Creating

ENFORCING CONTRACTS 63
What to reform?
Courts should be fast, fair and affordable. Long delays,
as experienced in Italy and Guatemala (table 10.3), force
businesses to look for other means of resolving disputes.
If going to court is expensive, as in Timor-Leste and the
Democratic Republic of Congo, fewer business transactions
occur—and those that do involve only a small
group of people linked by kinship, ethnicity or previous
dealings. Less wealth is created.
Three reforms are most urgent:
• Reduce delays in deciding cases.
• Cut the number of appeals to the supreme court.
• Make enforcement competitive.
Reduce delays in deciding cases
TABLE 10.3
Where is enforcing contracts the most efficient—and
where the least?
Procedures (number)
Fewest
Most
Australia 11 Kuwait 52
Greece 14 Lao PDR 53
Iceland 14 United Arab Emirates 53
Norway 14 Egypt 55
Tunisia 14 Cameroon 58
United Kingdom 14 Sierra Leone 58
Denmark 15 Iraq 65
Uganda 15 São Tomé and Príncipe 67
Hong Kong, China 16 Sudan 67
Ireland 16 Timor-Leste 69
Time (days)
Least
Most
Tunisia 27 Lebanon 721
Netherlands 48 Nigeria 730
New Zealand 50 Congo, Dem. Rep. 909
Japan 60 Slovenia 913
Singapore 69 Sudan 915
France 75 Poland 980
Korea 75 Timor-Leste 990
Denmark 83 Angola 1,011
Norway 87 Italy 1,390
Belgium 112 Guatemala 1,459
Cost (% of overdue debt)
Least
Most
Norway 4.2 São Tomé and Príncipe 69.5
New Zealand 4.8 Central African Republic 72.2
Switzerland 5.2 Burkina Faso 95.4
Denmark 5.3 Papua New Guinea 110.3
Korea 5.4 Bhutan 113.8
Sweden 5.9 Cambodia 121.3
Belgium 6.2 Indonesia 126.5
Finland 6.5 Malawi 136.5
United States 7.5 Timor-Leste 183.1
Taiwan, China 7.7 Congo, Dem. Rep. 256.8
Source: Doing Business database.
Four types of reform reduce the time it takes to enforce
a contract. One is introducing summary proceedings
or simplified trial procedures. Another is simplifying
procedures for collecting and hearing evidence. A third
is changing case management practices. The final one is
using lower courts to decide simple commercial cases.
In a summary proceeding the creditor need only
present the judge with evidence of the transaction and
nonpayment. Debt cases no longer go through preliminary
investigation before court clerks. In Burundi
this reform cut nearly 3 months off the time to recover
debt. In Latvia the creditor can enforce payment immediately
after the hearing. Not all reforms bring the
desired results. For example, in Poland a simplified trial
procedure exists for small claims up to $3,000. But few
people use it. Restricted access—with claims arising
from unpaid utility bills ineligible—and court fees that
equal those for the regular procedure explain the lack of
enthusiasm.
In 94 countries only written evidence is admitted
for a judge’s consideration. When judges hear cases, they
read and approve the record of any new evidence. This
takes days, sometimes weeks, to transcribe. In 2004 Brazil
allowed oral evidence in its courts. In Germany a judge
need no longer hear witnesses or experts if they have already
testified on the same matter before another judge.
This is possible even without the consent of the parties
to the case. And if judges decide they have enough evidence,
they can interrupt hearings and issue judgments.
In Finland hearings are now optional. Judges can decide
on cases based solely on the evidence submitted.
Case management is illustrated by Slovenia’s reforms,
which involved 2 changes. First, judges are responsible
for following cases from start to finish rather
than sending the parties from one court administrator
to another. Second, a preliminary hearing clarifies the
nature of the dispute so that parties come to the main
hearing prepared. In its first year case management has
cut Slovenia’s average time to resolve disputes by 90 days.
Attorney fees tend to be lower in countries with
case management: the average cost of resolving a dispute
about a debt is 15% of the debt’s value in countries with
case management and 29% in countries without, even
after controlling for income per capita. This is because
cases move faster. Georgia is implementing case man-