Creating

ENFORCING CONTRACTS 65
tract enforcement would temper requests for larger
court budgets. Dutch and Danish courts, for example,
have only a quarter of the judges and administrators
used in Croatia on a per capita basis (figure 10.4).
If Bulgaria were to adopt the Estonian process for
enforcing contracts, which would imply revising the civil
procedure code, a third of its judiciary budget could
be reallocated to better uses. 3 An easier judicial process
would also bring more cases to the courts, as an estimated
$4 billion in overdue credit is currently handled outside
the judicial system. Analysis suggests that in just 5 years
such reform might create about 70,000 jobs, since more
money would be available for new business activity.
Fourth, the integrity of the judiciary is higher in
countries with faster resolution of cases and fewer procedures
(figure 10.5). And businesses use courts more if
they see value in their dispute resolution services.
Legal experts often argue that stricter procedural
requirements lead to more fairness. They do not, at least
in developing countries. Procedural complexity makes it
difficult for typical businesses to understand the process.
As a result they avoid courts in favor of simpler, often
informal, alternatives. 4 And countries with more procedures
to enforce a contract, such as Egypt, are not the
ones where businesses consider the process fairer. Quite
the opposite: a World Bank survey of more than 10,000
enterprises in 82 countries shows that fewer procedures
are associated with more fairness and impartiality in the
legal system. 5 This makes for happier clients and a more
credible justice system.
Notes
1. Jappelli, Pagano and Bianco (2005).
2 Desai, Gompers and Lerner (2004).
3. Dimitrov and Stanchev (2005).
4. See recent evidence on Poland in World Bank (2005c).
5. Batra, Kaufmann and Stone (2003).