Creeping Privatization of Justice

Lauren's and Bob's recent posts brought to mind a theme that keeps cropping up in my teaching and research: public authorities increasingly offloading responsibility for important justice-related issues, especially consumer justice, to the private sector.

On the teaching side, I teach Civil Procedure, and that world is all abuzz with talk of a slew of recent Supreme Court and Court of Appeals opinions that have prioritized private arbitration over public adjudication of disputes (see, e.g., here and here). And this movement is afoot not only in the classic context of complex business disputes, where arbitration makes some sense; rather, it has taken hold in David-and-Goliath situations involving important rights like employment contracts and consumer sales and service contracts of a variety of kinds. In the big case that started the latest round of hoopla, AT&T Mobility v. Concepción, Justice Scalia acknowledges that "the times in which consumer contracts were anything other than adhesive are long past," yet he and the majority proceed to bend over backwards to ensure that clever company counsel can relegate disputes over such contracts to arbitration, effectively ensuring no suits will be brought in many cases, where the stakes are too low without aggregate (class) litigation, as in Concepción.  

On the research side, virtually every discussion around the world of consumer insolvency reform begins from the premise that out-of-court workouts are to be preferred, and court-sanctioned payment plans and coercive discharge should be a last resort. Many world consumer insolvency regimes require consumers to engage in an informal workout negotiation as a mandatory prerequisite to seeking formal relief. The notion of private workouts in this context is like Communism: it sounds great in theory, but it just doesn't work out in practice. In the highly morally charged context of consumer workouts, creditors consistently refuse to offer any kind of relief from the inflated principal debt, and only limited relief from spiraling interest (sound familiar?).

What seems to work better is at least a kind of public-private partnership, or better yet a private process where some public actor plays a powerful facilitating role. As observed in the World Bank's new report on the treatment of individual insolvency (para 134), "The wish for voluntary settlements will not, however, be fulfilled automatically or by the order of the law; some institutional support and incentives are needed." The report goes on to mention the types of approaches that have enjoyed more success, such as when the Central Bank acts as an 800-pound gorilla, convicing creditors that it would be a great idea if they were to agree to plans a Bank representative concludes are reasonable (this is the situation in France, for example).

Farming out the delivery of justice to the private sector wholesale just seems to be a bad idea. But proper public oversight of private-sector function can be a nice compromise. As more countries consider reforms to their personal insolvency laws, I hope comparative lessons in effective public-private cooperation can make for a better approach than simply hoping for success. The recent Irish personal insolvency reform plan illustrates both the dangers of unsupervised capitulation to the private sector and the promise of comparative lessons for buttressing success with a bit of public-sector support.

Auction gavel image courtesy of Shutterstock.