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Bringing patients to court may not be efficient

Friday, June 19, 2009

This is my recent op-ed piece in JP. I tried to argue that litigating is not always the best option, both for producer and consumer in cases where credence good is involved.

Unlike buying clothes in a department store, the quality of a particular health, legal and financial service is hard to ascertain. Even if consumers have experienced the service, the long-term effect of the service remains unknown. Is there any guarantee you will not be sued for following your lawyer's advice, or that you will not experience any side effects for taking medication? No.

Health, legal and financial services exploit the high degree of information asymmetry between seller and buyer. Put simply, the service is there because laypersons don't know what to do. Clients don't know the law and patients don't know their disease.

As such, consumers rely heavily on their service provider. Demands are created by the service provider and not by the consumer alone. So clients follow their lawyers on which transaction structure they should enter into and patients follow their doctors on which pills they should buy and swallow.

Hence, at the tip of the business is trust and reputation. Reputation may be worth more than the actual quality itself. As reputation is earned through sustainable efforts in performing high-quality, honest services and a good relationship with consumers, it is the Achilles' heel of this business.

Do courts resolve tarnished reputations through their verdicts? The news that a former patient has been victimized by a health service provider is more likely to be good news for the media than news that a hospital wins a lawsuit over its former patient.

People are naturally more interested in stories where they can be projected into the situation. Hospitals are impersonal institutions owned by corporations, therefore it is not in the interest of the layperson to hear a story of them winning a lawsuit.

Is criminal libel a good recourse to repair a damaged reputation? One thing about going to criminal proceedings is that external factors come into play in the process - namely the police and the prosecutors.

Once a case has been lodged with the police and transferred to the prosecutors, it is no longer in the full control of the "victim" or their lawyers. Unlike lawyers, the police and the prosecutors worked on behalf of the state in the pursuit of (bureaucratic) justice, not in the interests of both parties.

It is not within their consideration if the hospital is interested in maintaining reputation and the former patient just wants to go home. As such, criminal justice institutions may decide to proceed with imprisonment although it may not be in the best interests of any party.

Conventional wisdom suggests going to court in libel cases to get an injunction - that is, to get a court order for the defendant to stop defaming the client.

However, this is effective only in the age of the printing press, not in the Internet age. Court injunctions are meaningless, as the cost of distributing and multiplying information for every user is very low. Once an email is sent, there is no way to stop it from spreading.

Rather than go to court, I would argue for a market-based solution. From the plaintiff's point of view, going to court means they have to pay litigation costs and legal fees. If they win in civil court, they may not be able to recover the costs as the defendant may not have enough money to pay. If it is the insurance company they are suing, the insurance company may decide to appeal, which means more costs and more publicity for the plaintiffs. If at all they finally win the case, it will not bring the damaged reputation back, so they will still need to pay a public relations company to repair the damage.

From the defendant's point of view, the judicial process is lethargic, cold, cumbersome, costly and often does not reflect their sense of justice. From the taxpayers' point of view, legal proceedings mean a burden for their tax money. Taxpayers pay every penny for electricity, water and other utilities spent by the police, the prosecutors and judges. Yet, like laypersons, judicial professionals do not know about medicine.

That is why judges need doctors to stand as expert witness. If there are two expert witnesses with conflicting views, one from the plaintiff and one from the defendant, judges will just have to choose the most convincing one and take the opinion into their decision. The end result could be far from we call "the truth".

In a market-based solution, the parties stay out of court. If the health service provider does something wrong, they pay the patient and the patient can agree not to sue at a price. If providers don't do anything wrong, they ask the patient to issue a public apology and a sum of money to the extent that they can pay. The cost expended in this mechanism is much lower compared to going to court.

This mechanism requires the government to reduce information asymmetry in the market as parties can only negotiate when the evidence is available.

In practice, this means medical records should be made available to the patient. Criminal, administrative and civil sanctions should be introduced for those who tamper with medical records or retain them from patients.

This setting will provide incentives for honest behavior. It will make information discovery cheaper for patients and insurance companies, and also prevent burdening taxpayers through complicated judicial proceedings.

The writer is the founder of the Center for Law Information.

 

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Virtual worlds and the science gateway to democracy

Friday, June 5, 2009

C Milburn argued that virtual worlds such as Secondlife opens the gateway for science towards democracy. As I have previously written, secondlife's copybot resembles a nanofactory. Future post molecular manufacturing society could be benefited by the simulation from these virtual societies. How secondlife handle copybot might be an inspiration on how we handle nanofac.

Download the paper "Atoms and Avatars: Virtual Worlds as Massively-Multiplayer Laboratories" here.

