Project R-15605

An empirical law and economics analysis of director's liability case law (Research)

Director liability laws ensure accountability, protecting companies from misconduct. Simultaneously, they must also nurture an environment for strategic decision-making and risk-taking to drive economic performance of companies. Belgian liability laws consist of both closed norms outlining specific behavior and vague, open norms. Open norms allow judicial discretion in evaluating directors' behavior. However, the effectiveness of liability rules hinges on legal certainty and equality. To this date, little is known on how judges rule in director liability cases. The ambiguity in open norms' application may cause uncertainty about lawful behavior, potentially leading to risk-averse behavior, which is detrimental for a company's performance. This project analyzes the use of open versus closed norms in Belgian director's liability court verdicts, and the impact of the 2019 changes in corporate laws on these practices. We use Natural Language Processing to systematically extract data from liability court verdicts to determine the norms used by judges as well as the behaviors deemed negligent. This innovative approach allows for detailed data collection from a large sample of verdicts. We also seek to identify evidence of biased decision-making, which touches directly on the principle of equality. Given the potential for discretion in the application of open norms, we examine to what extent gender in-groups bias exists in judicial decisions.

01 January 2025 - 31 December 2028