U.S. Litigation Costs Ranked as No.1 in the World

There are a lot of things to be proud of about the U.S. legal system. The country is a world leader in promoting justice, human rights, and the courts’ ability to protect the rights of one citizen to seek restitution when they have suffered harm or damages.

If there’s one stereotype that’s true of U.S. courts, it’s that the country has a litigious attitude.

All that litigation comes at quite a cost, though, according to a newly published study from the U.S. Chamber Institute for Legal Reform and NERA Economic Consulting. The study, International Comparisons of Litigation Costs: Europe, the United States, and Canada, points to one inescapable conclusion – that the U.S. is the most costly system in the world.

Comparing such complicated matters across such different countries as, for example, the U.S. and Denmark, is naturally going to leave room for interpretation, and the study is quick to acknowledge that any attempt to quantify and compare different countries’ legal costs faces challenges. At the same time, several factors have been identified as reasons for the U.S.’ position as the most expensive system for liability costs as a fraction of GDP (currently 1.66%, compared to Canada’s 1.19%, the UK’s 1.05%, or the Netherlands’ 0.4%).

Whether a country uses civil or common law, the number of lawyers per capita, and the cost of government social programs all have a big impact on the overall costs.

While in much of Europe and Canada government payments cover the cost of what would be liability compensation, the study suggests that even when this factor is removed, it is the “legal environment” that makes the U.S. such a unique case. So, while “liability costs in Europe would be 33% higher if government spending in Europe were reduced to that of the U.S.”, the authors found that “[d]ifferences in the legal environment explain most of the variation in liability costs and specifically the higher liability costs in the U.S., and the U.K. compared with the less litigious Eurozone countries” (Emphasis added)

If there’s one stereotype that’s true of U.S. courts, it’s that the country has a litigious attitude. Unnecessary, and at times, wasteful cases have been widely publicized and commented upon, and the ease of access to legal action can be a bad as well as good thing.

There may well be extenuating circumstances, however, explaining some of the U.S.’ higher costs. Large business-driven lawsuits, and the scale of compensation and awards, do not reflect the true nature of the everyday legal system. Lawsuit abuse may also add to the expenses of the current process, and tackling fraudulent and prospecting lawyers is in many ways a separate issue to the financial burden of litigation. For all of its expenses, the U.S. legal system remains an experienced, effective and accessible means for companies and individuals to protect and enforce their rights, providing a service to millions of Americans in a country which dwarfs most of Europe. While the study’s suggestions for cost-reduction – which include reasonable suggestions such as further regulation to reduce litigation events, as well as more idealistic suggestions such as introducing further social programs and “discouraging weak claims” – present some reasonable options, the benefit of litigation continues to outweigh even the comparably high cost. All complicated systems can be improved, and as long as consumer protections and legal transparency are always first and foremost, the U.S. will remain a leader.