 

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Housewife on trial for defamation

Wednesday, June 3, 2009

Prita Mulyasari, the housewife detained for sending letter about her experience of (alleged) medical malpractice will undergo her first criminal trial tomorrow. Prita was brought to both civil and criminal suit by PT.Sarana Meditama Internasional Cs (presumably the legal incorporation of RS Omni where she was treated). She had lost the civil suit, but was nevertheless detained by the police for the criminal prossecution.

If I were the plaintiff's lawyer, I would recommend to revoke my client's criminal offense complain to the police. With internet activists standing behind her, it would be a bad move to go on with criminal proceeding. The reputational damage caused by media blow-up does not worth the penny the hospital spent for litigation costs and public relations costs.

Tanggerang District Court website has an op-ed column about this case.

 

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International Regulation

Wednesday, May 20, 2009

International Approaches to the Regulatory Governance of Nanotechnology" is available for download from the RGI website.

Nanotechnology seemed to be going towards the Private Ordering path

 

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HP 3 Rights, What Strategy for NGOs?

Tuesday, May 19, 2009

Following my Articles on HP-3 in Jakarta Post ("The need for Clarification on HP-3 Rights" and previously "Coastal Management Law Review?") it is relevant to ask question on which course of (legal) action would our Civil Societies colleagues take, in response to the enactment of Coastal Law.

I can think of three possible actions by Civil Societies:
  1. Judicial Review. Most activist would blame the Law for its interest in privatizing coastal areas. As such, they would be inclined to invalidate Law 27/2007. But what reasons can be used to submit the JR? Roughly speaking, I would say that any attempt to invalidate Law 27/2007 will have a very minimal chance of success. I do not see any provision under the Law which diametrically contradicts the Constitution. True, that the implementation of the Law may deprive certain members of the societies (such as the Adat Community) from their Constitutional rights, but in general, the black letters of Law 27 guarantees the preservation of existing traditional rights. Thus, if JR is to be opted, the most convincing hole would be to contradict the ill-defined HP-3 rights against "legal certainty" provision of the Constitution. I am not suggesting that this measure would be effective as property rights needs not to to be fully defined (a 'complete' property rights is impossible anyway), but there is a chance of success since "legal certainty" is weighed considerably by the Court. In any case, a move in reviewing Law 27 must not be aimed at winning the case completely (which result in the complete invalidation of the law) but simply in getting partial invalidation of harmful articles or, if not possible at all, in gaining the Court's recommendation for safeguarding its implementing regulations.
  2. Legislative Review. If one thinks that the Law is insufficient or defective invalidation may not be the option. The Court's function is in ensuring that provisions of Laws are Consistent with the Constitution. So, if there are provisions of laws which is consistent with the Constitution but is nevertheless defective, the Court may choose to reject the petition to invalidate and recommends it for a legislative review. However, when a Law is recommended for a legislative review by the Court, it does not necessarily follows that the parliament will take the Court's suggestion. There are so many Bills that the Parliament needs to enact in any given year and there are political (as well as administrative) costs for rediscussing an already-enacted bill.
  3. Implementing Regulation and Its Reviews. Law 27 will require plenty of government regulations and regional regulations to be implemented. In terms of technicalities, this measure is the most technically feasible. It is easier to change implementing regulation than annuling a provision of a Law or modifying it through legislative measures. Option #1 involves proceedings at the Constitutional Court and option #2 involves deliberation by parliament members. Option #3 however, only involves the government. It is easier for the government to enact regulations which are friendly to the cause promoted to Civil Societies. But because Option #3 rests on the discretion of the government alone, there is always a chance of capture by business interests. A way of rejecting an enacted government regulation is by conducting an appeal to the Supreme Court. Note however that the appeal for Government Regulation (against a Law) in the Supreme Court would take a very long time, as the Supreme Court has a very high case-load.
From these options, I would suggest Civil Societies to first submit a JR to the Constitutional Court. This must be done with a caveat that it has a minimum chance of success, so the aim of the JR should not be in entirely invalidating the Law but in obtaining partial invalidation and recommendation from the Constitutional Court in safeguarding the Law's implementing regulation.

This move will benefit Civil Societies developing monitoring and stakeholder participation capacity during and after the property rights setting takes place, as institutional set-up for HP-3 (zoning, etc) and its implementation are prone to capture.

 

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The need for clarification on HP-3 rights

Thursday, May 14, 2009

I published an article in today's Jakarta Post:

Law 27/2007 enables private ownership of coastal zones through a system called HP-3 (which governs the right to commercialize coastal waters). The idea behind this system is to allow the exploitation of the currently neglected, but potentially profitable, 81,000 thousand kilometers of Indonesian coastline and its 12 mile wide territorial sea.

