Municipalities in Financial Distress: An Environmental, Social and Governance (ESG) Critique

Eugenio Vaccari, Laura N Coordes, Geo Quinot 

The treatment of local public entities or municipalities in distress is a largely unexplored area of law. The rules regulating these processes are often unaffected by the influence of legal principles developed in areas such as bankruptcy and restructuring law. Yet the insolvency of a municipality has a huge impact on local, regional, and national stakeholders. 

As municipalities cannot be liquidated, their crises present unique opportunities to address triggering factors and lay the foundations for their long-term “renaissance”. However, the regulatory approaches of the jurisdictions considered in this presentation (South Africa, the United Kingdom and the United States) fall short in promoting long-term solutions to address the causes of municipal distress.

This presentation outlines the results of previous comparative studies conducted by the same co-authors and the research carried out for a book commissioned by Edward Elgar Publishing and to be published by the end of this year. It also builds on the research and material collected as part of a multi-sectorial and multi-disciplinary project funded by the World Bank which acknowledged that insolvency regimes have a role in fighting the climate crisis and is calling for the implementation of “adaptive legal frameworks” and climate mitigation strategies in insolvency regimes.  

This presentation adopts a legal-realist perspective to investigate the extent to which environmental, social and governance (ESG) considerations play a role in shaping the content of the restructuring plans and strategies to turn around local public entities in distress. It discusses key municipal bankruptcy cases (Detroit, Croydon, Mangaung and more recent ones, such as Birmingham in the UK and Flint in the USA) and the current legal framework in the 3 jurisdictions considered in this presentation. The goal of this presentation as well as of the work of its authors is to promote a debate designed at fostering novel, fresh, creative, and flexible approaches to deal with the long-standing issue of municipalities in financial distress.

Students and transferring lawyers need to attend the whole event including the reception in order to claim a Qualifying Session.

This event is open to all members of the Inn. No guests.

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Learning Aims:

After this session, students should be able to:

• TBC

Links to the Professional Statement, wider workings of the Bar, administration of justice or a public interest matter

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