2.4.2. Independent Policies of(Re)D>istribution and Deployment

Many rules of distribution do not relate to the interests of deployment. Instead, they

aim to protect specific classes of creditors (employees, tax authorities) independently

from the question of deployment. Strictly speaking, to accept independent distributional

policies as mandatory requirements under the freedoms of Community lawwould

only be possible if Community law would not generally restrict the legitimate

objectives of insolvency proceedings to the maximisation of the value of the estate.

To protect particular creditors or other interested parties not recognised as creditors

under non-insolvency law by rearranging the pie-insolvency entitlements undermines

insolvency law's ability to preserve and enhance the estate's value for the benefit of

the creditors. Independent distributional policies produce 'perverse incentives' for

groups of creditors to (ab)use the insolvency system for individual benefit rather than

for the benefit of the collective and are incompatible with the goal of maximising

creditor return. In the words ol Jackson: 'Bankruptcy law cannot both give groups new

rights and continue effectively to solve a common pool problem'. !" Within the limits

of the economic account's own parameters this is generally recognised. The critique

against the economic account of insolvency law i s not so much aimed against its 'logic

and limits'. Rather, it takes issue with the account's (unsupported) premise from which

the 'logic and limits' follow, that historically insolvency law is a debt-enforcement

device solely for the benefit of the c r e d i t o r s . 1 " However, once accepted that insolvency

law's objectives are properly limited to value maximisation, then, strictly speaking,

a valid argument can be made for rejecting the adoption of independent distributional

policies. It has in this context been pointed out that the risk that insolvency-specific

rules of distribution may result in strategic creditor behaviour does not affect the

ability and appropriateness of those rules to protect certain creditor groups.1

Independent distributional policies would therefore not fail the Community law

requirement of appropriateness under the law of the freedoms. This in itself i s correct,

but misses the point: Allowing for independent distributional policies risks rendering

the rules of deployment and not those of distribution ineffective, resulting in the

unlawfulness of the former not the latter.

As discussed above, the freedoms appear to leave the Member States little room to

pursue interests other than value maximisation through their insolvency laws. On the

other hand, the proportionality test under the economic freedoms does allow Member

I Section T w o . C o m m u n i t y Law a n d C r o s s - B o r d e r I n s o l v e n c y R e g u l a t i on

proceedings such as the Dutch surseanee van betnling aiming at the prevention of

insolvency.1"

The underlying problem in A bels was one of priority in insolvency.1 The compulsory

transfer of the entitlements of the employees to a new and solvent employer essentially

absolves the employees from the risk of their claims not being met in the insolvency

proceedings of the transferor. However, this benefit for the employees comes at the

other creditors' expense. The transfer of contractual rights of employees and the

corresponding employer liabilities will reduce the price third-party buyers are willing

to pay for the insolvent business as a 'going concern'. There will therefore be fewer

proceeds available for distribution among those remaining creditors.'"'" By allowing

Member States to decide whether or not to extend the protection offered by the

Directive to situations of insolvency (liquidation) proceedings, the Court seems to

implicitly accept redistribution in insolvency independent from value maximisation.1 ''