The Rule of Law and Corporate Insolvency in Six Asian Legal Systems

Abstract

This paper examines insolvency law and practice in six Asian jurisdictions and is based on a socio-cultural study of the perceptions and practices of leading insolvency practitioners, officials and business people. The paper explores specific manifestations of “rule of law” as reflected in the character and operation of insolvency regimes in six Asian legal systems. We look in particular at insolvency practice in China, Taiwan, Hong Kong, Singapore, Malaysia and Indonesia; the research involved the conduct of fieldwork in each of these six legal systems. This consisted in the collection of relevant legal materials on each jurisdiction and the conduct of interviews with key insolvency practitioners and officials; a total of 115 in-depth interviews were conducted (see further, Tomasic and Little, Insolvency Law & Practice in Asia, Hong Kong, FT Law & Tax, 1997). It is clear from this research that the rule of law has a wide variety of meanings and that legal practices in the six legal systems studied, often depart from Western notions of the rule of law in many significant respects. In some jurisdictions, insolvency law forms part of a new commercial law which justifies executive control and management of the economy and private business activities. In most jurisdictions, judicial independence is not securely institutionalised, there is a high level of avoidance in recourse to formal insolvency law by indigenous businesses, and there is widespread reliance on extra-legal, informal and even illegal processes to resolve corporate insolvencies. This paper seeks to explain the conceptual diversity of the rule of law as found in Asia and the resort to practices not in keeping with the Western concept of the rule of law. This reflects the impact of Asian legal ideologies, cultural values and social and governmental institutions on an essentially Western legal doctrine. This has often meant that the idea of the rule of law has been reformulated in Asia into rule by law or a less nuanced version of the rule of law, as has most clearly happened in China and Singapore. The paper further suggests that any analysis of the rule of law in Asia must take into account the diversity of Asian cultural, social and political contexts and the legally pluralistic character of these jurisdictions. Sometimes, local cultural values, such as the Confucian ethic, run counter to values inherent in the rule of law idea.