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

This study examines 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. The comparative literature has traditionally focused on the extent to which laws in the Global South are 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. At the same time, recent scholarship on legal heterodoxy suggests that Global South jurisdictions have innovated in incorporating broader distributional or public policy objectives in private law. Our findings provide evidence of legal heterodoxy and highlight the limits of dominant views by documenting (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 explore the role of state capacity in explaining legal heterodoxy in the Global South and describe the emergence of sub rosa legal reforms that circumvent workers’ priority in bankruptcy through new categories of insolvency-proof security interests.