Authors: Dr Valentina Dimitrova-Grajzl, Dr Peter Grajzl, and Dr Katarina Zajc

Despite the judiciary’s central role in the capitalist market system, micro-level empirical analyses of courts in post-socialist countries are remarkably rare. This paper draws on a unique hand-collected dataset of commercial claims filed at Slovenian courts to examine the determinants of two salient adjudicatory outcomes: whether a case was resolved via trial or settlement and if the case was tried, whether the plaintiff was awarded the initial claim. Consistent with the divergent expectations theory of litigation, we find that trial-based resolution is more likely when the case is complex and less likely when parties use mediation. Addressing sample selection and endogeneity concerns, we show that defendant’s legal representation, plaintiff’s profitability, and, importantly, court identity are robust predictors of plaintiff victory at trial. Thus, more than two decades after the start of transition in Slovenia, the judicial system is still a source of legal inconsistency and uncertainty.

Well-functioning courts are the foundation of an effective legal order and central institutions of a market economy. Courts are the key not only to upholding property rights, but also to promoting large-scale commerce (see, e.g., Johnson et al. 2002, Dixit 2003). In post-socialist and developing countries in particular, empirical evidence indicates that in order for markets to flourish, laws on the books must be backed by adequate enforcement by the courts (Pistor et al. 2000, Skosples 2012).

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