Balancing the Protection of Business and Employment in Insolvency: An Anglo French Perspective
Eleven International Publishing 2017 (PhD Monograph)
302 Pages Posted: 2 Jun 2021
Date Written: May 1, 2017
The financial crisis of 2007/8 has had a significant impact on the place of social policy objectives in a highly liberalised Common Market. As laws have been reformed over the years since the failure of Lehman Brothers set in motion a domino effect among high risk investment banks and financial institutions throughout the economically advanced nations of this world, both employment protection and corporate rescue have been found, at times, in the spotlight. While the corporate rescue culture of the European Union promotes the rehabilitation of businesses in financial distress in preference to liquidation where possible, it also emphasises reducing unemployment and social exclusion. The social implications of business rescue must therefore be considered, rather than taking a purely economic approach, emphasising creditor wealth maximisation during insolvency proceedings. EU social policy has also generated a number of employment regulations, such as the Acquired Rights Directive, which are arguably the greatest obstacle to promoting business rescue. Thus there is an enduring conflict that subsists between the aims of corporate rescue and employment protection regulation.
Employees attached to the sale of a business can represent a liability, reducing the intrinsic value of that business and potentially reducing the number of businesses successfully rehabilitated through the use of business rescue mechanisms. Substantial employment protection damages the effectiveness of business rescue by deterring acquisitions in view of the potential liability attached to transferring employees. Ineffective business rescue may then have an adverse effect on the economy and job security due to increased business failures and job losses. The obstruction to successful business rehabilitation represented by employment protection must therefore be balanced with business rescue in order to successfully promote the rescue culture. An examination of the approaches taken by different jurisdictions, in this case the UK and France due to their important influence in the EU as well as their archetypically different legal systems should help elucidate how the tension may be managed and, perhaps, a balance achieved.
The form of this examination is particularly important if an effective reform is to be introduced. As such, a comparative historical methodology concentrating on the path dependent legal developments of both jurisdictions will be applied in order to discover the fundamental historical, economic, social, political and cultural differences between the UK and France that have influenced their approaches to social policy and corporate insolvency law. Legal developments cannot be explained by examining a legal rule in isolation, but must account for the social and economic pressures operating on the law from the outside as well as the established ways in which the issues are dealt with internally. Even when economic and social conditions are similar at the time that a parallel rule is promulgated, the differences in historical journeys to arrive at similar rules can explain why different jurisdictions do not approach new problems in the same way.
This thesis will analyse the legal position of employment protection and corporate rescue in the UK and France through a historical comparative analysis of the political, social, and economic developmental context of the two legal areas. Based on the understanding of each jurisdiction’s path dependent position within the legal framework of the EU, reform the ARD will be recommended that will attempt to balance the aims of corporate rescue and employment protection in the event of business transfers occurring during corporate rescue procedures. Given that the regulation of this policy intersection is made within the EU legal framework, the comparative historical analysis methodology will assist in identifying the most effective reform that will fit within the varied legal systems of the EU Member States, and also help to predict how such a reform may be implemented over time.
Keywords: insolvency law, corporate rescue, United Kingdom, France, legal reform, legal history, employment protection, legal theory, path dependency
JEL Classification: G3, J8
Suggested Citation: Suggested Citation