1. 3rd Economic Analysis of Litigation Workshop June 27-28 2016
How and why Russian judges decide on appeals of the decisions of administrative authorities (on the example of antitrust law)
3rd Economic Analysis of Litigation Workshop
June
Svetlana Avdasheva, Svetlana Golovanova,
Elena Sidorova
Higher School of Economics , Moscow, 2016

2. ? To rely on regulators in contrast to judges
Institutional reform in transition economies
To improve legal rules and protect the independence of judges
To rely on regulators in contrast to judges
(Shleifer, 2012 )
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Higher School of Economics , Moscow, 2016

3. Future of the rule of law in transition economies
Still developing legislation
Increasing impact of court decisions
Evidence of decisions that seem ‘wrong’
Judicial errors?
Prosecutorial bias?
Corruption?
Evidence on how judges behave is important:
to answer the questions on the future of institutional development in transition
to assess the legal reforms
(for instance, Russian on-going court reform, convergence of commercial courts with the courts of general jurisdiction)
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Higher School of Economics , Moscow, 2016

4. Scarce empirical evidence on the judicial behavior in transition ex-socialist economies
Slovenia (Dimitrova-Graizl et al, 2010, 2011…)
Determinants of judicial productivity and quantity-quality tradeoffs – including caseload, gender, education, promotion concerns, salary, specialization
Russia (Schults et al, 2014)
Prosecutorial bias in criminal courts
Russia (Volkov et al, 2014)
‘Claimant-bias’ in commercial courts
Impact of personal characteristics of judges on outcome
Russia (Trochev, 2012, 2014)
Explains paradox of successful suing executive authorities in Russian courts
Complex strategies to protect judicial independence
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Higher School of Economics , Moscow, 2016

5. Our focus
Presumed prosecutorial bias as bias in favor of executive authorities (‘failure of judges’)
Judges in the courts specialized on civil cases (*)
In the claims which result from completely new legislation for ex-soviet country
Are decisions predicted by the ‘specific ex-socialist considerations’ ?
If yes, which are these ‘specific ex-socialist considerations’?
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Higher School of Economics , Moscow, 2016

6. Russian context-1: commercial courts
Until recently: two relatively isolated branches of court systems
to decide criminal and civil cases between physical persons (general jurisdiction courts)
to decide cases between entrepreneurs as legal persons and between entrepreneurs and executive authorities (commercial courts)
organized by regions – 83 regional courts of first instance
Specialized appellation and cassation instances in every branch
Since 2014 under the process of unification (subordination of commercial courts system to general jurisdiction court system)
Access to court system is extremely easy in Russia – negligible fees, no restrictions of representation, motivation on no backlog
Recenty from 1,2 to 1,4 mln cases annually, about 5 mln against administrative decisions of executive authorities
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Higher School of Economics , Moscow, 2016

7. Russian context-2: judges and their motivation
Legislation on the judges’ carrier in commercial courts of first instance:
First three years appointment
Then life tenure (conditional on the records in first three years)
Motivation
Motivation on no backlog
Motivation on no appeals : if appellant is not satisfied with the decision of the first instance + appeal + cassation and Supreme Court considers decision does not comply with substantive or procedural rules – the case returns to the first instance
Executive authorities almost automatically appeal unfavorable court decision, more often than companies (in case of company vs authority)
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Higher School of Economics , Moscow, 2016

8. Russian context-3: antitrust
Among the clams to executive authorities (under administrative legislation enforcement) claims to annul infringement decisions of competition authority (on antitrust legislation) are not large but important part
High threshold of fines on antitrust violation since 2007
In comparison to EU, under similar substantive rules antitrust legislation is enforced much more often
Distributional considerations are extremely important for the authorities
Abuse of dominance: ‘exploitative’ conduct
Large number of appeals on infringement decisions of competition authorities: roughly about every 3rd decision is appealed, from 3 thousand decisions (followed from 10 thousand investigations) annually
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Higher School of Economics , Moscow, 2016

9. Specific context provides opportunities to test hypotheses
On the bias towards executive authorities:
If there is a bias towards executive authorities it should be stronger for the judges on their first three-years appointment
It should be stronger in the regions with poor institutions
On the role of experience and education of judges
Since large part of antitrust cases considered in the courts should be enforced according to effect-based standard
Comparison of expected welfare effects depends on the ability to evaluate positive efficiencies specific to the case
Better educated judge with higher likelihood makes decision in favor of company
More experienced judges can do the same
On the impact of regional institutions
In the regional with better institutional environment judges should be less biased towards executives
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Higher School of Economics , Moscow, 2016

10. Data and hypotheses of empirical analysis
3682 decisions of the first instance courts on the claims to annul the infringement decisions of Russian competition authorities on art. 10 (abuse of dominance) and art. 11 (agreements and concerted practices) during from (first year of enforcement after the introduction of high penalties standards) to 2012
Fast decisions: 10 months to the final decision in average
2/3 judges in the sample are female
22% in their first three year appointment
20% obtain their degrees after the breakdown of Soviet Union
Annulment rate decreases from 51% in 2008 to 34% in 2012
Evidence in favor of increasing bias towards the administrative authorities?
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Higher School of Economics , Moscow, 2016

