order to dilute the legal rights of secured creditors and redistribute the associated wealth to other parties, but (transaction costs permitting) prospective secured lenders may well alter the terms and tariffs of their respective deals so as to contract around the legal alterations. There is some evidence from US studies that such circumvention has been encountered.60

A final objection to communitarianism urges that insolvency judges are not necessarily well placed to decide what should, or should not, be deemed a community problem, or what should be in the community’s best interest,61 and that this involves judges in politically fraught decision-making and encourages policy ad hocery. In defence, however, communitarians might respond that judges inevitably and in all sectors of the law advert to public and community interests, that an insolvency law solely for creditor protection is objectionably narrow and that if community interests impinge on judicial decisions they should be dealt with openly and fully.

The forum vision

Rather than seeing the insolvency process in terms of substantive objectives it may be conceptualised in procedural terms, its essence being to establish a forum within which all interests affected by business failure, whether directly monetary or not, can be voiced.62 The enterprise is seen as comprising not merely the physical assets and stock of business but the focus of interests and concerns of all participants in the company’s financial distress. The law’s function, in turn, is seen as establishing space. It ‘creates conditions for an ongoing debate in which, by expressing … conflicting and incommensurable values, participants work towards defining and re-defining the fundamental aims of the enterprise. Through the medium of bankruptcy discourse, the enterprise realises its potential as a fully dimensional personality.’63 Not only interested parties can engage in this discourse. To some it, most significantly, allows extralegal resources and expertise to be brought into play so as to construct the domain to be legally regulated. Thus accountants play an important part in defining the onset of insolvency and in advising on responses: ‘Before corporate failure can be internalised within the legal system, it has first to

60 See citation in ibid., p. 959. 61 Schermers, ‘Response to Professor Gross’, p. 1051.

62See Flessner, ‘Philosophies of Business Bankruptcy Law’.

63Korobkin, ‘Rehabilitating Values’, p. 772.

be represented and calculated as an economic event by means of the calculative technologies of accountancy.’64

Such a vision may throw light on an important role to be played by insolvency law but it necessarily falls short of offering guidance on matters of substance. As, moreover, with other theories of legitimation through providing means of representation,65 difficult issues remain concerning the amount of representation to be offered to different parties; the ‘right’ balance between provisions for representation and efficiency in decisionand policy-making; and the extent to which representation should be reinforced with legal rights.

The ethical vision

According to Philip Shuchman, insolvency laws fail to rest on an adequate philosophical foundation in so far as the formal rules of insolvency disregard issues of greatest moral concern.66 He argues that the situation of the debtor, the moral worthiness of the debt and the size, situation and intent of the creditor should be taken into account in laying the foundations for insolvency law. Judgements in such matters would not be based upon intuitions but on utilitarian principles. Thus the criteria to be employed would be ‘present and prospective need, desert and the moral and philanthropic worth, and the importance of the underlying transaction … [I]n the context of bankruptcy it is assumed that interpersonal comparisons of utility are significant and that social states can be ordered according to the sum of utilities of individuals; further, that the choice of any given arrangement ordinarily ought to be some sort of aggregation of individual preferences.’67

Shuchman, therefore, argues that a distinction should be drawn between debts that have arisen out of contracts that personally benefit the creditor and debts flowing from involuntary acts or loans between friends. He would, accordingly, have judges or administrators base

64P. Miller and M. Power, ‘Calculating Corporate Failure’ in Y. Dezalay and D. Sugarman (eds.), Professional Competition and Professional Power: Lawyers, Accountants and the Social Construction of Markets (Routledge, London, 1995) pp. 51–76 at p. 58.

65See R. B. Stewart, ‘The Reformation of American Administrative Law’ (1975) 99(2) Harv. L Rev. 1667 and, generally, C. Pateman, Participation and Democratic Theory (Cambridge University Press, London, 1970).

66P. Shuchman, ‘An Attempt at a “Philosophy of Bankruptcy”’ (1973) 21 UCLA L Rev. 403. See also J. Kilpi, The Ethics of Bankruptcy (Routledge, London, 1998).

67Shuchman, ‘An Attempt’, p. 447.

decisions on such matters as priorities on ethically relevant realities. He would resist blind acceptance of pre-petition creditors being equal.

Whether it is realistic to expect to find ethical principles to underpin all insolvency law can be questioned,68 as indeed might the possibility of any group of individuals or judges coming to agree on the substance of such principles.69 The boundaries, moreover, of relevant ethical principles (and the border between ethical principle and prejudice, distaste or disgust)70 cannot be established uncontentiously. To rely upon the judiciary to evaluate the moral needs and deserts of creditors and the moral worthiness of debts, and to incorporate such evaluations within insolvency law, places a large degree of faith in their own moral judgement (not to say the existence of an identifiable and agreed set of moral predicates) and their determination and ability to develop a consistent and coherent body of law on this basis. Such a system might also have considerable and detrimental effects on the availability and cost of credit in so far as creditors’ bargains would be placed in the shadow of legal uncertainty. Creditor wealth maximisers might, finally, add that questions of consistency between bodies of law arise, and argue that if noninsolvency law generally declines to take on board the virtuous (or disreputable) motives of those involved in legal transactions then insolvency law should do likewise.71

The multiple values/eclectic approach

In stark contrast to approaches offering a single, economic rationale, as exemplified by the creditor wealth maximisation vision, is the notion that insolvency law serves a series of values that cannot be organised into neat priorities. Thus Warren offers what she calls a ‘dirty, complex, elastic, inter-connected’ view of insolvency law from which neither outcomes can be predicted nor all the factors relevant to a policy decision can necessarily be fully articulated.72 Whereas the economic account can explain insolvency law only as a device to maximise creditor wealth, not distribute fairly, a value-based account is said to understand

68See Carlson, ‘Philosophy in Bankruptcy’, p. 1389.

