By Sarah Paterson (London School of Economics & Political Science)
In a recent article, I argue that we have repeatedly failed to identify clearly our concerns for fairness in different types of debt restructuring situations, and that this has confused corporate bankruptcy policy debate. To defend the article’s thesis, I build a theoretical frame by unpacking the principles and the procedural demands of fairness from diverse fields of scholarship such as moral and political philosophy, biological sciences, psychology, organisation theory, group theory and economics. I apply this theoretical frame to three very different types of debt restructuring: a restructuring of a small or medium sized enterprise; a restructuring of a large corporate; and a restructuring of a financial institution in English law. In each case, a fairly typical fact pattern is outlined to ground the analysis, and the quality and extent of the fairness concerns examined.
The analysis in the article concentrates exclusively on fairness. It does not consider the trade-off between fairness and other objectives (such as cost reduction), or utilitarian objections (such as concern that a situation which differentiates between classes of stakeholder in its approach to the fairness of the case would make stakeholders worse off overall), or arguments that what we might consider to be questions of fairness should properly be reinterpreted as economic questions. In short, its objective is not to argue that fairness should prevail over all other considerations, but rather to explore, as an initial question, the quality of fairness in each of the situations with which it is concerned.
S. Paterson, ‘Debt Restructuring and Notions of Fairness’ (2017) 80(4) Modern Law Review 600 available here.