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Université de Lausanne
Faculté des HEC
Département d'économétrie et d'économie politique

Cahier de recherches économiques du DEEP No. 16.19

Baptiste Massenot and Maria Maraki and Christian Thöni


Legal compliance and litigation spending under the English and American rule: Experimental evidence

October 3, 2016

Abstract

We investigate fee-shifting rules in litigation with regard to their impact on legal compliance, settlement, and litigation spending. We develop a model to compare the English rule, according to which the winning party is compensated by the losing party, to the American rule, according to which parties pay their own expenses independent of the outcome of the trial. We conduct an experiment to put the predictions to an empirical test. In accordance with the model, we fi nd that litigants spend substantially more under the English rule than under the American rule. Defendants are signifi cantly more compliant under the English rule when out-of-court settlement is not possible, but not when settlement is possible. Settlement rates do not signi ficantly diff er between the two rules, nor do they di ffer within the subsets of strong or weak cases.

JEL Classification: K13, K41, C91, C72, D44

Keywords: litigation, experiment, American rule, English rule, fee-shifting, loser-pays, legal compliance, settlement, litigation spending


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