Insolvency in Administrative Contracts under Jordanian Legislation: An Analytical Study

Abstract

This study examines the legal effects of insolvency in administrative contracts under the Jordanian legislative framework, focusing particularly on the implications of declaring the insolvency of a contractor dealing with a public administration. It analyzes Article (32) of the Jordanian Insolvency Law No. (21) of 2018 and explores how such declarations impact the validity and continuity of administrative contracts.

Using a descriptive-analytical methodology, the study highlights both the legislative text and relevant international standards, as well as legal scholarship. The findings reveal shared interest between public administration and insolvent contractors in preserving the contractor’s economic activity to ensure the uninterrupted functioning of public services. Article (32) provides a general rule that insolvency alone does not automatically terminate administrative contracts, provided the contractor’s economic activity continues. However, it also grants the administration discretionary power to terminate the contract where objective risks are identified.

The study recommends creating a dedicated chapter within the Jordanian Insolvency Law to address insolvency in administrative contracts, in recognition of their special legal nature. It also urges legislators to limit the administration’s discretionary authority by linking it to clear and verifiable indicators of risk, to prevent arbitrary contract termination.