Legal advances required to make Guyana more competitive
By Mr Sasenarine Singh
Stabroek News
May 4, 2007
This column addresses the merits of contract enforcement to advance our competitiveness as a country. With the advent of the Commercial Court, collection of debts appears much easier but weaknesses remain in the system. Weaknesses such as swift enforcement of the court's decision and abuse of the appeal system need to be urgently addressed.
Our Commercial Court has brought a welcome relief to the business community but why only in Demerara? Two High Court Judges were trained to operate this Commercial Court so the question begs to be asked, why do we only have one Commercial Court based in Demerara? What about a Commercial Court in Berbice and Essequibo? There is an upswing in commercial activities in these other counties and this will be made more pronounced when the Berbice River Bridge and the Ethanol Plant are completed in Berbice. Why is the second judge not being made use of in these other counties to address commercial matters? This can contribute to some Berbicians and Essequibians not having access to timely judgment and not being able to afford resolution to their commercial disputes as a result of the transportation cost both in dollars and time. I trust that this matter will be addressed swiftly by the judicial administration.
There is also the real threat that there can be an accumulation of cases in the Commercial Court and this threat needs to be monitored constantly since lengthy delays in the issuance of decisions forces businesses to look for other means of resolving disputes and this can result in illegal measures being employed sometimes. If going to court remains time consuming this will result in fewer business transactions taking place involving mainly people linked by kinship, ethnicity or previous dealings. The outcome-less business transactions lead to less wealth creation activities for our people.
From my understanding of the legal impediments to doing business in Guyana, I have noted three reforms most desirable:
- Reduction in the delays in deciding cases.
- Reduction in the number of appeals reaching the Appeal Court.
- Making enforcement of judgment competitive and swift.
It is anticipated that the Judicial Reform Project about to commence will attend to these impediments to enhance our competitiveness.
Delays
Delays in deciding court cases can be dealt with through four reforms. The first is to introduce summary proceedings or simplified trial procedures. In a summary proceeding, the creditor need only present the trial judge with evidence of the transaction and non-payment by the debtor and the debtor is asked to respond. With this information, the judge makes a decision. Immediately after judgment is awarded, the creditor should be able to enforce the payment terms but this is conditional on the enforcement being executed in a timely manner. Strategies to speak to this matter are delved into below.
Another technique that can be used to reduce delays in arriving at decisions in commercial cases is the disallowance of oral evidence in the Commercial Court. The Judge in charge of the Commercial Court should be empowered by law to decide on commercial cases based solely on the written evidence submitted such as documents of sale and non provision of receipts as evidence of non-payment. In Germany, judges need no longer hear witnesses or experts if they believe they have heard enough evidence. The judges can simply interrupt the hearings and issue judgments.
Judges also need to be made responsible for cases from start to finish even if they leave the Commercial Court for other judicial duties. To further support the sitting Commercial Court Judge, preliminary hearings can be done by lay judges to clarify the nature of the dispute so that parties come to the main hearing prepared.
However, if all of the above approaches are put into practice, it does not mean that the small business person will have improved access to the Commercial Court. Thus there is need for some administrative support for small claims disputes. Support such as allowing for lay Judges to deal with these matters. This will allow for the lay commercial Judges to hear these matters outside of the regular working day. This night court, so to speak, will allow for swift resolution of small claims commercial cases. Once the lay judge has arrived at a decision, he will forward it to the sitting Commercial Court Judge who will review and certify the decision where applicable and hand down an official court decision. As a result of utilizing the service of these lay Judges for small claims disputes, it should allow for a lower court fee to be levied.
Further, the legal fraternity must not be allowed to charge more than a percentage of the claim for small claims. Attorney fees tend to be lower in countries with good case management practices - on average of about 10% - 15% of the debt's value and thus to support the growth of small business persons, the legal fraternity should be persuaded to not violate this international norm for small claims.
However, the administration of justice in the Commercial Court must be financially sustainable and thus recognizing that provisions are made for small claims, similarly provision must be made for medium size and large claims. The judiciary must impose a system of cost that reflects the realistic cost of litigation for medium and large claims in the Commercial Court. There should be an increase in the fees for filing a writ for large and medium claims that is reasonable and that can generate enough revenue to make the operations of the Commercial Court sustainable. Further, the laws should empower the judicial administration to set fines that compensate for the time and effort spent in arriving at judgment. This will allow for abuse of the system to be minimized by litigants. In some countries, the revenue from the Commercial Court contributes to subsidizing the other courts such as the Family Court and the Criminal Court.
Appeals
Appeals to decisions from the Commercial Court are necessary for fairness and justice where valid and are allowed in every country. But there should be deterrence to this line of action to prevent abuse, where debtors use this tactic to stall enforcement. A balance must be struck between the rights of debtors and the rights of creditors. There must be some creative mechanism which blocks such abuse since excessive delays result in denial of justice.
The appellant needs to take responsibility for engaging the court's time by being made liable to procure an appeal bond from a Commercial Bank valued at a specified percentage of the sum in dispute and this money should be deposited in an interest bearing account awaiting the outcome of the appeal. The appellant should be seen as operating from a premise of good faith and not employing a delaying tactic. Should the appellant be found not to have a case or to have acted in bad faith in an attempt to delay justice, the bond should be used to award costs and partially offset the previous judgment awarded in the Commercial Court.
Further, the laws should be changed to allow for pragmatic fines to be levied on the loser to compensate all the parties for their time and effort involved in arriving at the decision. This should serve as a deterrent to those who are bent on abusing the system to delay justice.
The most notable reform to streamline appeals has been to impose time limits on their filings. Countries that introduced rules limiting the number of days in which an appeal can be filed and heard, saw severe reductions in their backlog of appeals.
Make enforcement competitive
The best way to expedite the recovery of overdue debt is to allow competition in the enforcement of judgments. Colombia did this in 2003 by scrapping the monopoly of the state to enforce judges' rulings. Private companies led by mainly ex-policemen quickly got licensed and moved into the business. The result: the execution of judgment was cut by nearly 2 months. The Government of Guyana should seriously consider this reform and allow ex-policemen to secure employment as private bailiffs and private enforcers of commercial judgments. This private enforcement of commercial court rulings would go a far way to enhance the delivery of justice, cut time wastage and engender the return of faith in the court process. It will also serve as a steady source of income for retired policemen.
There are several strong arguments for the aforementioned reforms.
First, easier contract enforcement is associated with higher bank lending;
Second, an efficient court system increases entry by new firms and hiring by established ones;
Third, reform reduces demands on the government budget. Simplified contract enforcement would temper requests for larger court budgets since the loser will be called upon to pay fines to compensate for the court's time and efforts and the enforcement fees to the private enforcers;
Fourth, the integrity of the judiciary is higher in countries with faster resolution of cases and fewer procedures. Businesses use courts more if they see value in their dispute resolution services.
A World Bank survey of more than 10,000 enterprises in 82 countries shows that fewer procedures are associated with more fairness and impartiality in the legal system. This makes for faster resolution of commercial matters and a more credible justice system. It is my hope that after the Judicial Reform Project we have a more credible justice system especially in the resolution of commercial matters.