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Business Law Today

Beyond the Border
An International Perspective on Business Courts
By Ralph Peeples and Hanne Nyheim
Business courts are not only found in the United States. They can be found around the globe, and not just in the predictable places. The legal heritage doesn't seem to matter. Courts devoted to matters of business law have appeared--and are appearing--in Europe, Asia, Africa, and the Americas, in countries with common law systems and in those with civil law systems. The World Bank, in its 2007 Doing Business report, cited the creation of specialized courts as one of the most common reforms undertaken worldwide from 2005 to 2006. Business courts have been proposed and are under serious study in, among other places, the British Virgin Islands (as the commercial division of the Eastern Caribbean Supreme Court), Peru, Pakistan, and India.

Why have so many countries become interested in establishing business courts? Two reasons frequently surface: expertise and efficiency. These reasons are interrelated, and in many cases a business court will be established for both reasons. For many complex business cases, the need for expertise on the part of the judges is vital; otherwise, the result reached may seem arbitrary to one or more parties. In short, credibility matters.

Efficiency is an important concern as well. It is important for the parties to have not only a fair resolution, but also a timely and cost-efficient resolution of their dispute. For countries with mature, developed economies, the establishment of a specialized court offers a new competitive advantage in the form of speedier, less expensive, and more predictable resolutions of business disputes. For countries with developing economies, a specialized court offers some additional assurance to investors, both domestic and foreign, that disputes will be taken seriously and resolved in a fair way.

First, we need to discuss what a business court is. Any definition of a business court is, in the end, a bit of a compromise. It depends upon how wide or narrow we want the frame of the picture to be. For example, we can say that a country has a business court if it has a system of "commercial courts"; in other words, a set of trial and appellate courts, available throughout the country, which hear and review disputes involving businesses. In that sense, there is nothing new about business courts; they have existed in a number of countries for many years. France, for example, established a system of commercial courts under Napoleon. Indeed, reliance on a national system of commercial courts is more common in countries with a civil law tradition--although England, with its commercial and admiralty court system, is an exception to even that rule.

In contrast, we can argue that a business court means a division of a larger court (typically a trial court) with a jurisdiction limited to some, but not all, kinds of business disputes, presided over by only a few specialist judges, with an emphasis on aggressive case management and use of alternative dispute resolution (ADR). In this article, we will use this latter definition as a starting point, while acknowledging that any attempt at categorizing is likely to be flawed. Perhaps the problem of agreeing upon a set definition also explains the paucity of scholarly literature on the subject of business courts from an international perspective.

Even with a narrow definition of "business court," we will encounter problems of inclusion and exclusion. Consider the problem of limited jurisdiction. How might it be stated? First, the jurisdictional limit might be expressed in money terms. Ireland, for example, uses a threshold amount of U1,000,000 in dispute for admission to its business court. Second, the limited jurisdiction might instead be expressed in qualitative terms (for example, "complex business cases"), in which it is left to the court to decide whether a particular case qualifies for inclusion. A third approach would be to limit the court's jurisdiction by statute or rule to specific subjects (for example, intracompany disputes, intellectual property disputes, insolvency proceedings, or some combination of topics).

One unifying theme does seem to recur, however. The idea behind the establishment of a business court, whether in London or Dar es Salaam, is to provide a more predictable, more efficient, and less expensive system of resolving certain kinds of business disputes. Limiting jurisdiction to "high stakes" commercial cases (however defined), relying on a limited number of specialist judges, and emphasizing aggressive case management all support the related goals of expertise and efficiency.

There is an additional attraction to the use of business courts. The traditional technique for resolving commercial disputes between two private parties of different nationalities has been arbitration, usually provided for in the contract (if the underlying transaction took the form of a contract), and usually conducted by one of a few select international organizations that offer arbitral services. The prevailing party in the arbitration then seeks enforcement of its award in the courts of the appropriate country. But what if a country offers an alternative: an independent, sophisticated court presided over by specialists, with an emphasis on speed and fairness? A business court, properly administered, might function as an attractive alternative to traditional, commercial arbitration. By offering both efficiency and expertise, a business court could match or perhaps exceed the often-cited advantages of international commercial arbitration. In addition, obtaining a court judgment in the host country avoids the obvious drawback to arbitration: enforcement of the award in the host country's courts.

Next, we present several brief case studies of business courts in various countries. The list is not exhaustive, but it shows the different forms a business court may take. In fact, when it comes to business courts, no two countries do it quite the same way.

England and Wales
It does not yet exist, but it has attracted more attention from business lawyers around the world than any other specialized court could hope to do. The "Business Court," scheduled to open by 2010, will be housed in a new building on Fetter Lane in London, not far from the Royal Courts of Justice. When completed, the new court will incorporate portions of the work of the Chancery Division, the Commercial Courts, and the Technology and Construction Court. Trademark issues, patent disputes, and international contract issues will also be included in the court's jurisdiction. Plans call for the building--to be called the Rolls Building--to include 29 courtrooms, 12 hearing rooms, and 44 public consultation rooms. The new court building will emphasize information technology, and is intended to reinforce London's prominent position in international commercial dispute resolution.

