A Law and Economics View on Harmonisation of Procedural Law

Abstract

Even though there exists an extensive Law and Economics literature on the topics of procedural law and harmonisation of law, very little has been written on harmonisation of procedural law as such. This chapter starts by providing a brief overview of the economic approach to legal intervention, private enforcement and procedural law. Subsequently, the economics of harmonisation of (substantive) private law is discussed. The traditional legal arguments in favour of harmonisation (differences in legal rules between countries result in legal uncertainty and increased costs and therefore hinder cross-border trade, and harmonisation would create a level playing field) turn out to be unconvincing. The economic analysis of law provides several arguments against harmonisation (regulatory competition enables satisfying a larger number of preferences, it enables learning effects, (centralised) legislators suffer from limited information and the possible influence of interest groups should be taken into account) and in favour of it (the need to internalise interstate externalities, the desire to avoid a race to the bottom, decreasing transaction costs and profiting from economies of scale). These arguments have to be weighed in order to reach a conclusion on the desirability of harmonisation. Such a weighing shows that there is, at best, a limited scope for harmonisation of procedural law (and then only as an additional option). Harmonisation would remove the possible learning effects and does not allow satisfying a larger number of preferences. The possible arguments in favour of harmonisation of procedural law seem weak, especially now that procedural law is closely connected to the underlying substantive law. The only potentially strong argument is the reduction of transaction costs. It is ultimately an empirical matter whether this argument outweighs the arguments against harmonisation. The 2008 Oxford Civil Justice Survey suggests that this is not the case.