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Melanie Johnson MPThe 2001 INSOL Congress |
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President, Congress Chairman and Delegates, I am delighted to be able to welcome you - from so many places throughout the world - to London for this INSOL Congress. I am very sorry that I was unable to be at Lancaster House to meet some of you on Monday evening - you may have seen from headlines in the Press that the phrase "pressures of parliamentary business" was, for once, entirely accurate! I hope that those of you who were present enjoyed the dinner. I also hope those of you who have the time will also take the opportunity to get out of London and into the country which is very much "open for business"! I moved from the Treasury where I was Economic Secretary to become Minister with responsibility for insolvency matters following the recent election. I am very pleased to make my debut (as it were) on insolvency issues to such a prestigious gathering of international professionals. The theme of your Congress is "evolution" - or should I say in the words of e-commerce "e-volution", as you take stock of the changes that have impacted on the world of insolvency since your last Congress in 1997, held in New Orleans. Changes there certainly have been and on a global scale. Few people present in New Orleans in 1997 might have predicted that the period of steady growth in the US and the UK economies would have continued for so long. Low inflation and economic stability, the priorities for the first term of our government, have provided an environment here in the UK which has proved excellent for business, for growth and for employment. The challenge for our second term is enterprise and productivity. We are determined to extend the opportunity to create wealth to everyone by helping more people to start and grow their own businesses. Put simply, we want the UK to be one of the best places in the world to do business. In order to do that we need to encourage more people to turn their ideas into new enterprises. In providing that encouragement we have to recognise that, with the best will in the world and no matter how hard some people try, not every business will succeed. We in the UK need a modern insolvency system which can ensure that the price - legal, economic and social - of financial failure is not so high that people either do not have a second chance or cannot bring themselves to try again - or, worse still, were put off trying in the first place by a fear of failure. The reforms to insolvency law that we are planning to make in the forthcoming Enterprise Bill will reduce the penalties for honest failure. But we will provide a robust regime for dealing with those who abuse their creditors. We will also seek to ensure that businesses do not fail unnecessarily, and will follow the recent lead of several other jurisdictions by abolishing the preference the government has as a creditor in insolvency proceedings. We are not alone in pursuing reform. Within Europe, following the Lisbon and Feira Councils, the European Commission has been working with member states to identify and promote best practice in the area of insolvency reform as part of its Programme for Enterprise and Entrepreneurship 2001-05. Research undertaken in support of that programme by the Boston Consulting Group clearly identifies the potential contribution that "re-starters" can make to the increasing dynamism of all our economies. But ensuring that markets are as dynamic as possible is not the complete picture. As I have remarked earlier, a properly functioning market must imply that, at some time, there will be some failure no matter how benign economic conditions may be generally. Within the developed economies we have seen the spectacular flowering of Internet businesses and, in some instances, the equally spectacular collapse of them. But the future surely lies with high-tech, high-added value business. The so-called "dot.bomb!" companies will almost certainly be seen one day as pioneers. Their experience shows that it remains impossible to buck the fundamentals of the market - at least for very long. Where there is no substance to any business it will fail when the cash runs out. All that remains is for your profession to see what can be salvaged from the wreck. But for the most part it remains true that if action is taken early enough many businesses can be saved, in whole or at least in part. If few predicted the relative stability and benign economies we have enjoyed in the West, even fewer would have foreseen the problems which beset many of the south-east Asian economies from 1997 onwards. The extension of world trade, and with it an increase in foreign investment, will benefit everyone in the world economy, not least the developing countries. But the financial crisis in South East Asia showed that the development of a modern and effective legal infrastructure, particularly to cover situations when things go wrong, was as important as ensuring economic development itself. In some Asian countries many foreign investors seemed to be totally unaware of their position in the event of financial failure and were shocked to realise how exposed they were. As a result there is a widespread and increasing recognition that insolvency systems are not just about the mechanisms for dealing with liquidation and bankruptcy, but are an integral part of national and global frameworks needed to create efficient markets, encourage investment and generate economic growth; and there is a growing awareness of the importance of arrangements for dealing with cross-border insolvencies. The lack of transparent and predictable insolvency regimes will inevitably prove a considerable barrier to any expansion of trade and investment. It is all the more satisfying to see the problem being made the subject of such widespread and high-level efforts. It is right therefore that I should pay tribute to the support that INSOL has given to the range of multi-lateral initiatives in this area. A prime example is that given to the development by the World Bank, in collaboration with the International Monetary Fund, the Inter-American, African and Asian Development Banks, the European Bank for Reconstruction and Development and other international bodies, of the "Principles and Guidelines for Effective Insolvency and Creditor Rights Systems" which were finalised in London earlier this year. I should also mention INSOL's support for the OECD, the Governments of Australia and Japan and the Asian Development Bank, in their sponsorship of the annual Forum for Asian Insolvency Reform. I was pleased that the UK could play a direct role in helping this process of reform around the globe; and that my Department's Insolvency Service has been able to contribute positively to the various international initiatives. The work of UNCITRAL [United Nations Commission on International Trade Law] in producing the "Model Law" (which we in the UK propose to take into domestic legislation at an early opportunity) also benefited greatly from INSOL's support and co-sponsorship. But I recognise that INSOL's contribution has not been limited to supporting the work of other organisations. The INSOL Lenders Group has broken new ground with the publication of its "Principles for Multi-creditor Workouts", a valuable addition to the range of formal insolvency, rescue or reconstruction procedures that exist throughout the world. And now INSOL has produced its Report on Consumer Debt across jurisdictions which provides much needed information and analysis in this area. The subject of consumer over-indebtedness and of the increasing level of consumer bankruptcies is one which is of concern to many governments. The encouragement of responsible borrowing and responsible lending is something we in the UK have very much in mind, particularly in the context of our proposed reform of bankruptcy law. We are not in the business of creating "debtor's charters" or of encouraging serial bankruptcy. Creditors' interests must be protected and we will ensure that they are. That leads me to one final concern which I know is shared in every jurisdiction - the cost of insolvency or rescue procedures. For creditors and debtors what matters most is the maximisation of the value of available assets and the transmission of as much of that value as possible to the parties with an interest. I am sure that INSOL will play a full role in ensuring that the development of effective insolvency systems throughout the world is carried forward with a keen eye for cost and value for money. You have a full and varied programme to look forward to - one which draws on the widest possible range of experience in the world of insolvency. The exchange of that experience can only help generate the understanding needed to bring coherence to our different systems and minimise the impact of financial failure at the local, national and global levels. I am sure you will have a most successful Congress. Thank you. |
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Other speeches by Melanie Johnson MP
(the following are available from the archive) |
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