What Can Restructuring Laws Do? Geopolitical Shocks, the New German Restructuring Regime, and the Limits of Restructuring Laws

Abstract

In this article, I discuss the possibilities and limitations of restructuring laws against the background of geopolitical shocks such as the Covid-19 pandemic and the current energy crisis. I make two claims, one narrow and focused on German bankruptcy law, and one broad with a cross-jurisdictional reach. My narrow claim relates to ‘StaRUG’, the new German restructuring regime. I argue that this law is a superfluous and flawed instrument. It should be repealed. My second claim is much broader. I argue that bankruptcy laws, including restructuring laws, are generally ill-suited to deal with the economic consequences of geopolitical or macroeconomic shocks as a ‘first line of defence’. Bankruptcy laws are not designed to provide the structural assistance at scale which the businesses affected by these shocks need. At the same time, massive state aid for distressed businesses in times of crisis and, in particular, ad hoc bailouts of large critical firms are also problematic. I propose that firms’ resilience against geopolitical or macroeconomic shocks should be strengthened, and that best practices (‘Principles’) for bailouts should be developed.