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HISTORICAL OVERVIEW OF INSOLVENCY LAW IN GENERAL
Although we find that general works on the history of law and procedure make scant mention of the history of bankruptcy, it has a very long history – being known in the Middle Eastern and Roman worlds as long as there has been a recorded history of commerce and trade.7 Credit sales and indebtedness were practically unknown and in early primitive societies there were no laws protecting creditors or regulating the distribution of a debtor’s estate.8 Payment was seldom delayed and creditors who performed their part of a transaction had little cause to fear default on the part of the debtor. Sanctions varied from being religious in character to a severe form of the primitive procedure of execution.9 It is interesting to note that in ancient Egypt payment of debt was for example often forced by a spiritual sanction. In the event of default by the debtor, it was almost a universal custom for the debtor to pledge the body of his nearest deceased relative, especially that of his father, and the creditor was given the right to remove the mummy.10 Much of the medieval laws of European insolvency11 arose from the customs of the Italian cities which enacted laws and developed rules to govern the conduct of trade by citizens and foreigners and to deal with the absconding debtor’s assets.12 This phenomenon probably arose as a result of the absence of sufficient procedures in early Roman law to deal the more sophisticated commercial climate. The etymology of the word bankruptcy is said to be banca rota (broken bench) and was derived from the ceremony whereby an insolvent trader was punished by being forced to break his bench, thereby denying him the ability to continue trading.13 Certain writers hold the view that the word “bankruptcy” is derived from the French words banque (bank) and route (road or path) or the Italian word bancorupto.14 Then again, Blackstone preferred the Italian lineage: “The word itself is derived from the word bancus or banque, which signifies the table or counter of a tradesman and ruptus, broken; denoting thereby one whose shop or place of trade is broken and gone …”15
Principles of modern bankruptcy law in both common and civil law countries matured from a uniform origin.16 The “Law Merchant”17 was a distinct body of law developed by a network of medieval courts scattered across Europe which would exercise their jurisdiction in the locations where they resided over the dealings of merchants and commercial issues in general. The Law Merchant became a body of common European usage, drawing extensively upon the customs and practices which had become established among merchants in their dealings with one another but based principally upon the mercantile law of Italy, which itself was derived from Roman law.18 With regard to the regulation of early bankruptcy law, it is not apparent how far the general law of the day took any notice of trading disputes, and it seems probable that for the most part the supervisory function was left to special local tribunals in towns and markets across Europe.19 With the improved conditions of the eleventh century, trade and commerce in England revived, and, after the Norman Conquest, the guild merchant made his appearance. This development not only widened the horizons of trade in England, but the new transactions of merchants also progressed beyond the scope of the old folk-law in the market. The Law Merchant gradually became more influential across Europe and especially in England as undoubtedly a body of cosmopolitan law akin in status to civil or canon law.20 Although a parallel cannot be drawn between the institution of the Law Merchant and modern insolvency regulators, the former most certainly did represent a crystallisation of principles previously left to the general knowledge and common sense of jurists and as such could be regarded as one of the earliest regulatory sources in mercantile law.
INSTITUTIONAL FRAMEWORK: ROLE OF THE COURTS
The institutional framework of the US bankruptcy system consists of specialised bankruptcy courts, which in turn are supported by the US Trustee. At the centre stage of the bankruptcy proceedings we find the person known as the “Bankruptcy Judge”, whose status and tenure have been among the more controversial bankruptcy issues considered by Congress in recent years.245 One of the major weaknesses of the 1898 Act had been the fractured jurisdictional scheme in which bankruptcy referees (renamed judges in 1973) could only hear certain core matters in bankruptcy.246 As the organic bankruptcy court had up to 1978 simply evolved without legislative definition it simply became inadequate. Originally it was contemplated that the referee in bankruptcy would be an administrative assistant to the US district judge and would consequently conduct the administration of bankruptcy cases under the supervision of the district judge.247 Following the amendments introduced by the Chandler Act of 1938, the role of the referee was expanded and he became a “bankruptcy judge” who virtually took over all the original jurisdiction of the bankruptcy court.248 The bankruptcy judge had come to exercise the judicial power to decide disputes as a court of original jurisdiction but was still also responsible for the supervision of the administration of bankruptcy cases.
In the 1978 legislation a bankruptcy court system that was intended inter alia to upgrade the judicial office was established. The 1978 Code explicitly granted jurisdiction to the federal district court: “the bankruptcy court is given in personam jurisdiction as well as in rem jurisdiction to handle everything that arises in the bankruptcy case”.249 The 1978 Code thus established a bankruptcy court system with a substantially enlarged bankruptcy court jurisdiction, enabling bankruptcy judges to hear virtually any matter arising in, or related to, bankruptcy cases.250 The Code, however, was not clear on the status of the bankruptcy judges responsible for exercising this enlarged jurisdiction.251
Although the Code bestowed upon bankruptcy judges substantial jurisdiction over bankruptcy matters as “adjuncts”252 of the district court, the constitutional status and protection of Article III, which inter alia includes the enjoyment of life tenure and compensation protection, were not bestowed on them.253 Consequently, in Northern Pipeline Construction Co v Marathon Pipeline Co254 in response the Supreme Court swiftly ruled visà-vis the power of bankruptcy judges. In the Northern Pipeline ruling the court held that the granting of the broad jurisdiction to bankruptcy courts in the 1978 Act violated Article III of the Constitution, by vesting non-Article III judges with too much of the “judicial” power in the US.255 The Supreme Court was particularly concerned with bankruptcy judges having the power to rule on state law issues.256 Although the Northern Pipeline decision invalidated the entire grant of jurisdiction, a stay was granted (twice) in order to permit Congress time to resolve the matter.257 The courts themselves devised a desperate solution and, as imposed by emergency rule, jurisdiction was assigned to the district court in anticipation that jurisdiction would typically be exercised by the bankruptcy judge.258 The Supreme Court‟s decision subsequently forced Congress to restructure the bankruptcy court system and, with the enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984,259 the bankruptcy courts were established on a more certain footing.260
