JURISDICTIONAL INSECURITY FROM THE DEBTOR’S PERSPECTIVE: A BROADER DEBATE ON THE EFFECTS OF ADVERSE SELECTION AND COSTS OF CREDIT IN BRAZIL

Abstract

This paper argues that jurisdictional insecurity also harms debtors. Economic debate in Brazil practically ignores the problem of unfaithful and opportunistic creditor behaviors. Economic theory of contract assures that creditors have more information about the market, and they are, therefore, in an advantageous position and law should act in order to correct this unbalance. The analysis of 1,687 judicial decisions by the Superior Tribunal de Justiça (Supreme Court of Justice), during years 1998 to 2008, does not reveal anti-creditor bias at this level of the Judiciary. The paper proposes the inclusion of debtor’s jurisdictional uncertainty in credit restriction model.