69See the exchange between H. L. A. Hart, Law, Liberty and Morality (Oxford University Press, Oxford, 1963) and P. Devlin, The Enforcement of Morals (Oxford University Press, London, 1965).

70See R. M. Dworkin, Taking Rights Seriously (Duckworths, London, 1977) ch. 10.

71See Jackson, Logic and Limits of Bankruptcy Law, ch. 1.

72Warren, ‘Bankruptcy Policy’, p. 811.

insolvency law’s ‘economic and non-economic dimensions and the principle of fairness as a moral, political, personal and social value’.73 Multiple values/eclectic approaches as exemplified by Warren and Korobkin see insolvency processes as attempting to achieve such ends as distributing the consequences of financial failure among a wide range of actors; establishing priorities between creditors; protecting the interests of future claimants; offering opportunities for continuation, reorganisation, rehabilitation; providing time for adjustments; serving the interests of those who are not technically creditors but who have an interest in continuation of the business (e.g. employees with scant prospect of re-employment, customers, suppliers, neighbouring property owners and state tax authorities); and protecting the investing public, jobs, the public and community interests. Such approaches incorporate communitarian philosophies and take on board distributive rationales, placing value, for instance, on relative ability to bear costs; the incentive effect on pre-insolvency transactions; the need to treat like creditors alike; and the aim of compelling shareholders to bear the lion’s share of

the costs of failure.

Further goals can be added by making reference to the Cork Committee’s own statement of aims – a clear example of the multiple values approach.74 Thus, as already noted, Cork emphasised the role of insolvency law in reinforcing the demands of commercial morality and encouraging debt settlement,75 and also stressed deterrent and distributive ends in urging that insolvency should seek to ascertain the causes of failure and consider whether conduct merited punishment.

The multiple values approach, moreover, is broad enough to encompass the forum vision. Thus, in putting forward his own value-based approach, Korobkin posits the worth, inter alia, of insolvency law’s providing a forum for the representation of views: ‘under the valuebased account, bankruptcy law has the distinct function of creating conditions for a discourse in which values of participants may be

73Korobkin, ‘Rehabilitating Values’, p. 781.

74See Cork Report, para. 198. For an overview of multiple aims and essential features of an insolvency system see E. Flaschen and T. DeSieno, ‘The Development of Insolvency Law as Part of the Transition from a Centrally Planned to a Market Economy’ (1992) 26

International Lawyer 667 at 668–71.

75See also G. Triantis, ‘Mitigating the Collective Action Problem of Debt Enforcement through Bankruptcy Law: Bill C-22 and its Shadow’ (1992) 20 Canadian Bus. LJ 242, who argues that while bankruptcy law may be valuable to resolve the collective action problem and to secure efficiency, an additional objective should be to promote efficient ‘private workouts’ in the shadow of bankruptcy law. (See also Baird’s reply, pp. 261–8.)

rehabilitated into an informed and coherent vision of what the estate as enterprise shall exist to do’.76

What is the case for a multiple values approach? Warren argues that a policy focusing on the values to be protected in an insolvency distribution and on the effective implementation of those values assists decisionmakers even if it does not dictate specific answers. It illuminates the critical, normative and empirical questions and involves inquiries into the range of relevant issues such as who may be hurt by a business failure; how they may be hurt; whether the hurt can be avoided and at what cost; who is helped by the failure; whether aid to those helped offsets the injury to those hurt; who can effectively evaluate the risks of failure; who may have contributed to the failure and how; whether the contribution to failure serves useful goals; and who can best bear the costs of failure and who expected to bear those costs.77

Such an approach is thus said to highlight the empirical assumptions underlying insolvency decisions to ask tough and specific questions by coming to grips with the ‘difficult and complex tapestry’ of empirical presumptions and normative concerns.78 It honestly acknowledges that judgements are made in balancing numbers of values in insolvency decision-making. Answers may not be complete but are said to be more fully reasoned than those resulting from single rationale approaches.79

Eclecticism, nevertheless, gives rise to not inconsiderable problems. In the first instance, little assistance is offered to decision-makers on the management of tensions and contradictions between different values or on the way that trade-offs between various ends should be effected. Questions, moreover, are easily begged in choosing which values to invoke or emphasise.80 Nor do core principles emerge to guide decisions on such trade-offs or to establish weightings: this, as noted, was a concern

that the 1994 Justice Report expressed with regard to the Cork statement of aims.81

The open-textured nature of eclecticism can be a problem in some multi-value schemes. Unless particular values are identified with

80See G. E. Frug, ‘The Ideology of Bureaucracy in American Law’ (1984) 97 Harv. L Rev. 1277 at 1379.

81Insolvency Law: An Agenda for Reform, paras. 3.7–3.8.