Issues Concerning
Insolvency Reforms in Asia
Terence Halliday
American Bar Foundation and
Northwestern University
OECD Forum on Asian Insolvency
Reforms
Seoul, Korea
November 11-12, 2003
Three “conversations” over
insolvency reforms

Global conversations between
international institutions and nation-states
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Regional conversations among neighbors
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Global organizations developed models, templates
Nation-states offer proving-grounds, experimentation
Innovations in one nation inform those in another
Local conversations among stakeholders

Negotiations over policy preferences
Research Program:
Globalization of Insolvency
Regimes

Sponsored by the American Bar Foundation & National
Science Foundation (USA)

Design:
• Statistical analysis, world bankruptcy reforms, 1978-1998
• Reform initiatives by global and regional organizations

IMF, World Bank, ADB, EBRD, INSOL, IBA, UNCITRAL
• National reforms in Asia, Central and Eastern Europe


China, Indonesia, Korea
Perspective:
• Independent – of any organizations engaged in insolvency
reforms
• Empirical – based on multiple sources of data
• Institutional or systemic – specialists in theories of institutional
design and functioning
Observations about Insolvency
Law-Making in Asia
1. Asian Reforms Reflect Regional
and Global Initiatives
Benefits of multilateral initiatives:
• Concentrate expertise
• Distill experience
• Cross-fertilize national experiments
• Commit tangible resources
• Disseminate information
1. Global Initiatives, contd
Significance for Asian reforms:

Substantive convergence towards rescue
regimes, with real threat of liquidation
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Consultative process has broadened progressively
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Global models are constructive

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World Bank regional consultations
Culminating in UNCITRAL’s global legislative forum—
representation of all regions, legal families, key INGOs
(Legislative Guide on Insolvency)
Codify knowledge and experience
Global models should be viewed as experimental

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Which elements are fundamental, which variable?
Are ‘best practices’ ever universal, always contextual?
2. Insolvency Law-Making in Asia is
Recursive (Cyclical)
Cycling between law on the books and law in
practice, bankruptcy reforms are:
1.
2.
Always incomplete, produce unintended
consequences
Driven by internal dynamics (engines)
 Professionals widening, narrowing the gap
 Professionals contesting approaches to law
 Stakeholders following iterative strategies
3.
Often stimulated by external forces
Cycles occur differently in China, Indonesia, Korea
Repeated cycles may reflect:

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Successive moves to a higher equilibrium, legal capacity
Unrealistic expectations, lack of political will or capacity
3. Insolvency Law-Making in Asia
Produces Conflicts Among Policy
Norms
Three norms:
• Efficiency (purely economic criterion)
• Equity (distributive policy criterion)
• Stability (social and political criteria)
National Experiences:
• Korea: between efficiency and equity
• China: between efficiency and stability
4. Insolvency Law-Making in Asia is
embedded in Economic, Political and
Social Systems
Political systems (distribution of power in a society)
Example: Korea: challenges for state to redistribute its power
internally, to retract from economic guidance
Economic system (distribution of wealth)
Example: Indonesia: significance of corporate restructuring
for ethnic Indonesian/Chinese Indonesian relationship in
organizing the economy
Social system (organization of civil society, culture)
Example: China: changes in status, social security system,
and its impact on adoption of a comprehensive bankruptcy
law
5. Insolvency Systems in Asia may vary
by Types of Capitalism and Commercial
Culture
Varieties of capitalism exist in Europe and North
America—why not Asia?
• Liberal market economies (U.S., Britain, Australia, New
Zealand)
• Coordinated market economies (e.g., Germany, France,
Scandinavia)
Varieties of commercial culture may also vary
among nations—why not Asia?
• Transactional business cultures
• Relational business cultures
Insolvency systems may need to reflect varieties of
capitalism and commercial culture
Implications for Reforms in Asia
1.
Find a balance between global and local imperatives
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2.
Expect systematic variations on global themes
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3.
What are the circumstances that determine whether a success in
one country will also succeed in another?
Identify institutional contexts and affinities
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5.
What are universals? What are particulars?
UNCITRAL’s solution: acceptable alternatives
Learn from comparable situations
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4.
Global designers recognize national variations
National reformers value global/regional models
Insufficient attention to embeddedness in multiple systems
Insufficient specification of institutional conditions of success or
failure
Moderate expectations

Much ‘negotiation’ between global and national models will take
time