Courts,Sentencing and Justice in a Changing Political and Managerial Context

This article examines the main developments over the past quarter of a century concerning courts and the sentencing of offenders. It does so in terms of an analysis of shifting political and managerial perspectives in criminal justice and tracks the twin changes, on the one hand, from post-war consensus on sentencing to the more populist stance of politicians towards the end of the 20th century and, on the other, towards a more managerialist approach in reorganizing and running the courts. A key issue identified here is the steady encroachment by an increasingly influential executive on judicial independence and the article concludes by considering prospects for the future in this regard.     

Commonwealth Convergence Toward a Narrower Scope of Auditor Liability to Third Parties for Negligent Misstatements

There have been fundamental shifts in the legal liabilities of auditors in the twentieth century. The article analyses myriad cases. It reveals that case rulings in the later decades moderated previous decisions that had resulted in an expansion of the scope of auditor liability. It shows that there has been a convergence in approach within Commonwealth nations in respect of auditor liability for negligent misstatements. Numerous factors are identified that explain, first the expansion of auditor liability in the early to middle decades of the twentieth century, and also its subsequent reversal in latter decades. The article concludes by arguing that the current positions not likely to remain. The decisions of the courts are shown to be the products of continual struggle to balance the respective rights and interests of auditors, investors (both current and prospective) and the wider community.     

Bondholder-Stockholder Conflict: Contractual Covenants vs. Court-Mediated Ex-Post Settling-Up

Bondholders have failed to respond to corporate restructurings by demanding more protective provisions; in fact, the trend has been toward fewer rather than more restrictive covenants. In this article, we model the use of contractual covenants as a trade-off between contract implementation costs and deadweight efficiency losses. We find that the current lack of restrictive covenants is arguably consistent with rational investor behavior. The key to this conclusion is the recognition that there is an implicit ex-post settlement component to debt contracts, which is enforced by the courts. A look at the behavior of the courts and of bondholders supports our point of view.     

Appointing and Remunerating Insolvency Practitioners in Japan: The Roles of Japanese Courts

Japanese courts play an important role in appointing and remunerating insolvency practitioners. This article examines the roles of courts on the basis of academic and practitioner literature, judicial decisions and interviews with practitioners and former and current judicial officers. First, the article focuses on the methods used to appoint practitioners and the evolution of the system at the Tokyo District Court, Japan's busiest insolvency jurisdiction. Second, the article examines the courts' roles in reviewing and setting practitioners' remuneration through another case study from the Tokyo District Court. Practices trialled and developed in Tokyo are often adapted for local purposes around Japan. The article argues that the courts' involvement has helped to keep the cost of resolving corporate insolvency in Japan down. The review and setting of remuneration deserves particular attention with the increasing prevalence of pre‐packaged and informal restructuring that prima facie appears to allow for greater freedom to set remuneration as between the practitioner and debtor‐client. The article uses a case study to demonstrate that pre‐packaged restructuring is still influenced by the court, however, arguing that the relationship between the court and practitioners remains important. Finally, the article suggests that changes in Japanese insolvency practice and external factors may require the courts and the profession to revisit approaches to appointing and remunerating practitioners. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

Prosecuting Insurance Fraud—A Case Study of the Massachusetts Experience in the 1990s

There is widespread agreement that insurance fraud is a major problem in the United States. There is little agreement, however, in what constitutes insurance fraud in the many articles and research papers published on the subject during the past ten years. The term ‘‘fraud’’ carries the connotation that the activity is illegal and, hence, that prosecution and conviction are potential outcomes of a specific fraud. Accepting that premise allows us to adopt the legal definition of fraud in the insurance context and to examine the experience of dealing with insurance fraud in terms of property‐liability insurance lines. Specifically, we examine ten years of data on referrals and disposals of incidents of suspected fraud as processed by the Insurance Fraud Bureau of Massachusetts to provide estimates of the distribution of types of people who perpetrate a variety of insurance frauds. We compile conviction rates, sentencing outcomes, and recidivism rates in detail to illuminate the law enforcement process and to gauge the deterrent effect of prosecuting insurance fraud in the criminal courts. The Massachusetts data lead us to conclude that the number of cases of convictable fraud is much smaller than the prevailing view of the extent of fraud; that the majority of guilty subjects have prior (noninsurance) criminal records; and that sentencing of subjects guilty of insurance fraud appears effective as both a general and specific deterrent for insurance fraud but ineffective as a specific deterrent for other crime types, as the recidivism rate appears no different from the general property criminal's recidivism rate.     

The Extra‐Territoriality of the Statutory Stay in an English Administration – Revisited

This note is written by way of an addendum to the author's article on the extra‐territorial scope of the stay imposed in an English administration which was published in this journal last year. 1 In that article, it was argued that the stay imposed in an English administration should be treated by the English courts as applying without territorial limitation but that the courts should nonetheless grant leave to proceed in other jurisdictions in any case where there is no sufficient connection with England. The purpose of this note is to reconsider the issue in the light of the decision of the Privy Council in Stichting Shell Pensioenfonds v Krys 2 on anti‐suit injunctions, where judgement was given some months after publication of the original article. It is suggested that the decision in Shell as to the circumstances in which an anti‐suit injunction will be granted has significantly narrowed the issue but that extra‐territoriality would nonetheless still be a desirable development.     

