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| How law spreads |
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| Written by Brian Micklethwait | |
| Monday, 23 October 2006 | |
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There is a fascinating posting up at the China Law Blog (all who regularly visit this blog should at least irregularly visit that one) about the new bankruptcy law that will go into action in China on June 1st 2007. China's new law provokes from Dan Harris some fascinating recollections about Russia: Many years ago, I represented a creditor with a fairly small claim in one of Russia's first bankruptcies. I sent a freshly minted law school graduate to the creditors meeting on Sakhalin Island (he was already on Sakhalin for other reasons) to monitor our client's interests. I envisioned his role would be to babysit our client's claim. Within days, this new associate was calling our office with all sorts of technical American law bankruptcy questions. Turns out the Russian lawyers and the judge were essentially relying on our new associate to run the bankruptcy because none of them had any familiarity with bankruptcy and they were looking to "the American" to explain it to them. I can see that same sort of thing happening in some of China's courts as well, particularly if the foreign lawyer involved in the bankruptcy speaks Chinese.Indeed. China needs a better bankruptcy law, for reasons Harris quotes Wen Liao explaining. (Ms Liao has a BA in English literature from the University of Sichuan International Studies, ChongQing, China, and is now based in London. Whether she grew up in Britain or China is unclear, but guess: China.) Basically, says Ms Liao, failed businesses have to be shut down in a way that minimises the inevitable grief to employees and creditors but does not render it permanent with permanent subsidies to the failed enterprise, thereby enabling resources to move towards more successful enterprises. But how do such laws work? Even as the USA and other rich countries outsource their manufacturing to those nimble new companies in China (that need the new bankruptcy law for if they aren't nimble enough), the rich countries can do new kinds of business, explaining things like the detailed workings of bankruptcy laws to their new partners. |