A History of Insolvency – part one

A History of Insolvency – part one...

Ancient Societies and Early Roman Law

Whilst no definition of the word “society” depends solely on the existence of trade between individuals, it is difficult to perceive of any society capable of flourishing without the development of commerce of one sort or another. Trade, if it is to be efficient and successful, leads to credit, debt and default and the development of society consequently gives rise to a need for a method of regulation of debt, in other words, insolvency law.

Ancient Mesopotamia

One of the earliest expositions of laws, The Code of Hammurabi from ancient Babylon, dating from approximately 1754 BC, included a series of laws concerning debt. For example, a debtor was permitted to pay his debt in produce according to a scale set by the Code and if a debtor had no money or produce, a creditor was not permitted to refuse to continue to supply him.

 

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The head of the Code of Hammurabi which takes the form of a basalt stele and is located in the Louvre in Paris.

A debtor could be seized personally as security for a debt but in such circumstances he could nominate his wife, child or a slave as a hostage to work off the debt.  The creditor could only hold a family member for three years and if a hostage died due to the creditor’s cruelty, the creditor had to give an equivalent member of his family in return, or pay for a slave.

The debtor could also pledge his property such as his house, land or crops. The Code stipulated that the debtor must raise the crop himself and pay the creditor from its yield, so that an early form of mortgage was applied. If the crop failed, re-payment of the debt was deferred, and the debtor was excused interest for that year.

The Code was so sophisticated as to provide that the whole of a debtor’s property could be pledged as collateral for payment of a debt, without any of it being passed physically to the creditor. Further, it provided for personal guarantees with the guarantor becoming liable to pay if the debtor defaulted.

Ancient Egypt   

Although it is thought that Ancient Egypt operated by a legal code, little of the code has survived. In early Egyptian civilisation (at least during the second millennium BC) there appears to have been no legal provision for debt enslavement and slaves were considered only as war plunder. However, there is evidence that the Pharaohs developed a tradition of proclaiming general debt cancellation.

Ramses III (1184 –1153 BC) and his son Ramses IV (1153-1146 BC) both made proclamations declaring the cancellation of arrears on taxes as well as the release of political prisoners and an amnesty for exiles.

By the 8th century BC Egypt had certainly developed a law providing for debt slavery as Pharaoh Bocchoris (717-11 BC) made a proclamation cancelling debts and freeing debt slaves. It is unclear whether the motivation for such proclamations was the avoidance of civil unrest. However Ancient Egyptian law appears to have been an aspect of the administration of the society dispensed by court officials according to the diktat of the Pharaoh. No doubt the Pharaoh was concerned to see that the peasantry at his disposal were available to produce food and serve in military campaigns rather than detained for other purposes by their creditors.

 to be continued.

Author:
Lewis Onions

Lewis Onions

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