Freer markets, more court rulings?

Abstract

The governance of economic sectors in Europe has over the past decades been characterized by several important shifts. Two of the most notable shifts are those from state to market governance and from state to court governance. The first shift is the result of a coherent set of policies that have introduced competition in formerly public sectors such as energy, gas, water, telecommunication, and public transport. This set of policies included the liberalization of these sectors by lifting entry barriers, the privatization of public corporations, and the introduction of new forms of regulation, enforced by sector regulators. The second shift is from state governance to court governance. In many European countries, litigation rates have increased steeply. Also increases in the number of lawyers, the number of judges, and the number and amount of damage claims indicate that there is a trend toward juridification. Legal institutions also play an increasingly important role in economic sectors. There are more market regulations and the court is regularly called upon to review decisions of regulatory agencies and thereby to interpret the new market regulations. Economies and societies are increasingly governed through formal legal institutions. Does liberalization enhance juridification? And if yes, how? These are the main questions this study aims to answer. It does so in the first place by testing the communicating vessels theory developed by Van Waarden (2002a; 2002b) in different economic sectors: Telecommunications and public bussing services in the United Kingdom and The Netherlands. The theory suggests that there are risks involved with every economic transaction and that each economic sector requires a certain level of risk reduction, which could be provided by a variety of institutions. The primary risk reducing institution in public sectors was the state. After the deregulation of these sectors, other institutions emerged as possible risk reducers, amongst which the legal institutions such as sectoral regulators and courts. The main predictions that liberalization would lead to increases in risk and uncertainty, that various actors would attempt to reduce these risks, and that these attempts would lead to legal conflict, are confirmed for all four sectors. It is therefore plausible that liberalization leads to more legal conflicts. The main mechanism can be generalized to other sectors. On the other hand, the way in which this mechanism operated differed between the four sectors. The main differences were the type of conflicts that emerged, the actors who were engaged in these conflicts, and the costs of juridification. Also, the impact of the costs of juridification differs between the sectors. It is relatively higher in the bussing than in the telecommunication sectors. The main reason is the costs of following procedures and lawyering do not differ much, while the size of the sectors differs enormously