as competitive on the international stage. Third, private sector solutions will complement and compete with state-offered or endorsed solutions. Fourth, artificial intelligence is about to change the face and nature of dispute resolution fundamentally. Each of those trends offers ample opportunities to unlock economic potential. The chapter concludes by pointing out how international organizations can contribute. 1 Setting the Stage: The Case for Commercial Dispute Resolution as a Major Enabler of Economic Development As countries are competing ever more vigorously for economic develop ment,1 market size and potential, institutional and regulatory quality, openness to trade, infrastructure quality, economic and political stability and labour 1 Barros and Cabral 2000, 360–71; Vuksic 2015; Gonzalez, 26 October 2017. * Andreas Baumgartner, co-founder and the current ceo of The Metis Institute, a.baumgartner@themetisinstitute.org. Andreas Baumgartner 9789004407411 Downloaded from Brill.com03/09/2020 11:03:19AM via free access 189 Commercial Dispute Resolution quality as well as cost are still paramount.2 However, there is another key factor of economic (but also social and political) development which is often overlooked, even though it features, for example, in the ‘Ease of Doing Business’ index of The World Bank: ‘The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system’.3 The argument runs that better dispute resolution contributes to a better business climate and, as a consequence, to the attractiveness as a destination for foreign direct investment.4 As has been noted, “economic development requires not only that there be predictable and fair rules to govern business activities but that these rules are actually enforced”,5 for which commercial dispute resolution is an important factor. Or, “Simply emphasizing the significance of property rights is not sufficient. [...] Property rights must be readily enforceable and credible to have the desired effect”.6 Some literature even goes so far to claim that “judicial efficiency explains more of the pattern of [Foreign Direct Investment] fdi than the combined skilled labour and capital endowment”,7 or puts institutions, explicitly including courts, at the same level of importance as the three major factors in classical economic theory, money, people, and resources.8 Others are more cautious, emphasizing the difficulties of operationalizing the impact of rule of law on the economy for empirical research.9 However, even the more cautious authors concede a statistically significant effect of the quality of trading parties’ domestic legal institutions on trade.10 And—even though with a number of caveats regarding the sample size and the need to resort to proxies to measure reform efforts—econometric analysis appears to support the hypothesis that judicial reforms may enhance entrepreneurial activity and foreign direct investment.11 2 Hornberger 2011, 2. 3 World Bank, ‘Enforcing Contracts Methodology’. 4 McConnaughy 2013, 14; in the article with respect to dispute resolution by arbitration. 5 Fry 2011, 390. 6 Cross 2002, 1743. 7 Bellani 2014, with further literature references. 8 Weisbrot 2003, 252. 9 Cross 2002, 1768. 10 For example Fry 2011, 391. 11 Lorenzani and Lucidi 2014, 35. Andreas Baumgartner 9789004407411 Downloaded from Brill.com03/09/2020 11:03:19AM via free access