Adversarial versus Inquisitorial Systems: Error and Valuation

This paper discusses valuation within the judicial processes by comparing the adversarial and inquisitorial systems of litigation. It evaluates adversarial and inquisitorial litigation on the legal systems’ ability to aid processes that lead to discovery of knowledge. It argues that much of the information required for accurate valuation must be discovered. While the adversarial method of litigation is essentially a competitive model of evidence production; the inquisitorial system comprises only the expert/principle searcher, and lacks a competitive discovery process. Therefore, as a system, adversarial litigation may be more conducive for error minimization in enforcing rules than inquisitorial litigation. On the question of business valuation of firms under Chapter 11, both the adversarial and inquisitorial systems are problematic, given that market competition leading to discovery of prices and valuation is impossible within the judicial system of valuation.