In­jus­tice a threat to en­trepreneur­ship and en­ter­prise

Jamaica Gleaner - - BUSINESS - 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

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 cross­bor­der; 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.

One love!

IGrant de­scribes this us­ing a sce­nario of ‘when the tide rises, all the boats rise’, adding that ho­tel chain’s pres­ence in Gre­nada has served this say­ing very well.

Lo­cal tour op­er­a­tor Ed­win Frank and spice ven­dor, Wilma Smith bol­stered the state­ments made by Grant, ex­plain­ing the eco­nomic im­pact the re­sort has

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