Luecke, Heike (2015) Insolvency Darwinism : forum shopping activities from Germany to England as an example of a driver of insolvency law perfection. (PhD thesis), Kingston University, .
Abstract
The practice of German companies to indulge in forum shopping in England to achieve beneficial treatment under English insolvency proceedings has encouraged the German Government to make significant changes to German insolvency laws by introducing new legislation in the form of the Law for the Further Facilitation of the Rehabilitation of Companies (“Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen” “ESUG“ ). The Act states that the impetus for the reform was the move of German companies to England which started a general discussion of “Germany, as a restructuring jurisdiction” (“Sanierungsstandort Deutschland”). Such forum shopping activities increased the awareness of the perceived weaknesses of the German system. This research looks at forum shopping from a Darwinian perspective. Germany and England as Member States of the European Union compete with each other as movement of capital to another Member State has a negative effect on the country’s economy. A reputation as a “bad restructuring jurisdiction” has an impact on the choice of business location and could act as a disincentive to company incorporations in Germany. Freedom of establishment allows companies to choose a regime which fulfils their needs, the Member States have to be motivated to attract companies and be willing to adapt to changes to keep up with business demands. In particular it should be borne in mind that forum shopping is not a one-dimensional activity and in itself constitutes an element of investment. The quality of a country’s legal restructuring framework has an impact on a company’s choice of business location in the first place and its willingness to invest and hence to attract debt financing. Taking the example of Germany and England, it is argued that forum shopping activities foster the development, improvement, reform and revision of existing laws. This thesis argues that Insolvency Darwinism results in a global alignment and convergence of insolvency systems so that the jurisdictions within the EU imitate each other with their rescue-friendliness. This competition for the “best insolvency regime” results in a more perfect insolvency landscape. The alignment with more rescue-friendly insolvency regimes is preferred to avoid unwanted forum shopping activities, whereas a “fettered Darwinian approach” of partially imitating another system will fail to deliver the desired result. This thesis critically examines whether Germany has achieved its aim of establishing a “culture of second chance” in changing the Insolvency Code (“Insolvenzordnung”) introduced by the ESUG. Chapter one serves to explain why forum shopping functions as a driver of insolvency law perfection, using a “Darwinian approach” and Darwin’s core thesis of “natural selection” to explain the competition of jurisdictions in insolvency law. Chapters two and three give an overview of the developments of the rescue culture in Germany and England. Chapters four to eight compare and contrast the different key areas in Germany and England, examining the situation in Germany before and after the introduction of the ESUG. Specific focus is put on the question of whether the changes introduced by the ESUG were driven by forum shopping activities and whether these changes led in fact to a more “perfect“ insolvency regime, in the sense as examined in chapter one. Chapter nine is dedicated to the conclusion.
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