Legal Heterodoxy in the Global South: Priority of Workers versus Secured Creditors in Insolvency

Abstract

We examine how priority of workers’ claims vis-à-vis secured claims in insolvency varies across jurisdictions and over time as a window into the shifting treatment of distributional or social justice considerations in private law. Existing literature focuses on the extent to which laws in the Global South are either legal transplants from European countries belonging to the same legal family or have more recently adhered to “neoliberal” prescriptions from the United States or international organizations. Our findings highlight the limits of these theories by showing (i) Global South-driven legal innovation and diffusion, with Mexico’s 1917 constitution granting workers’ claims priority over secured claims nearly two decades before comparable French legislation was enacted, and (ii) significant persistence—and, in some cases, growing recognition—of priority for workers’ claims across jurisdictions, despite strong contrary pressures from international organizations such as the World Bank and UNCITRAL. We also discuss the role of state capacity in explaining legal heterodoxy in the Global South and describe the growth of sub rosa legal reforms that circumvent workers’ priority in bankruptcy through new categories of insolvency-proof security interests.