This paper discusses settlements in German civil proceedings. It begins by introducing some empiric data regarding the general behaviour in Germany in which to solve legal disputes. Then, it provides an overview of legal possibilities and requirements for settlement and/or not to go to trial, and briefly compares the German approach with those of other countries. The essay’s purpose, however, is to look at the economic efficiency of settlements. Using an economic analysis of law and the principal tool now being employed in this area – the game theory –, this paper gives economic reasons and conditions for individuals to determine whether and how to settle disputes. Additionally, in order to explain the observed behaviour, the paper takes a detailed look at Germany and the average German attitude on how to solve legal disputes. For this reason, it discusses abstract reasons for the observed behaviour and other than the theoretical ones.
Table of Contents
I. INTRODUCTION
II. LEGAL BACKGROUND
1. Sec. 779 of the German Civil Code (§ 779 BGB)
2. Sec. 278 of the Code of Civil Procedure (§ 278 ZPO)
3. Sec. 15a of the Introductory Law to the Code of Civil Procedure (§ 15a EGZPO)
4. Others
5. Other countries
5.1 France
5.2 Switzerland
5.3 United Kingdom
5.4 USA
III. ECONOMIC ANALYSIS OF LAW
1. Basics
2. Economic analysis of settlements – game-theoretical approach
2.1 Main features
2.1.1 Players
2.1.2 Actions and Strategies
2.1.3 Outcome and Payoff
2.1.4 Costs
2.1.5 Information
2.2 Example
2.3 Extensions
2.4 Interim conclusion
IV. DETAILED ANALYSIS OF GERMANY
1. Settlements and social welfare
1.1 General considerations
1.2 Load removal of the judicial system
1.3 Preservation of legal relationships
1.4 Circumvention of procedural rules
1.5 Particularities in Germany
1.6 Other aspects
1.7 Interim conclusion
2. Analysis of reality
2.1 The German judicial system
2.2 The German law schools
2.3 The German mentality
2.4 Interim conclusion
V. CONCLUSION
Objectives and Research Focus
This paper examines why, in the German judicial system, out-of-court settlements are significantly less popular than in other jurisdictions, despite their potential for economic efficiency. It investigates whether existing legal frameworks sufficiently encourage settlement behaviors and explores how economic analysis, specifically game theory, can be applied to understand the decision-making processes of individuals involved in civil disputes.
- Comparison of German settlement regulations with international approaches (e.g., USA, UK, France).
- Application of game-theoretical models to evaluate the efficiency of settlements.
- Analysis of the impact of the German legal system and procedural requirements on dispute resolution.
- Evaluation of social welfare benefits versus individual incentives in civil litigation.
- Exploration of psychological and educational factors shaping the "German mentality" toward legal disputes.
Excerpt from the Book
1. Sec. 779 of the German Civil Code (§ 779 BGB)
§ 779 I BGB provides a statutory definition for the expression settlement: ‘A contract with which the parties to legal relationship eliminate the dispute or the uncertainty about this relationship by reciprocal easing (settlement), […]’8. This section shows that the arguing parties to a legal relationship may always settle by private contract. In other words, the parties to a dispute shall come together, talk and think about the dispute and try to reach an amicable solution. § 779 BGB clarifies the legislature’s intent that parties should arrange their conflicts rather than looking for a judgement. § 794 I Nr.1 ZPO even substantiates this intention by regulating that a settlement has the same procedural effects like a verdict: It constitutes an enforceable title that authorizes execution against the other party’s property9.
Summary of Chapters
I. INTRODUCTION: Outlines the rising caseloads in German civil courts and sets the goal to analyze the lack of popularity of settlements in Germany through an economic lens.
II. LEGAL BACKGROUND: Provides an overview of the statutory possibilities for settlement in Germany, including § 779 BGB and § 15a EGZPO, and compares these to international systems.
III. ECONOMIC ANALYSIS OF LAW: Introduces the methodology of economic analysis and utilizes game theory to demonstrate when settlements are theoretically efficient for individuals.
IV. DETAILED ANALYSIS OF GERMANY: Examines whether settlements promote social welfare in Germany and analyzes the cultural and structural reasons—such as the judicial system and legal education—that hinder their adoption.
V. CONCLUSION: Summarizes that while settlements are often economically efficient, cultural factors and the high quality of the German court system make their widespread adoption difficult.
Keywords
Economic analysis of law, Settlements, Civil Procedure Law, Game theory, Litigation, Social welfare, German judicial system, § 779 BGB, § 15a EGZPO, Dispute resolution, Legal efficiency, Transaction costs, Amicable solution, Procedural law, Legal mentality
Frequently Asked Questions
What is the core subject of this paper?
The paper provides an economic analysis of civil dispute settlements in Germany, investigating why parties prefer litigation over amicable out-of-court resolutions.
What are the primary thematic areas?
The themes include the legal framework for settlements, the game-theoretical efficiency of settlements, and the specific structural and psychological reasons for the low popularity of settlements in Germany.
What is the primary goal of the research?
The research aims to determine whether settlement is economically efficient for individuals and society, and why, despite these efficiencies, parties in Germany continue to prefer trials.
Which methodology is employed?
The author uses the "economic analysis of law" as a primary method, specifically utilizing game theory to model player strategies, payoffs, and costs in litigation versus settlement scenarios.
What does the main body of the work cover?
It covers legal statutes governing settlements, quantitative data on court caseloads, game-theoretical modeling (British vs. American systems), and a deep dive into the German "mentality" and legal educational system.
Which keywords define this work?
Key terms include Economic Analysis of Law, Settlements, Civil Procedure Law, Game Theory, and Social Welfare.
How do German laws try to force settlements, and why is this often ineffective?
German laws like § 15a EGZPO introduce mandatory conciliation attempts; however, these are often ineffective because parties might only follow the procedure formally without the actual intent to settle, leading to a waste of time and money.
What role do German law schools play in the current situation?
The paper argues that German law schools focus strictly on the application of codes and traditional litigation, with marginal regard for economic efficiency, which discourages future lawyers from seeking out-of-court solutions.
- Quote paper
- Dominik E. Arndt (Author), 2007, Economic Analysis of settlements, Munich, GRIN Verlag, https://www.grin.com/document/123781
