1. A Case Study of Divergences and Convergences in National Personal Insolvency Laws in the Context of European “Bankruptcy Tourism”

2.  Ireland v England and Wales: from “Debtors’ Prison” to “Debtors’ Paradise” and the incentives for forum shopping provided by differences in national laws.  Impossibility of harmonisation: inherently national characteristics influencing divergences in personal insolvency law?  Trends towards convergence: natural reduction in incentives for forum shopping.

3.  Irish personal insolvency law wholly inappropriate to address the country’s high levels of over- indebtedness

4.  Access: Ireland: high costs and procedural complications. England & Wales: inexpensive and simple procedure (same day bankruptcies).  Discharge conditions: Irl: No automatic discharge: 12 years plus preferential payments plus realisation of entire estate plus court discretion.  It “may be that, because of the requirement to discharge expenses and preferential payments as a precondition to being discharged from bankruptcy, the [debtor] has no prospect of being discharged and will remain a bankrupt for the remainder of [his or her] life unless... [the debtor] wins the lottery.” Grace v Ireland [2007] IEHC 90, per Laffoy J. EW: 12 month automatic discharge.  Restrictions: Irl: severe restrictions with view that all bankrupts are dishonest and should be excluded from society. EW: fewer restrictions, with distinction between honest and culpable debtors – BROs and BRUs.  Conclusions: Differences in national laws create irresistible incentives for forum shopping. Extent of differences make harmonisation impractical.

5.  Are personal insolvency laws based on inherently national characteristics/preferences, meaning that harmonisation is impossible and/or undesirable?  Social welfare provision Generous social welfare system could justify restrictive bankruptcy regime. Ireland: third smallest unemployment benefit in EU15; lowest income replacement rate in EU15 (2009).  Regulation of credit markets Open credit markets lead to increased indebtedness and necessitate liberal insolvency laws. Ireland: open credit markets and huge levels of indebtedness, but restrictive bankruptcy regime.  National dispositions towards entrepreneurship Bankruptcy as a safety net for risk-takers and a driver of entrepreneurship. Ireland: traditional pro-entrepreneurship government policy and national opinion; bankruptcy law unfriendly towards entrepreneurs.  National “culture” Ideological and cultural views of credit, indebtedness and default. Irish law appears to deter and punish over-use of credit, yet Ireland has a modern consumer credit society.

6.  “Facts on the ground” and political economy. Plus research explaining flawed premises of old approaches.  Role of political influences in personal insolvency law reform: BAPCPA 2005 in USA. European consumer bankruptcy revolution during recession of early 1990s.  Ireland: Late 1980s/early 1990s : Very low levels of personal debt: bankruptcy reform not an urgent issue. 2000s: Credit-driven boom and bust: personal indebtedness as a priority public concern. Law Reform Commission: research explaining flawed premises of traditional legal approach and outlier status of Irish law.  Are the links between personal insolvency law and national characteristics overstated?  Do national characteristics continue to create obstacles to convergence?

7.  France Consumer insolvency system based on minor, consensual adjustments to contractual obligations. 2004: “personal recovery” procedure: immediate and total debt discharge.  Sweden Typical continental approach : restricted access, mandatory payment plan, debt counselling and voluntary negotiations. 2007: removal of restrictions on access. “zero proposal”: immediate debt discharge.  Netherlands Mandatory payment plan (3 years). 2008: discharge after one year for debtors unable to make part repayments sufficiently large to justify continuing plan.

8.  England and Wales IVA repayment plan as the “gateway criterion”. Debt Relief Orders: mandatory debt counselling.  Ireland Law Reform Commission recommendations 2009-2010. Bankruptcy law: access, discharge, restrictions. Introduction for first time of a non-judicial debt settlement system: inspired by UK and European regimes. An outlier of European personal insolvency laws falls in line with laws of other Member States

9.  Possibilities for future convergence and consequent reduction in forum shopping  Increase in scope and influence of comparative research: Renewed academic interest, pan-European research projects, European Consumer Debt Network...  European Union and Council of Europe initiatives: European Commission Communication: Overcoming the Stigma of Business Failure – for a Second Chance Policy (COM(2007) 584 final). Recommendation of the Committee of Ministers to Member States on Legal Solutions to Debt Problems (Council of Europe CM/Rec(2007)(8), 2007).  Awareness of bankruptcy tourism as a driver of convergence: “Debtors’ Prison” and “Debtors Paradise”: are either reputations desirable? Race-to-the-middle?

10.  It may be impossible to remove incentives for forum shopping without harmonisation: bankruptcy tourism remains very attractive.  Harmonisation may be practically impossible at present.  Personal insolvency laws may not be as closely linked to inherently national characteristics as often thought: common realities of credit society and political factors may be key.  Therefore, obstacles to convergence, if not harmonisation, can be overcome.  Convergence has begun, and looks likely to continue.  Natural convergence in national laws may remove incentives for forum shopping.

11. Thank You