Law Department Management Blog
“In 2003 tort costs were equivalent to 2.2% of American GDP, compared with 1.7% in Italy, 1.1% in Germany and less than 1% in Japan, France and Britain.” The article in the Economist, May 22, 2010, at 68, doesn’t explain those figures but goes on to point out that the “share of American GDP represented by such litigation costs fell in each of the following five years, thanks in part to restrictions in the Class Action Fairness Act of 2005.”
If the figures are reliable, and if litigation costs represent something on the order of 20-40 percent of total legal spending by legal departments, it would be methodologically legitimate to normalize such spend numbers for departments in those six major countries. In other words, for example, if US legal department were being compared to French legal departments on relative spend management, it might be informative to adjust the US departments’ spend in line with the baseline difference between the two country’s tort costs. This would be analogous to showing market-adjusted changes in share prices or salaries in different countries adjusted for purchasing power parity.
A second observation based on the similarity of these tort cost findings would be that the costs of legal departments across major countries are to some degree converging, aside from labor costs.