President Bush yesterday issued an executive order directing all government agencies to take steps to reduce litigation.

The order was made to address "a legal system that’s just spun out of control," he said.

Bush’s directive requires federal agencies that file or defend against civil suits to adopt a "loser pays" rule in disputes with federal contractors, forcing the loser of the suit to pay part of the legal costs of the winner.

The aim is to reduce incentives for filing suits and to encourage alternative means for resolving them.

Bush’s order also mandates that the government attempt to exchange information with opposing litigants to reduce discovery time and costs. He also told government agencies to curtail the use of expert witnesses, and to notify parties ahead of time who are to be sued by the federal government.

The order, based on recommendations by Bush’s Competitiveness Council chaired by Vice President Dan Quayle, also directs federal agencies to try to settle out of court more often.

The move was hailed yesterday by tort reform advocates and those seeking to stem the surge in law suits across the nation.

"I think it can make an enormous difference in area that has been pretty much going on automatic pilot," said Walter Olson, a senior fellow with the Manhattan Institute in New York and author of the Litigation Explosion.

He added: "There has been little interest in how government does its litigation."

But Pamela Gilbert, a staff attorney with the Washington, D.C.-based public interest group Congress Watch, criticized the move, saying Bush’s action contained little substance.

"It’s merely a warmed-over version of the Fortune 500 proposal to keep injured victims out of court," she said. "This looks like a meager attempt by Bush at domestic policy."

Quayle sparked a furor among lawyers when he recently said in a speech before the American Bar Association that the nation has too many lawyers and criticized excessive use of the courts to resolve disputes.

In addition to suggestions implemented in the president’s executive order, the Competitiveness Council has called for limitations on punitive damages, reducing "frivolous and protracted" prisoner litigation, and reforms in other areas that require legislation.

While not all of the group’s recommendations can be achieved by presidential mandate, some of them can, such as Bush’s directive yesterday to all U.S. agencies to reduce ambiguous legislation that leads to litigation.

"That part does scare us," says Congress Watch’s Gilbert. "We think this is part of a practice that originated with Ronald Reagan to issue executive orders to agencies that had the effect of choking off safety regulations. This looks like a similar mandate from President Bush."

"If a regulation proposes a litigation hazard it will be delayed or watered down or such," said Gilbert. "Again it’s the business agenda they’ve been pushing for decades."

She also finds the "loser pays" principle disturbing. To force the non-government party to a suit to consent to taking part under such rules, she notes, would require legislation, not merely an executive order.

The result is that that rule would probably only be applied in those cases where the government has an excellent chance of losing, since the private party is the one being given the choice.

This could definitely encourage the settling of disputes, she grants, but that "could be fiscally irresponsible."

Said Gilbert, "Government litigates a lot and often wins. This would say, ’Don’t litigate, settle,’ and that’s a very irresponsible position to take."

Olson disagreed. "It provides a sobering influence to federal litigators," he said. "The prospect of having to compensate the successful opponent is going to give the government incentive to withdraw from bad cases much earlier."

He noted that such a rule could have immediate impact on imminent domain cases. Often, he says, when the government takes someone’s land, "the property owner can’t get legal fees back and the fees can often be more than the value of the property or at least the difference between the offered price and what the owner is worth. So, the government can steamroller property owners."

Olson granted that some parts of the executive order are little more than difficult-to-enforce suggestions and others, such as defining what is or is not an expert witness, "will need to be fleshed out."

Nevertheless, he strongly disagreed with Gilbert, who believes that the whole basis for the order — that litigiousness harms America’s ability to compete — is an "absurd premise offered by an administration with no solution."

Said Olson, "Leading foreign competitors do not typically describe their legal systems as minefields as our industry does."

"For those who time and again see half of (their awards) eaten up in legal fees, who see the legal system all too often only helping the legal machine itself, I don’t think there will be much anguish over a well-reasoned effort to cut down on the waste and the destructiveness of litigation."

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Read Michael Fumento’s additional work on government.