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Journal of European Tort Law

Editor-in-Chief: Oliphant, Ken

Ed. by Karner, Ernst / Koch, Bernhard A. / Wendehorst, Christiane

3 Issues per year

Online
ISSN
1868-9620
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On the Judicial Interest Rate: Towards a Law and Economic Theory*

Hugo A Acciarri / Nuno Garoupa
  • Professor of Law, the H Ross and Helen Workman Research Scholar and Co-Director of the Illinois Program in Law, Behavior and Social Sciences, University of Illinois College of Law, United States
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Published Online: 2013-04-13 | DOI: https://doi.org/10.1515/jetl-2013-0002

Abstract

While all legal systems implement a form of pre-judgment or post-judgment interest, there is a dearth of literature on substantive law and economics analysing the impact, functioning, and assessment of the judicial interest rate. Current legal scholarship typically views the interest rate as having a neutral effect on private and social costs. This paper demonstrates that the issue is theoretically far more complex and largely influential in legal policy. Due to the asymmetric opportunity costs for each party in a case, judicial interest rates may lead to improper delay of proceedings or the decoupling of damages from recovery. These potential results influence the number of settlements and suits. On this ground, we compare different institutional settings from an economic perspective and conclude that the appropriate mechanism depends on the alternative policy instruments available, namely, the rules of procedure, court fees, or mechanisms for appropriately setting damages. Further, we argue that abolishing the statute which sets pre-judgment interest may be a proposal worth considering.

About the article

Hugo A Acciarri

Nuno Garoupa


Published Online: 2013-04-13

Published in Print: 2013-04-01


Citation Information: Journal of European Tort Law, ISSN (Online) 1868-9620, ISSN (Print) 1868-9612, DOI: https://doi.org/10.1515/jetl-2013-0002.

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© 2013 Walter de Gruyter GmbH, Berlin/Boston. Copyright Clearance Center

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