Business Removing

60 DOING BUSINESS IN 2005
FIGURE 8.2
Inefficient courts—less investment, less trade
Investment as a percent of GDP
23
Trade as a percent of GDP
90
22
80
21
70
20
60
Shortest Longest Least Most
Countries ranked by days to enforce a contract, quintiles
Countries ranked by cost to enforce a contract, quintiles
Note: Relationships are significant at the 5% level.
Source: Doing Business database, World Bank (2004a).
nials of justice. An excessive formalism of the proceedings
is the main cause of this situation.” 4
Courts serve businesses best when they are efficient
and fair. This requires simplifying debt collection—say,
by establishing summary proceedings—and reducing
cost and delays. Successful reforms have introduced case
management in the courts, as in Armenia and Slovakia,
put enforcement into the hands of specialized public
agencies or private bailiffs, as in Latvia, and reformed
procedures to discourage frivolous appeals, as in Estonia.
Colombia implemented the most far-reaching reform
of any country in 2003. The time to resolve a dispute
was cut by 30% (figure 8.3). Eighteen other countries reformed
one or more aspects of contract enforcement:
Albania, Argentina, Armenia, Bosnia and Herzegovina,
Bulgaria, Finland, Germany, Honduras, Israel, Lao PDR,
Lithuania, Mexico, Nicaragua, Norway, Portugal, the Philippines,
Serbia and Montenegro and Slovakia. Many reforms
were initiated by governments at the pressure of
business groups, with judges initially opposing them and
then begrudgingly accepting the change. In some instances,
particularly in Latin America, enforcement functions
were taken out of the courts altogether, rather than
dealing with the politics of court reform.
FIGURE 8.3
Colombia: the top reformer in 2003
Days to resolve a commercial dispute
527
146
165
Before
reforms
Source: Doing Business database.
216
363
After
reforms
79 Enforcement
216 Judgment
68 Notification
Who is reforming courts?
European countries made up more than half the reformers
in 2003–04. Nordic and Baltic courts—in Estonia,
Finland, Lithuania and Norway—saw the most changes.
No reform took place in the Middle East, Africa or South
Asia. Yet debt recovery is slow in the Middle East, at 438
days. Lebanon and Syria take about 2 years each (box
8.1). The United Arab Emirates is only slightly faster.
Middle Eastern countries also have the highest number
of procedures to enforce a contract. And enforcing contracts
is expensive in Africa, where court and attorney
fees account for 40% of the overdue debt, if collected. Recovering
debt in South Asian courts also comes at a high
price—42% of the claimed amount will go toward such
fees. By comparison, legal fees account for only 6% of the
debt in OECD countries (table 8.1).
The 3 most ambitious reformers—Bosnia and Herzegovina,
Colombia and Lithuania—improved in different
ways. Bosnia and Herzegovina allowed summary
judgments for smaller commercial disputes and moved
such cases to lower courts. The time to resolve a dispute
was cut from 665 days to 330—a huge improvement, although
still high. But lower courts need not always oper-