Page 172 [172]
TIBOR TAJTI
of bankrupt companies or their attorneys reacted upon by civil and criminal
contempt sanctions, should prove that.
Of egual importance are the myriad practical dilemmas of legal systems
continuedly struggling with making administration of bankruptcy cases more
efficient, as is the case in the post-socialist systems of Central and Eastern Europe
(CEE). Here, the garden variety of contemptible behavior of participants in the
bankruptcy process clearly present a major stumbling block, in addition to the
negative effects of the extremely intense bankruptcy stigma." Unfortunately, the
concrete appearance forms of demeaning behavior are evidenced more by anecdotal
evidence shared by those facing the defects in real life then by a sufficiently large
number of publicized cases; let alone academic studies. Figuratively speaking,
while the multi-faceted set of issues the law on contempt powers of courts is
made of is quite widely discussed among scholars and practitioners in the US, in
emerging legal systems is largely (if not completely) ignored.
For a practical example why US sources might serve as a toolbox for others let
us mention a concrete example from Hungary, where (similarly to other parts of
the region) the efficient administration of bankruptcy proceedings is contingent on
the willingness of the insolvent company’s officers to cooperate with the appointed
bankruptcy practitioner (IP, or trustee in the US). In fact, everything starts with
making properly composed financial reports available to the IP in due time. This
often is not achievable as courts have no means to speedily enforce their related
procedural orders as contempt of court rules are dysfunctional. Refusal to obey
turnover orders of bankruptcy courts, however, were forcefully dealt with in the
US, indeed, through the instrumentality of both civil’ and criminal* contempt
rules already in the 19 century.
As far as the European Union is concerned, irrespective of the increased
importance of cross-border insolvencies,’ the desire to overcome the bankruptcy
stigma, or the innovative tools designed for preventing wasteful liquidation of
businesses in financial distress,’° the impact of contemptuous behavior on the
efficiency of either cross-border, or preventive restructuring proceedings, has so
far escaped attention.
On how the bankruptcy stigma affects the attitude of individuals and officers of companies
vis-a-vis bankruptcy as a phenomenon, and howit cripples the administration of bankruptcy
proceedings, see Tajti, Tibor, Bankruptcy Stigma and the Second Change Policy: the Impact
of the Bankruptcy Stigma on Business Restructurings in China, Europe, and the United
States, China-EU Law Journal 6 (2018), 1-33.
” Oriel v. Russel 278 U.S. 358 (1929).
§ In Re Wiese 1 S.W.3d 246 (Tex.App. — Corpus Christi 1999).
Regulation 2015/848 on insolvency proceedings.
Directive 2019/1023 on preventive restructuring frameworks.
+ 170 +