Legal enforcement,default and heterogeneity of project-financing contracts

This paper employs mechanism design to examine how imperfect legal enforcement impacts simultaneously the availability of credit for investment and interest rates. The analysis combines limited commitment, which encapsulates the idea that courts are imperfect, and asymmetric information about cash flows, which makes debt contracts optimal. Costly use of courts may be optimal, which differs from most limited commitment models, where punishments are merely threats, never actually applied in optimal arrangements. Paradoxically, liquidation by courts only happens in optimal arrangements when courts are imperfect. Credit constraints emerge, but even credit-constrained individuals do not borrow as much as they can. Consistent with stylized facts, wealthier individuals borrow at lower interest rates and run larger-scale enterprises. The reliability of courts has a positive effect on the scale of projects. However, its effect on interest rates is more subtle and depends on the degree of curvature of the production function.     

The Extra‐Territoriality of the Statutory Stay in an English Administration

This article considers the extra‐territorial scope of the stay imposed in an English administration and argues that it should be treated by the English courts as applying without territorial limitation but that the courts should nonetheless grant leave to proceed in other jurisdictions in any case where there is no sufficient connection with England. It argues that this solution would be right in principle and that the court is not constrained from adopting such an approach by precedent. Copyright © 2014 INSOL International and John Wiley & Sons, Ltd     

Shareholder access to manager‐biased courts and the monitoring/litigation trade‐off

Facilitating access to courts for outside shareholders is often viewed as a remedy against managerial opportunism. My model shows that, when courts are biased toward managers, reducing the barriers to shareholder suits can lower efficiency because it can lead to either excessive litigation or excessive monitoring of managers by shareholders. The latter effect implies that easy shareholder litigation may lead to a greater use of substitute mechanisms of corporate governance rather than more reliance on the judiciary. I also show that easy shareholder access to manager‐biased courts leads to the formation of more, rather than less, concentrated ownership structures.     

Digital courts and corporate investment in sustainability: Evidence from China

The construction of digital courts is a crucial measure to improve the judicial environment through the deep integration of judicial reform and digital technology. This study examines the impact of the judicial environment on corporate investment in sustainable development programs by exploiting a quasi-natural experiment in China that mandates certain provinces to promote the application of mobile mini courts. Our results show that shocked companies tend to devote more resources to supporting sustainable development. The result is robust to a battery of sensitivity tests. Further analysis suggests that judicial environment enhancement promotes corporate investment in sustainability through increasing firms' litigation risk, improving the protection of property rights, and reducing economic policy uncertainty. Moreover, the heterogeneity results indicate that the positive impact of the judicial environment on corporate investment in sustainability is more pronounced in firms with lower quality of judicial services, a larger size, lower risk preferences, or more significant analysts' forecast errors. In additional tests, we find that the facilitating effect of digital courts is more significant in provinces with less developed economies or higher internet penetration rates. We also find that constructing digital courts can also increase companies' disclosure of information about sustainable projects. Overall, our empirical results contribute to a deeper understanding of the influence of the judicial environment on corporate practices and mainly initiate a thought-provoking insight into how to encourage corporate sustainable behavior.     

Rainfall or Rainmaking? Lawyers,Courts, and the Price of Mold Insurance in Texas

In well‐functioning property‐‐liability insurance markets, the price of coverage reflects the impact of the legal environment on the frequency and severity of claims. This article presents a case study of the Texas mold insurance crisis of 2001–2002. We provide a narrative of the controversy in Texas over insurance coverage for household mold and use county‐level data from a single Texas insurer to assess the determinants of postcrisis prices for supplemental mold, slab, and extended water loss coverages. We find that more attorneys per capita and more heavily Democratic courts were both associated with higher prices for mold and slab coverage.     

International Recongnition of Foreign Insolvency Proceedings: The Canadian Perspective

The movement towards liberalization of world trade laws and the increasing economic interdependence between nations has increased the potential for international insolvencies. This article examines the extent to which Canadian courts recognize foreign insolvency proceedings and contrasts the Canadian approach with the approaches taken in the United Kingdom and the United States. La libéralisation des lois commerciales internationales et l'interdépendance économique croissante entre les pays ont augmenté les possibilités de faillites. Cet article examine dans quelle mesure les tribunaux candiens reconnaissent les procédures étrangères relatives à la faillite et contraste l'approche canadienne avec celles du Royaume-Uni at des États-Unis.     

