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Bridging the funding gap - The economics of cost shifting, fee arrangements and legal expenses insurance and their prospects for improving the access to civil justice

Listed author(s):
  • Tom Schepens

    (Center for Advanced Studies in Law & Economics, Ghent University)

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    The right of access to civil justice is a cornerstone of the Belgian legal order. At present time, however, financial barriers prevent about three quarters of the Belgian population from fully asserting their subjective rights. As traditionally, apart from legal aid, private funding is the dominant method of funding a civil claim in Belgium, alternative funding options in between private and public funding might hold some prospects for improving the access to civil ustice. Therefore this paper aims to provide an in-depth economic analysis of the effects of cost shifting, client-lawyer fee arrangements and legal expenses insurance on the various dimensions of the access to civil justice. In summary, the main results from the analysis are that theoretically all three alternative funding methods may hold certain prospects for improving the accessibility of civil justice. But, as far as empirical data are available, cost shifting fits least the requirements for solving the policy issue addressed in this paper. However, the validity of this empirical observation is subject to certain limitations. Both contingency fees and legal expenses insurance hold clear prospects for overcoming risk aversion and liquidity constraints. Also, relative to hourly fees, the incentive scheme inherent to contingency fees appears most appropriate to curb lawyer opportunism. The involvement of a legal expenses insurer may lead lawyers to behave less opportunistically too. Finally, within the current legal framework, insurers' control of costs and quality requires their direct or indirect involvement in the civil justice administration system. This may pose some challenging policy issues as the market for legal expenses insurance further develops in the future.

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    Paper provided by Berkeley Electronic Press in its series German Working Papers in Law and Economics with number 2007-2-1196.

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    Handle: RePEc:bep:dewple:2007-2-1196
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