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Businesswise | Injustice a threat to entrepreneurship and enterprise

Published:Sunday | October 30, 2016 | 10:00 AMYaneek Page

It is said that experience can be a cruel teacher because it gives you the most difficult tests first and then valuable life lessons after.

In some cases, this aptly describes entrepreneurship and justice.

Many people go into business unconcerned about justice until they are faced with fierce legal battles or fall prey to injustice that threatens their goals, profitability, market position or overall viability.

To make matters worse, there is little literature, research or data that forewarns unsuspecting entrepreneurs of the practical ways they and their businesses may be affected by the state of justice where they operate.

One report that gives modest insight into the implications of justice and enterprise is the World Bank's annual Doing Business Report, now in its 14th year, which seeks to investigate regulations that enhance and constrain business activity in over 190 countries around the world, including Jamaica.

Each year, the countries studied are ranked on areas that the World Bank believes will significantly affect the life of a business. For 2016, those areas are: starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting minority investors; paying taxes; trading cross-border; enforcing contracts; and resolving insolvency.

The measure that most closely captures the relationship between justice and enterprise is 'enforcing contracts' a term mentioned 455 times in the most recent 356-page report.

 

JUDICIARY SIGNIFICANT

 

Enforcing contracts measures mainly the time and cost to resolve a commercial dispute and the quality of judicial processes, which includes court structure and proceedings, case management, court automation and alternative dispute resolution.

The latest report highlighted significance of the judiciary to economic development and sustainable growth when it noted that: "Efficient contract enforcement is essential to economic development and sustainable growth. Economies with an efficient judiciary in which courts can effectively enforce contractual obligations have more developed credit markets and a higher level of overall development. A stronger judiciary is also associated with more rapid growth of small firms and enhanced judicial system efficiency can improve the business climate, foster innovation, attract foreign direct investment and secure tax revenues. Conscious of the important role played by judicial efficiency, governments have been active in reforming different aspects measured by the Doing Business enforcing contracts indicators."

Doing Business 2017 has ranked Jamaica at 67 of 190 countries in terms of the ease of doing business. However, when it came to enforcing contracts the ranking was considerably lower at 117. In fact, we continue to struggle in this area year after year.

 

LENGTHY DELAYS

 

The practical implications are that even where contracts exist, businesses should expect lengthy delays and substantial financial costs to enforce them.

On average, the report estimates, it takes 550 days to enforce a contract in court in Jamaica, whereas in the best performing country of Singapore, it takes only 120 days.

There are no limitations on the number of adjournments that can be granted in a case, and there is no stipulation that confines adjournments to unforeseen and exceptional circumstances. This means that entrepreneurs can expect to attend court several times only for their case to be adjourned again and again, which can be very frustrating for litigants.

When it comes to business, as in most other instances, justice delayed is truly justice denied. Even moderate delays in resolving disputes can have crippling effects on a firm. Jamaica also has very limited automation of court processes, so the status of cases can't be tracked online, court costs can't be paid electronically, and all claims must be filed manually.

Equally staggering is the huge cost in trying to enforce a contract in the courts. One can expect to spend 45.6 per cent of the entire value of the claim to have the courts enforce a contract, which only covers attorney's fees, court costs and enforcement fees, whereas the unparalleled global standard set by Bhutan is only 0.1 per cent.

Therefore, entrepreneurs with commercial disputes will need to dig deep in their company coffers to pay upfront costs of nearly 50 per cent of whatever they are claiming and while waiting years on resolution and to recover money damages and court costs.

It is no wonder that some businesses end up writing off huge debts owed to them, or sorrowfully surrender their legal rights rather than fight what is arguably a losing battle.

Anyone who plans to start or continue operating business in Jamaica should consider and where possible strategise to mitigate the substantial threats that injustice and an inefficient justice system pose to their operations.

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- Yaneek Page is an entrepreneur and trainer, and creator/executive producer of The Innovators TV series.

Email: info@yaneekpage.com Twitter: @yaneekpage Website: www.yaneekpage.com