DescriptionInsolvency, bankruptcy and changing morality in 19th century Netherlands
How to get insight in the changing morality surrounding insolvency and bankruptcy in the 19th and early 20th centuries? Did the – public or legal – opinion about insolvent debtors change in the course of the 19th and early 20th centuries?
During the 19th and early 20th centuries, the legislative framework remains more or less the same: insolvency is the state in which a debtor is if he cannot pay his debts; merchants go insolvent (in faillissement); other persons go into a state of apparent inability (in staat van kennelijk onvermogen). No moral qualifications played a role. Punishable were commercial debtors that had made excessive payments before the insolvency (simple bankruptcy) or had knowingly impaired the interest of creditors before or during the insolvency (fraudulent bankruptcy). Subjective qualifications basically failed in consecutive delictual descriptions. With exception of a rather pedantic draft Criminal Code of 1804, during the Batavian Republic, all relevant codes principally fit in this framework: the Code de Commerce and Code Penal (1811), the Bankbreukwet (1837), the Wetboek van Koophandel (1838), the Wetboek van Strafrecht (1886), the Faillissementswet (1896). Importantly, however, the Criminal Code (1886) made bankruptcy crimes equally applicable to everyone, merchants and other persons alike.
Between the 1840s and 1920s, there appears to be a majority within Dutch legal doctrine that emphasize the ‘neutrality’ of an insolvency as such: the Commercial Code (1838) and the later Insolvency Code (1896) do not distinguish between ‘honest’ but ‘unfortunate’ debtors, and ‘dishonest’ debtors, according to these scholars. During this period, some scholars supported, however, the introduction of such distinction within Dutch commercial and insolvency law.
Even in judicial decisions on insolvency and even (fraudulent) bankruptcy between 1840s and 1920s, the morality of debtors is rarely discussed: unsurprisingly, given the objective qualification of insolvency in the commercial code (1838) and the equally objective description of (fraudulent) bankruptcy in the bankruptcy code (1837) and criminal code (1886) respectively. Only coincidentally or rather, very much depending on the facts of a case, a debtor’s morality plays a role in the proceedings.
To nevertheless gain some insight in a possible changing perspective on insolvency and bankruptcy, the judicial and insolvency statistics of the Netherlands between the 1850s and 1920s are analysed. Admittedly, two trends can tell something about such changing perspective and morality in respect of insolvency, viz. the insolvency-bankruptcy ratio and the insolvency recidivism rate.
The insolvency-bankruptcy ratio looks at the number of insolvencies in a certain year and in how many insolvencies debtors were subsequently prosecuted for (fraudulent) bankruptcy. If an insolvent debtor is charged with (fraudulent) bankruptcy, this admittedly indicates that the public prosecutor (i.e. the government) did not trust this insolvent debtor to have acted in good faith. This insolvency-bankruptcy ratio drops quite considerably between the 1850s and the 1920s, from around 20% to (far) less than 1%, which admittedly indicates that more insolvents are considered to act in good faith.
The insolvency recidivism rate indicates how many insolvents have already faced (multiple) insolvencies before a current insolvency. This indicates whether society accepted formerly insolvent persons to doing business again. The stigma of insolvency does not prevent a former insolvent person to participate in commerce again – and also to go insolvent again. Between around 1900 and 1920 the insolvency recidivism ranges between 6% and 9% of all bankruptcies in a given year. Admittedly, Dutch society allowed former insolvents to again start a company or business.
Some tentative conclusions will be drawn explaining this changing perspective on insolvency during the 19th and early 20th centuries in the Netherlands.
|Period||28 Oct 2022|
|Event title||Debt or Sin ? The Moral Roots of European Legal and Economic Thought|
|Degree of Recognition||International|
- Private Law
- Comparative Law