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Major incentive effects dept.

Loser-pays, some have argued, doesn't send a powerful enough signal to big companies that they should behave responsibly in court. After all, with all their money, they can afford to ignore the incentives, right? Or maybe they can't:

Liquidators for the collapsed Bank of Credit and Commerce International, which failed in its $1.8 billion lawsuit against the Bank of England, agreed Wednesday to pay costs of $137.6 million.

BCCI tried unsuccessfully to sue the central bank in one of the longest running -- and most expensive -- cases in British legal history.

Of course, the other way of looking at it is that even with loser-pays, you get some pretty appalling overuse of the litigation process -- a view fully explored in this London Times piece. But imagine -- or rather look at the U.S. to see -- how much worse it would be without the incentive structure of loser-pays.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.