Bankruptcy Reform in Russia

Résumé du livre

Russia at the dawn of the 21st century is experiencing a collapsing economy. In a world where healthy economies create and maintain capital, it is critically important that all efforts be made to assure creditors and especially private direct investors that in the event of debtor-insolvency their business interests are protected. The role of bankruptcy law under a regime of what I call "creditor rights" is limited. The court system can be used to avoid a "creditor's race" to grab assets. Whenever the "going concern" value of a firm is greater than the sum of its assets sold separately, a case can be made for a bankruptcy procedure as a way of protecting creditor rights. This paper examines the historical origins of the "creditor rights tradition" and advocates such a regime for modern Russia. This paper holds that especially with respect to Russia, we would do well to heed John Stuart Mill's advice and support reforms that favor creditors and protect the value of their rights. Those insolvent firms owned and managed by political oligarchs should be cut down, dismembered, and the assets they command transferred to new, more imaginative and solvent groups of managers. It is not the financial crisis or "short-term capital flight" that we must fear the most in Russia and the surrounding regions (as difficult as this phenomenon is for assuring investors that they will be able to repatriate the value of their original capital investments). Still, we must address the more serious problem in Russia which is the slow and steady process of disinvestment and capital consumption that heralds imminent social collapse. One small but crucially important step in stopping the capital outflow and the decline of long term investment and net export of the annual production of an increasingly impoverished nation is to adopt the older classical school call for creditor rights.