The formative decade of Israel's reorganization law: 1995–2004

The article analyses closely the major developments that took place between 1995 and 2002, both as a result of legislation and judicial law making. In 1995, the Knesset, the Israeli legislature, enacted a moratorium statute. This statute stays all pending proceedings against a financially distressed corporation which has applied to the court requesting its reorganization through a compromise or arrangement scheme. The moratorium statute influenced significantly this scheme and effectively reshaped it in a reorganization‐friendly manner. The article submits that the moratorium statute has effectively transformed the nature of secured creditors' rights from rights‐in‐kind to rights‐in‐value. In addition, the article will demonstrate the relative contribution of both the Supreme Court and the district courts to reorganization law's development. The Supreme Court established the grand premises for judicial law making in corporate reorganization by holding that the statutory substantive norms which apply in corporate liquidation apply in reorganization as well mutatis mutandis. For their part, the district courts contributed to the law making in two primary aspects of corporate reorganizations: First, by requiring that in reorganization cases a court‐appointed trustee shall manage the corporation and negotiate on its behalf with the creditors. Secondly, the courts developed the practice of auctioning the firms undergoing reorganizations as a means for maximizing the return to the creditors. Copyright © 2005 John Wiley & Sons, Ltd.     

From Performance Measurement to Performance Enhancement: An Information System Case-Study from the Administration of Justice

This article describes a pilot initiative at the magistrates' courts of East Sussex, which was designed to promote better performance in administration. The project continues, but it is already possible to conclude that a transformation of some significance has been achieved: from 'information for monitoring purposes' to 'information for enhanced performance'. The process that has been set in place promises to achieve what a nationally-driven, more generalized and standardized approach has struggled to deliver for more than a decade.     

The Inherent Power of Common Law Courts to Provide Assistance in Cross‐Border Insolvencies: From Comity to Complexity

The weighty and difficult issues associated with cross‐border insolvency have generated considerable debate over the last two decades. Legislative reform has typically proven slow and fragmented. This article analyses the inherent power of common law courts to grant assistance in cross‐border insolvency proceedings and the basis on which the inherent power is exercised. In doing so, it seeks to explore how the inherent power may continue to be of utility to common law courts. In particular, it considers the position in jurisdictions that are yet to adopt the United Nations Commission on International Trade Law Model Law on Cross‐Border Insolvency or enact a substantial statutory regime for recognising and cooperating with foreign courts or representatives in insolvency proceedings. The article considers the benefits and disadvantages of continuing to recognise – and extend – the inherent power. It suggests that although there are fundamental differences concerning the exercise of the inherent power, it may be possible to agree on a number of principles that inform the application of the inherent power and its future development. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

维稳压力对基层法院组织形态的形塑

维稳压力是形塑中国法院组织形态的重要因素。在维稳工作中,基层法院与地方党政系统形成紧密的互需关系。一方面,基层法院通过行使审判职能和延伸审判职能的方式参与地方维稳工作;另一方面,在案件审理执行以及涉诉信访工作中,基层法院也需要地方党政系统的支持。在维稳压力的影响下,基层法院的组织形态进行了调适,形成以案件属性转化、责任体系再造、组织运行重构为主要内容的运作机制。经过调适的组织形态在很大程度上提升了基层法院应对维稳问题的能力,不过法官独立行权空间受到一定程度的限缩。在基础性社会矛盾突出的转型期,基层法院组织形态的建构与运行依然会建立在对维稳压力审慎考量的基础之上。     

The resolution of financial distress

Most models of financial structure embody an assumption aboutfinancial distress that causes debt to be costly to the issuingfirm. This approach has been criticized on the grounds thatthe assumed costs could be avoided by a costless financial reorganization.In this article we show that despite the possibility of costlessreorganization, it may be rational for firms to incur significantcosts in the resolution of financial distress. The main assumptionsthat give rise to our results are the existence of asymmetricinformation and of judicial discretion that allows courts toimpose a reorganization on the claimants of a firm.     

From contract to speech: the courts and CPA licensing laws 1921–1996

This paper explores the ways in which accounting, licensing legislation and the courts have intersected over time, shaping and reshaping the contours of the CPA's economic jurisdiction and thereby restricting and/or enhancing competition between CPAs and the uncertified. While much attention has focused on the use of legislation and favorable interpretations of these statutes as a means of obtaining and expanding exclusive areas of work, little work has considered the role of the courts as a forum in which to contest and thereby limit the expansion activities of CPAs. The courts have played an important role in deciding issues such as who can be called a CPA, who can be called an accountant and when can a CPA be called a CPA. In deciding these issues, the courts have relied upon shifting constitutional arguments to advance and curb the jurisdiction building activities of CPAs. Early arguments called upon notions of the freedom of contract to challenge legislatively imposed limits on who might perform accounting work. Such arguments were later supplemented and eventually supplanted by those based upon freedom of speech, a freedom only recently held to extend to commercial speech. These shifting arguments are traced in the paper which concludes with some observations about the changing significance of the CPA designation.     

Rules of proof,courts, and incentives

We analyze the design of legal principles and procedures for court decision making in civil litigation. The objective is the provision of incentives for potential tort‐feasors to exert care when evidence is imperfect and may be distorted by the parties. Efficiency is consistent with courts adjudicating on the basis of the preponderance of evidence standard together with common law exclusionary rules. Inefficient equilibria may nevertheless also arise under these rules. Burden of proof guidelines are then useful as a coordination device. Alternatively, guidelines are unnecessary if courts are allowed a more active or inquisitorial role in contrast to that of passive adjudicator.