What is new about this development is geography: the idea that different courts, already in existence, will be brought together in one new building, designed specifically for the resolution of business disputes. The Commercial Court is itself a specialist court, dealing with complex business disputes, including matters involving international trade, banking, and commodities; Chancery, among other things, deals with partnership disputes, insolvency, and issues related to land; and the Technology and Construction Court considers issues of a technical nature. In all three of these divisions, a single specialist judge typically presides over the entire case. By having specialist judges hear business-related cases in a single building designed for that specific purpose and built to make effective use of information technology, the two goals of expertise and efficiency should be served.

The Commercial List of the High Court of Ireland was established in 2004. The court is presided over by a single judge, with expertise in business law. To be eligible for the Commercial List, the claim must be a business dispute, and must be for at least U1,000,000. There is no entitlement to use of the court. It is left to the judge's discretion, whether a particular case will be placed in the Commercial List. Aggressive case management and the use of information technology are emphasized, and the results to date have been impressive. In 2006, 50 percent of all cases on the List were concluded in less than 14 weeks; 90 percent of all cases were concluded in less than one year.

The Netherlands
Business courts are not confined to countries with a common law tradition, as the Netherlands, a civil law jurisdiction, illustrates. The Dutch Companies and Business Court functions as a separate section of the general court of appeal in Amsterdam. The court has exclusive jurisdiction in some fields of company law, including conflicts within companies. Since the Netherlands has no counterpart to the American derivative lawsuit, the Companies and Business Court provides a rough analogue, known as an "inquiry procedure." Upon petition of 10 percent of the shares outstanding, the court may order an investigation of a company's challenged policies or conduct. The investigation culminates in a report to the court. The bench consists of five people, three of whom are specialist judges with legal training; the remaining two are lay experts.

The Commercial Division of the High Court of Tanzania was established in 1999 as a specialized court, largely at the request of the Tanzanian business and financial communities. For a case to be heard in the Commercial Division it must have "commercial significance"--although the Division shares jurisdiction over commercial matters with the general division of the High Court. The Division consists of three full-time judges, and sits in Dar es Salaam.

Use of National Commercial Courts
Rather than establish a single specialized court, it is also possible to organize a national system of commercial courts, consisting of both trial and appellate courts. In this type of system, jurisdictional requirements tend to be less rigorous. In general, the matter in dispute simply needs to involve one or more businesses, domestic or foreign, and relate to an issue of commerce. This pattern is older than the business court model discussed above, and is more often found in countries with a civil law tradition.

France offers a good example. France has long had a national system of commercial courts, including both courts of first instance (trial) and appellate courts. In all, there are almost 200 commercial courts throughout the country. The French commercial courts do not impose jurisdictional requirements on litigants. Thus, any commercial case, whether routine or complex, can be heard in the commercial courts. The judge is not required to have specialized knowledge of business law.

This pattern of a national system of self-contained commercial courts is a common one. Belgium, Russia, Serbia, Spain, Turkey, and Ukraine, for example, also maintain a separate system of courts with a jurisdiction dedicated to commercial matters. In some countries, such as Spain, each provincial capital has a commercial court, presided over by a specialist judge. In other countries, the dispute will be heard by a panel of judges, who may or may not be experienced in commercial law.

Establishing a business court, whether in the United States or elsewhere, will not by itself improve the quality of dispute resolution provided to business enterprises. Properly administered, however, a business court can lower the costs of doing business by making the dispute resolution process more predictable and efficient--and thus, less costly for the parties involved. What matters in the end is expertise--the quality of the business judges. Mitchell Bach and Lee Applebaum made the point nicely in their 2004 Business Lawyer article on U.S. business courts, observing that "ultimately, a successful business court depends in each instance on the actual judge hearing business court cases." Regardless of the jurisdiction, it is the quality of the judge that matters most.

Obtaining Information About Foreign Business Courts

Traditional methods of legal research do not always work well when you need information about a business court located outside the United States (or if you simply want to know if one exists in a specific country).

Simple searches based on Boolean logic can be perilous, because business courts go by different names in different jurisdictions. They might be called a "business court," a "court of commerce," or, in other places, an "economic court." As a result, consulting a reliable treatise or reference book on the law (and legal structure) of a country—when such is available—is a good starting point.

Much research can be done electronically, but patience is necessary. We found several Web sites particularly helpful, which are listed below. Keep in mind, however, that a simple search using Google or a similar search engine can turn up some useful leads.

Also, consulting the official government Web site for the country or countries you're interested in may yield the information you need.

Some suggested general Web sites:

Each of the Web sites listed above contain links to specific countries and to other databases.

As always, special care must be taken to ensure that the information provided (by whatever means obtained) is up-to-date.
Peeples is a Professor of Law at Wake Forest University School of Law. He teaches courses in business organizations and dispute resolution. His e-mail is peeplera@wfu.edu. Nyheim is a Norwegian lawyer who recently graduated with an LL.M. from Wake Forest University School of Law. Her e-mail is hannenyh@gmail.com.

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