Constitutions and Crises: Balancing Insolvency and Social Policy through the Lens of Comparative Legal History

Abstract

The economic and financial crises of the last decade have led to massive changes in economic, social, banking, and employment policies throughout the world. However, both the United States and the United Kingdom have generally maintained more static in relation to their overall status quo regarding insolvency and social policy, in stark contrast to the reactions of most continental European nations. Taken together with the sovereign debt crisis that plagued many continental European nations beginning in 2010, it may be somewhat surprising that the United Kingdom has not adjusted its policies to any greater degree than it has. Rather, it is continental Europe that has moved more or less en masse toward the lower common denominator of the United Kingdom, at least in terms of social and employment protection. In addition, many peripheral or less economically developed European nations have achieved some inadvertent legal benefits from the crises of the last decade in the reform or creation of more robust insolvency and corporate rescue systems.

The purpose of this paper is to explore the historical and constitutional underpinnings of the US and the UK, within the context of the European Union when required, in order to identify important differences in legal development and divergence from a common legal ancestry in approaches to insolvency, in particular corporate rescue procedures such as Chapter 11 and administration under the Insolvency Act 1986, and the social policy issues related to it. By identifying points of divergence situated within the historical context in which it arose, a more detailed, path dependent observation may reveal deeply seated differences that can explain why the US and the UK have often relied upon different foundational philosophies in the development of legal systems in insolvency and social policy. While the UK and the US are often compared in a positive light, as being more closely aligned than other European nations and the UK, their differences continue to persist, despite EU influence, and indeed, at times, in spite of it.

Keywords: insolvency law, corporate rescue, comparative law, social policy, constitutional law, united states, united kingdom, comparative legal history, debt stigma

JEL Classification: G3, J8