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How UNCITRAL Overcame Challenges to Create Global Insolvency Norms
Scholars describe how UNCITRAL used a range of strategies to overcome challenges and formulate a global insolvency law.
Scholars Terry Halliday and Bruce Carruthers identify three organizational strategies used by UNCITRAL to formulate global insolvency law: micropolitical, procedural and formal strategies.
How is influence used within specific lawmaking forums? In UNCITRAL, no party was allowed to overtly “bully” other parties. Consensus was a key strategy to balance the interests of the various parties.
In the process of formulating its insolvency guide, UNCITRAL used the following micropolitical strategies:
The key procedural strategy was to make the guide creation process as fair. That is, all actors had a voice, clear rules governed proceedings and rules were fairly applied. Fairness was evident in the Working Group's agenda-setting, participation and decision making.
Because the ability to determine the agenda is a prime source for exercising power within the negotiation session, UNCITRAL was careful to manage the agenda-setting process. Before the meetings of the Working Group, UNCITRAL held a feasibility meeting in which multiple parties provided input on what could be accomplished rather than what would be ideal. Intractable issues were excluded from the agenda. This meeting also recognized prior initiatives of parties and functioned to allow a range of parties to have input on what the content of the Working Group meetings would be.
The agenda was narrowed to focus exclusively on business bankruptcy (excluding individual bankruptcy) and was further limited to include:
A final limit that focused the agenda was an emphasis on developing economies rather than the insolvency regimes of advanced economies. This had the function of preventing contests among actors from strong countries over consistency with their own laws.
So, by including various groups in the process of agenda setting, and by limiting the agenda to issues that were less contentious, UNCITRAL was able to craft an agenda that was both fair and realistic.
UNCITRAL encouraged Work Groups to select chairs or “rapporteurs” from developing countries, which ensured a strong voice for weaker actors.
Work Group procedures were structured to promote neutrality and participation. For instance,
Successive drafts of the Work Group products were sent not only to all delegates, but to the delegate’s networks as well.
Decision-making rules can either undermine or reinforce the legitimacy of the process and the final product. UNCITRAL facilitated a fair decision-making process in several ways.
The process of consensus-building was also strengthened by using two formal strategies: manipulating the lawmaking technologies and creating a variety of resources to implement the guide.
Manipulating Legal Tools
UNCITRAL was also able to avert threats of capture, stalemate and vacuous provisions by using a range of legal tools. The variation in these tools provided flexibility that enhanced harmonization.
Convention in the form of a multilateral treaty. This formal agreement prevented countries from altering the product to suit their own domestic situation. This tool applied only to conventions where agreement was possible across wide national variation.
Model laws provided more flexibility in application than conventions. Countries could modify or exclude certain provisions, but were encouraged to apply the model laws in their entirety. More recently, model laws have been accompanied by guides for enactment that provide help for national legislators to make informed decisions when applying the law.
A legislative guide was a short step from the guide. It provided principles not only to guide enactment, but also to assist governments in assessing the adequacy of laws.
By moving away from legal tools that demanded strict adherence, UNCITRAL was able to provide a framework for greater harmonization.
Different Types of Resources
The structure of the Legislative Guide on Insolvency Law provides an example of UNCTRAL's ability to deal with substantive and institutional extremes.
Glossary. The glossary, located just after the Introduction in the Legislative Guide, minimizes disagreements over legal concepts and terms. The Work Group developed their own terms in order to avoid using the language of any particular legal tradition.
Commentary. The commentary identified the issue involved. It sometimes specified principles that justified other principles. It provided alternative ways for the countries to address the issue. It discusses both benefits and deficiencies of alternatives. It usually identified a preference among alternatives. All of these helped to increase the Guide's legitimacy.
Recommendations: Recommendations are included at the end of each substantive section of the commentary and prefaced with a set of “purposes.” These purposes vary in length and provide information on the intended reach of the recommendation. There are different types of recommendations.
By using a combination of micropolitical, participation and formal strategies, UNCITRAL was able to provide a substantive global insolvency law, while avoiding capture by powerful actors or stalemate among Work Group participants.
Agreement with UNCITRAL Insolvency Law Was Not Universal
Support and acceptance of UNCITRAL's insolvency law was not universal, however. The World Bank was the only major participant in the process to resist the UNCITRAL synthesis. The World Bank had already formulated its own insolvency law and so was afraid that UNCITRAL's law would supplant its own as the “gold standard.”
In the end, UNCITRAL and the World Bank reached a compromise. The World Bank Insolvency Principles were included along with the UNCITRAL Law in a much abbreviated form. UNCITRAL recognized the insolvency regime assessment instrument created by the World Bank (IMF/World Bank ROSCs).
IFIs, professions and UNCITRAL wield powerful tools for persuasion. In extreme cases, the IMF and the World Bank are able to compel conformity at some level through economic coercion.
UNCITRAL used a range of strategies to formulate a global insolvency law. Scholars Halliday and Carruthers identify three major types of strategies to overcome challenges to the creation of a global insolvency law: micropolitical, procedural and formal strategies.
Data and Methods:
Based on interviews with actors involved in the development of international insolvency law.
American Bar Foundation.
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Halliday, Terence C., and Bruce G. Carruthers. Forthcoming. Globalization, Law, Markets. Chicago: University of Chicago Press. Ch. 4.
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