A HP-3 grants ownership to water columns (above the seabed to the water surface) in Indonesian territorial zones. In most cases, the Law stipulates that HP-3s will be granted by local governments. The Law says that the first period of ownership is granted for a period of 20 years but can be extended. As the law does not impose any limitation for extension, it is presumable that HP-3s could be owned perpetually. It is also worth noting that a HP-3 certificate can be used as collateral to secure a loan.

We know from theory that in order to be functional, property rights must fulfill the "3Ds" rule: definability, defensibility and defeasibility. Property rights can only be efficient within these three aspects, and only if transaction costs are low.

With respect to definability, the Law stipulates that a HP-3 covers a three dimensional space from the seabed up to the surface. This would mean that the seabed falls under another system of regulation. There is however, some interface between the seabed and the water column, and this becomes an issue in sea mining operations. If there is an overlap of ownership between the two (the seabed is granted to an oil company and the HP-3 on the surface is granted to an aquaculture company, for example).

A way of preventing this problem is by coordinating the awarding of property rights between the two areas. That is to say, the awarding of any marine mineral resources exploitation license by the central government must be coordinated with local government.

In another scenario, if both a seabed exploitation licenses and a HP-3 for the adjacent surface are owned by the same entity, disputes could occur from one area to another, which could dilute the value of the property of the neighboring HP-3 owner. One way to anticipate this is for the local government to stipulate which area is used for what. Zoning mechanisms must be very solid in order to prevent property rights disputes.

The law also does not define exact rights within a water column. A water column may be an area passed-though by highly migratory species protected under international law, which therefore cannot be harvested, even by HP-3 owners. A way to address this issue is by clarifying the dos and don'ts for HP-3 owners when implementing regulations.

Another significant problem is that marine boundaries constantly change because of natural phenomenon. HP-3 limits could be confused if the baseline used to measure a sea boundary also changes because the sea level rises. I am not certain as to what mechanism could be used to adapt to this problem.

As for defensibility; defending a property rights in the ocean is relatively more difficult than on land. On land, one can install fences in order to defend and mark their property. This is not possible in the sea. Nets can be used, but if used too extensively they could capture protected species. The surface structure could be used, but that should not hinder navigation for vessels passing through the area. And in any case, it is difficult to exclude traditional fishermen from fishing in HP-3 zones, as they may not be equipped with GPS.

HP-3s are interestingly defeasible enough. Defeasible basically means that the property rights can be transferred. In theory, a property right must be defeasible in order to enable exchange, so that a market can develop. The Law does stipulate that HP-3s can be transferred or encumbered with a mortgage. It is not yet clear which government department would be responsible for the registration of the mortgage. As long as the government has not clarified any institution responsible for the mortgage registration, the idea of mortgaging the sea will not be enforceable. Mortgage is an important part of the whole scheme, as it allows banks and other investor to enter and finance the project.

As we can see from the above explanations that property rights in the sea could be very costly in terms of its definability, defensibility and defeasibility. A huge amount of information would be required to define the property rights. Sonar imaging, GIS interpretation or anthropological studies on the existence of traditional fishing rights would expend a huge of amount of cost.

But these things are essential because, without a clear definition of property rights, future disputes may occur. Defending property rights is also difficult and the costs will be borne by the owners. If the cost of defending the property rights is more than the benefit of exploiting it, then it will not be a worthy investment. As for defeasibility, there is a high cost for institutional set-up. An institution will need to be established in order to maintain marine cadastre and administer HP-3 titles and their encumbrances.

 

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Preemptive Strike

Sunday, May 10, 2009

I found my old article about preemptive strike (2004). The article was written when John Howard (who, at that time was racing for another period of premiership) issued a statement that he will employ preemptive attacks to terrorist bases, when necessary. As you remember, the war on terror was the hype in 2004.

Australia had been active in the regional diplomacy, leading a multinational armed forces responsible for the security of post-referendum East Timor. Meanwhile terrorist activities in Indonesia was reaching its peak period (The Bali Bombing, Marriot and the Bombing of Australian Embassy). Morever, preemptive strike has always been Bush'es doctrine. So Howard's statement was important in this context. Implicitly, it appears that he wanted to show that Aussie has some muscle to maintain security in South East Asia.

Some quote:
Australian Prime Minister John Howard recently said he would not hesitate to order preemptive strikes against terrorist bases overseas. The statement was further clarified that such an attack would not be directed against "able" countries such as Indonesia.
However, this statement would seem to require a serious response, as this was not Howard's first concerning the issue.
The spread of "preemptive-ism" across the region is something of concern, since a preemptive strike will likely raise distrust among nations, provoke international anxieties and undermine the UN's role in maintaining peace and security.