CLP - Justice Driven Insolvency Law: A Normative Theory

Speaker: Dr Bolanle Adebola(University of Reading)
Chair: Lord Justice Zacaroli (Tax and Chancery Chamber President)

About the lecture 

This lecture responds to a longstanding challenge posed by the communitarian theory of insolvency: to interrogate the normative foundations of insolvency law and its dominant theories, and to elucidate more fully the values and assumptions that underpin the field. Gross, the leading communitarian theorist, contended that both the creditors’ bargain theory (CBT) and values-based approaches failed to articulate the philosophical basis of their claims, thereby leaving the field without a fully developed account of its normative foundations.

The CBT grounded its normative claim that the sole purpose of insolvency is to enable efficient debt collection in economic liberalism without articulating its broader values and implications. Though the values-based approach also rejected this narrow framing, arguing that insolvency law is shaped by multiple purposes and values, its best-known proponent, Warren, offered an empirical rather than normative theory of insolvency. Thus, although both leading theories offered alternative accounts of insolvency law, they failed, as Gross has argued, to engage with the philosophical roots of their own claims and their embedded implications. Gross’ communitarian theory, by contrast, self-consciously proposed a normative approach that included the debtor, its creditors and the public, arguing that insolvency law reflects the choices that society makes about how to treat failure in credit-based economics.

Fully engaging with Gross’ challenge, this lecture unpacks the philosophical roots of the three dominant insolvency theories, arguing that each is a theory of social cooperation, marked by both an identity of interests and conflict. Where conflict exists, fairness is engaged; and in social contexts, fairness becomes a question of social justice. Accordingly, the lecture advances two key claims. First, that each dominant insolvency theory implicitly professes a theory of social justice, though these remain neither fully articulated nor critically theorised. Second - and more importantly - that social justice is therefore not simply one value among others but the foundational and organising value of insolvency law. The lecture concludes by offering a Rawlsian account of social justice as a viable normative foundation for the field, and as a principled model for shaping both its doctrine and institutional design. Its insights are particularly relevant as the field seeks new theoretical groundings for the next generation of insolvency reform.

Image by Arek Socha from Pixabay

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