PART I: INTRODUCTION
1 GENERAL INTRODUCTION
1.1 INTRODUCTION
1.2 RESEARCH STATEMENT
1.3 RESEARCH OBJECTIVES
1.4 OVERVIEW OF CHAPTERS
1.5 SCOPE OF RESEARCH
1.6 TERMINOLOGY
1.7 REFERENCE TECHNIQUES
1.8 LIMITATIONS ON THE STUDY
PART II: A HISTORICAL OVERVIEW
1 HISTORICAL OVERVIEW OF STATE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW
1.1 INTRODUCTION
1.2 HISTORICAL OVERVIEW OF INSOLVENCY LAW IN GENERAL
1.3 ROMAN LAW
1.4 ROMAN-DUTCH LAW
1.5 ENGLISH LAW
1.6 SOUTH AFRICAN LAW
2 CONCLUSION
PART III: STATE REGULATION OF INSOLVENCY LAW: AN INTERNATIONAL PERSPECTIVE
1 INTRODUCTION
2 UNITED STATES OF AMERICA.
2.1 INTRODUCTION
2.2 HISTORICAL OVERVIEW OF THE AMERICAN BANKRUPTCY LAW
2.3 REGULATORY FRAMEWORK: THE UNITED STATES TRUSTEE
2.4 REGULATORY FRAMEWORK: THE BANKRUPTCY ADMINISTRATOR
2.5 INSTITUTIONAL FRAMEWORK: ROLE OF THE COURTS
3 UNITED KINGDOM
3.1 INTRODUCTION
3.2 HISTORICAL OVERVIEW OF ENGLISH INSOLVENCY LAW
3.3 REGULATORY FRAMEWORK: THE INSOLVENCY SERVICE
3.4 INSTITUTIONAL FRAMEWORK: ROLE OF THE COURTS
4 THE NETHERLANDS
4.1 INTRODUCTION
4.2 HISTORICAL OVERVIEW OF THE DUTCH BANKRUPTCY LAW
4.3 REGULATORY FRAMEWORK
4.4 VOORONTWERP INSOLVENTIEWET
5 INTERNATIONAL ORGANISATIONS
5.1 INTRODUCTION
5.2 UNCITRAL LEGISLATIVE GUIDE ON INSOLVENCY LAW.
5.3 WORLD BANK “PRINCIPLES AND GUIDELINES FOR EFFECTIVE INSOLVENCY AND CREDITOR RIGHTS SYSTEM”
6 CONCLUSION
PART IV: CONSTITUTIONAL AND ADMINISTRATIVE LAW ASPECTS OF STATE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW
1 INTRODUCTION
2 THE CONSTITUTIONAL LAW ASPECTS OF STATE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW
2.1 INTRODUCTION
3 ADMINISTRATIVE LAW ASPECTS OF STATE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW
3.1 INTRODUCTION
3.2 THE PROMOTION OF ADMINISTRATIVE JUSTICE ACT
3.3 PROMOTION OF ACCESS TO INFORMATION ACT 2 OF
4 CONCLUSION
PART V: STATE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW AND EARLIER LAW REFORM PROPOSALS
1 INTRODUCTION
2 LEGAL FRAMEWORK OF SOUTH AFRICAN INSOLVENCY LAW
3 REGULATORY FRAMEWORK OF SOUTH AFRICAN INSOLVENCY LAW
3.1 INTRODUCTION
3.2 POWERS AND DUTIES OF THE MASTER
3.3 REVIEW PROCEEDINGS
4 INSTITUTIONAL FRAMEWORK OF SOUTH AFRICAN INSOLVENCY LAW
5 PROBLEMS AND PITFALLS IDENTIFIED
5.1 MASTER AS REGULATORY BODY
5.2 REGULATION OF INSOLVENCY PRACTITIONERS
6 LAW REFORM
6.1 THE DRAFT BILL AND EXPLANATORY MEMORANDUM
6.2 PROPOSALS RELATING TO THE REGULATORY REGIME IN SOUTH AFRICAN INSOLVENCY LAW
7 CONCLUSION
PART VI: POLICY DEVELOPMENT AND CONSIDERATIONS WITH REGARD TO THE REGULATION OF SOUTH AFRICAN INSOLVENCY LAW
1 INTRODUCTION
2 EXISTING POLICIES AND POLICY CONSIDERATIONS IN SOUTH AFRICAN INSOLVENCY LAW
3 POLICY CONSIDERATIONS FOR A REVISED REGULATORY REGIME
3.1 INTRODUCTION
3.2 THE ROLE OF THE STATE IN THE REGULATION OF INSOLVENCY LAW
3.3 THE REGULATORY FRAMEWORK
3.4 INSTITUTIONAL FRAMEWORK
3.5 LEGAL FRAMEWORK
4 CONCLUSION.
PART VII: RECOMMENDATIONS AND CONCLUDING SUMMARY
1 INTRODUCTION
2 PROPOSALS FOR LAW REFORM
2.1 INTRODUCTION
2.2 PROPOSED REGULATORY FRAMEWORK FOR THE SOUTH AFRICAN INSOLVENCY REGIME
2.3 INSTITUTIONAL FRAMEWORK
2.4 LEGAL FRAMEWORK
2.5 CONCLUSION
3 CONCLUDING SUMMARY