11. Data and hypotheses of empirical analysis
Variables
Expected impact on the likelihood of annulment
H1: On bias towards executives
First three year appointment (Yes = 1)
Decrease
H2: On the experience/education of judge
Number of antitrust cases resolved (log number of cases)
Increase
Judge educated in post-socialist period(Yes =1)
Judge with economic education (Yes =1)
Н3: On the impact of regional institutional environment
Investment risk (as negatively correlated with quality of institutional environment) (divided in quartiles)
Control variables: claimant
Amount of fines (log_ RUR)
Conduct remedies are applied
Control variables: competition authorities
Experience (number of appeals considered before judge – log number)
Workload (log cases per capita)
Prosecutorial bias (ratio of infringement to investigation)
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Higher School of Economics , Moscow, 2016

12. Data and hypotheses of empirical analysis
Variables
Expected impact on the likelihood of annulment
Control variables: judges
Gender (male = 1)
Increase
Experience in deciding antitrust cases – log number of cases
Experience in commercial courts (general experience) – log number of year ?
PhD in Law (general experience) (Yes = 1)
Control variables: conduct
Duration of litigation (log months of litigation)
Abuse of dominance in question (Yes = 1)
Decrease
Control variables: region
Log Regional GDP
Institutional quality (investment risk rank)
Control variables: industry
Share of industry in GDP
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Higher School of Economics , Moscow, 2016

13. Main empirical results
Variables
(1)
(2)
(3)
(4)
(5)
Complexity of the case
Art_11 (agrts)
0.07*** (0.02)
0.08*** (0.02)
Duration
0.00*** (0.00)
0.01*** (0.00)
0.01***(0.00)
Expertise
0.06** (0.02)
0.06** (0.03)
Characteristics of the contested sanctions
Conduct Remedies
0.05*** (0.02)
0.05** (0.02)
Monetary Fines
0.07*** (0.03)
Ln_Fines
0.02*** (0.00)
Characteristics of CA subdivision
Experience_CA
-0.04*** (0.01)
-0.06*** (0.01)
-0.05*** (0.01)
Characteristics of the judge
Mage judge
0.03* (0.02)
Econ Education
0.12* (0.07)
0.10 (0.07)
Post-Soviet Degree
Experience Ant-t
0.04*** (0.01)
0.03*** (0.01)
Year
YES
Regional variables
Number of obs
3682
3673
3630
3130
3132
LR chi2
80***
111***
126***
139***
142***
Pseudo R2
0.016
0.023
0.026
0.033
0.034
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Higher School of Economics , Moscow, 2016

14. Empirical results-1 (from probit regression)
On the main hypotheses:
Decisions of the judges on first appointment do not differ from those of tenured judges
Institutional quality does not influence the probability of annulment
Judges with economic education annul infringement decisions more often
Judges with post-socialist education annul infringement decisions more often
The higher the experience of judge in resolving antitrust cases the higher the probability of annulment of infringement decision. General experience (either measured) does not provide that impact
Other interesting results:
Women judges confirm the decisions of competition authorities more often
Case complexity increases the probability of infringement decision annulment
Experience of competition authorities decreases the probability of annulment
Larger share of industry in GDP increases the probability of infringement decision annulment
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Higher School of Economics , Moscow, 2016

15. Empirical results-2: why does annulment rate decrease?
In the baseline regression years are significant…
They become insignificant when we take into account:
Increasing experience of competition authorities (from 5 cases being presented before judge in 2008 to 72 cases in 2012 cumulative for regional subdivision of competition authority)
This effect overweighs the effects
of increasing experience of the judges (from 11 to 64 cases decided in average before particular case)
of increasing amounts of fine (from 1,1 mln RUR to 2.5 mln RUR in average)
Therefore there is not independent decreasing trend in annulment rates…
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Higher School of Economics , Moscow, 2016

16. Discussions and implications
Not all the hypotheses are confirmed, and even not control variables work in expected direction
In spite of all that, contribution of the results to discussion:
On the comparative analysis of generalist vs specialized judges. As in Baye and Wright (2011) specialization (which is experience in our specification) matters for the litigation outcome
On the direction and scale of bias in the decisions of Russian judges. Results supports the conclusions of Volkov et al (2014) and Trochev (2012, 2014) on the sharp difference between judges in commercial courts and courts of general jurisdictiolns
On the expected outcome of the on-going court reform in Russia. Possible unfavorable outcomes of subordination of commercial courts to the higher courts of general jurisdiction
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Higher School of Economics , Moscow, 2016

17. Conclusion
There is no doubt that transition matters for the decision of the judges:
However there is no evidence that judges in Russian commercial courts are biased towards executive authorities
There is no evidence that overall quality of institutions affects judges
Therefore rule of reason in the Russian commercial courts is not completely ‘failed’
At the same time education and experience matter a lot
Under enforcement of administrative legislation courts with better educated and more experienced judges effectively correct Type I errors (wrongful convictions)
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Higher School of Economics , Moscow, 2016

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