The phenomenon of a “city” has always fascinated me. For instance, the historical roots of urban development, the acquisition by a city of its own “city rights” by the incumbent ruler, many centuries ago (at least in the Netherlands). See my recent book, written (in English) with historian Maurits den Hollander, titled Palace of Commerce: Amsterdam’s City Hall in the Seventeenth Century. This building, since 1808 the Netherlands Royal Palace in Amsterdam, served for over 150 years as Amsterdam’s City Hall during the “Dutch Golden Age”. Its size and splendour reflect the city’s prime position in international trade across the globe, as well as the dignity of its urban regents and administrative officials. This year, 750 years ago, Amsterdam has received its city rights. Celebrations are still ongoing. This town hall in the 17th century housed a large collection of offices and courtrooms. It even included a prison! Our book describes what originally happened in this large building. As an example, the famous painter Rembrandt applied at one of the courts for “cessio bonorum” (consensual transfer of its estate to creditors). For the book, see https://verloren.nl/Webshop/Detail/eid/92746.
But it could also be a city seeking its own position beyond its national borders, with many ambitions and activities in the global market place (see https://bobwessels.nl/blog/2021-12-doc10-a-city-and-its-role-in-international-law/.
Today, a city’s problems seem to be of a completely different order. Cities worldwide are confronted by escalating financial challenges. The book Municipalities in Financial Distress, shortly announced here, delves into the complexities of municipal financial distress through the lens of Environmental, Social, and Governance (ESG) considerations. By the way, the term “city” in the book, is hardly used. The authors use municipality or local authority and similar wording. These authors are legal scholars Eugenio Vaccari, Laura N. Coordes, Yseult Marique, and Geo Quinot from the UK, the US and South Africa. Their contributions are presented not individually, but as a collectivity of writers.
The book certainly is a timely and insightful contribution to the (rather only beginning) understanding and discourse on municipal financial distress and insolvency. They start with a theoretical framework. Where the contents-page is just half a page, it is not easy to read this – as such interesting – piece of over 60 pages, without having the structure of the chapter’s organisation in front of you.
Then the authors present a comprehensive examination of how the UK, the US, and South Africa address municipal financial distress. Not surprising, but for the first time provided with clear argumentation, these (common law) countries employ rather diverse strategies to manage and restructure financially troubled municipalities. And the differences are certainly huge. In the US with its Chapter 9 bankruptcy proceedings, allowing municipalities to reorganize their debts under federal oversight, whilst in the UK a formal bankruptcy mechanism for municipalities is absent, relying instead on central government interventions.
While the regulations regarding these debtors are already structurally different, the authors add their own perspective to their possible improvements based on ideas that have not yet been clearly developed in legislation. Their point is that traditional approaches to municipal insolvency often overlooks the broader environmental, social, and governance impacts of financial decisions. They argue that by incorporating ESG considerations, municipalities can adopt more holistic and sustainable strategies for financial recovery. They present pragmatic recommendations in a so-called modular decision-making framework, that tailors interventions to the specific needs and contexts of distressed municipalities.
It’s difficult to imagine a concrete implementation of a specific distress situation in a city. While businesses might (potentially) expect a one-to-one application of ESG, will the media and politicians handle it as straightforwardly? It will be a great challenge to manage the approach of the authors into a concrete plan when the hypothetical municipality is in financial distress.
It’s difficult to really grasp the book, especially since the topic of municipalities in insolvency law is still rather underdeveloped. In the (civil law) countries I have some knowledge about, these municipalities are embedded in the financial and political governance structure of a province or country. This places them on the borders or even outside national insolvency legal systems. Also, ESG itself is in a state of continuous development. In trying to better understand the specific problem of a municipality, the embedding of a municipalities’ initiatives, public services and actions could have been more clearly defined. How are debts handled that a municipality owes to higher and other public bodies? What is the role of public supervisory bodies? And, how does this compare with claims of commercial third parties? Can the ESG approach be transferred to municipalities, as the social and political desiderata are often already assessed according to public standards applied within their own constitutional structure? And how do you measure the influence of ESG considerations by one municipality compared to those of another (which is very reluctant to do so). And is that fair?
The fact that I still have many questions doesn’t change my view that this study is breaking new ground. Relatively unknown topics are connected and examined through a comparative lens. The interdisciplinary and inter-jurisdictional approach to a theme on the borders of public law, insolvency law, public finance, public policy, and practical governance, make the book an enriching and indispensable starting point for anyone interested in the topic. Readers will most probably be regulators, policymakers, legal-policy think tanks, local regulators as well as scholars in these fields. Or, just like me, persons fascinated by the phenomenon “city”.
Eugenio Vaccari, Laura N. Coordes, Yseult Marique, Geo Quinot, Municipalities in Financial Distress: An Environmental, Social and Governance Critique, Edward Elgar, 2025. ISBN 9781035319909.
Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at www.bobwessels.nl.