International Corporate Personhood

Business and the Bodyless in International Law

Kevin Crow

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9780367231941
• eBook ISBN: 9781000390100
• Edition: 1
• Topic: Business
• Subtopic: Business Law
• Index: Business

This book tracks the phenomenon of international corporate personhood (ICP) in international law and explores many legal issues raised in its wake. It sketches a theory of the ICP and encourages engagement with its amorphous legal nature through reimagination of international law beyond the State, in service to humanity.

The book offers two primary contributions, one descriptive and one normative. The descriptive section of the book sketches a history of the emergence of the ICP and discusses existing analogical approaches to theorizing the corporation in international law. It then turns to an analysis of the primary judicial decisions and international legal instruments that animate internationally a concept that began in U.S. domestic law. The descriptive section concludes with a list of twenty-two judge-made and text-made rights and privileges presently available to the ICP that are not available to other international legal personalities; these are later categorized into 'active' and 'passive' rights. The normative section of the book begins the shift from what is to what ought to be by sketching a theory of the ICP that – unlike existing attempts to place the corporation in international legal theory – does not rely on analogical reasoning. Rather, it adopts the Jessupian emphasis on 'human problems' and encourages pragmatic, solution-oriented legal analysis and interpretation, especially in arbitral tribunals and international courts where legal reasoning is frequently borrowed from domestic law and international treaty regimes. It suggests that ICPs should have 'passive' or procedural rights that cater to problems that can be characterized as 'universal' but that international law should avoid universalizing 'active' or substantive rights which ICPs can shape through agency. The book concludes by identifying new trajectories in law relevant to the future and evolution of the ICP.

This book will be most useful to students and practitioners of international law but provides riveting material for anyone interested in understanding the phenomenon of international corporate personhood or the international law surrounding corporations more generally.

Chapter 1
The emergence of international corporate personhood

While the concept of corporate personhood – a corporation as a bearer of human rights – has been fermenting in the United States for well over a century, the concept of ICP is of relatively recent vintage. The aim of this chapter is to track the emergence of the ICP to better understand the various theories we might adopt in conceptualizing the ICP’s relationship to existing international legal frameworks. To do this, a helpful first step is to back away from the conventional view on international law which conceptualizes the discipline as primarily concerned with relations between States. As many passages in this book show, the conventional view is not only increasingly irrelevant because of innovations in treaty and case law, it is also based on fundamental misconceptions.¹ International law and some form of international corporation were born in virtually the same instant; one might even think of the state and the incorporated Church as zygotic legal twins, created quite intentionally to occupy two distinct aspects of organizational governance (II.). Against this backdrop, and in broad strokes for now, the chapter will follow the major transformations in the corporate form through time, from the Dutch East India Company to Westphalia the 1600s to the first industrial revolution to the post-WWII period to the present, drawing a red line from what began as a legal insulation for churches and universities, and what spent seasons as catalyst for colonization, public servant, capital agent, to what finally became a politically-empowered legal person. The zygotic twins of yesteryear became evolved to private chartered corporation and state rather than church and state (III.). However, the legal contours and associated rights and obligations of the corporate person are unclear, particularly in the international context. While Chapter 3 will spend considerable time exploring precisely what these contours are (and aren’t), this chapter explores three primary theories of the corporation in international law, extracts three primary theories on corporate personhood primarily from Anglo-American and European law, and finally links these threads together in describing the emerging concept of international corporate personhood (IV., V. and VI.). With these points aired, the chapter concludes with a discussion on the natural persons that compose the ICP and the international agreements that affect them (VII.). Before we embark, however, this journey will require a shared understanding of a few essential definitions and two essential distinctions (I.).

I. Definitions and distinctions

Legally defining international corporate forms and activity can be confusing. There are many terms used to refer to business enterprises that act in more than one jurisdiction; this section will set out a cluster of the most common concepts and acronyms for current and future reference as you progress through this book. The most common of term is Multinational Corporation (MNC) and a close second is Transnational Corporation (TNC). These entities can engage in Direct Investment (DI), Foreign Investment (FI), or both (Foreign Direct Investment, or FDI). They can also participate in Corporate Groups (CGs) and Corporate Networks (CNs). I set out legal definitions for each of these in subsection I.a. The term that I use with greatest frequency in this book is one that comes from the field of economics: Multinational Enterprise (MNE). Like the economists, I use the term ‘enterprise’ rather than ‘corporation’ to refer to the any multinational corporation, network of corporations, corporate groups, subsidiaries, or other business arrangements with some form of centralized control, but the term does not refer to any specific legal form. The ICP can be an MNC or a TNC and it can make up part of an MNE, and all of these corporate forms can possess International Legal Personality (ILP). However, while the ICP always possesses an ILP, as a legal category, the ICP has characteristics which are distinct from other ILPs. Much ink has already been spilt over the treatment of ILPs generally, but while the ICP may possess some of the general characteristics of most ILPs, it is also distinct from any other form. I endeavor to make this distinction crystal clear in subsection I.b.

a. Definitions

The first use of the term Multinational Corporation has been attributed to David E. Lilienthal who, in April 1960, gave a paper to the Carnegie Institute of Technology on ‘Management and Corporations 1985’ which was later published under the title ‘The Multinational Corporation’. Lilienthal defined MNCs as ‘corporations… which have their home in one country but which operate and live under the laws and customs of other countries as well’.² The typical economist’s definition of a ‘multinational enterprise’ is any corporation which ‘owns (in whole or in part), controls and manages income generating assets in more than one country’.³ The separation of ownership and control is an essential feature of the modern MNE. Another important feature to note is the direct control over investments, rather than simple portfolio investment. Yet it allows for a conceptualization of international economic activity broader than the typical parent–subsidiary legal relationship.

In its most recent definition, operational since 1978, the UN Commission on Transnational Corporations in Word Development drew a distinction between ‘multinational corporations’ and ‘transnational corporations’. While I will not be using this distinction in this book, many UN documents consider enterprises owned and controlled by entities or persons from one country but operating across national borders as ‘transnational’, whereas enterprises owned and controlled by entities or persons from more than one country are considered ‘multinational’.⁴ The now shelved UN Code of Conduct – which will be discussed at greater length in Chapter 2 – collapsed this distinction into TNCs, stressing control as the defining factor.

The OECD book Guidelines on Multinational Enterprises goes one step further, loosening the requirement from control to coordination:

[Multinational Enterprises] usually comprise companies or other entities established in more than one country and so linked that they may co ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, state or mixed.⁵

According to this definition, the ability to coordinate activities between enterprises in more than one country is the salient factor defining an MNE. Other factors are not decisive. The definition is, therefore, broad enough to encompass both equity and non equity based direct investment, regardless of the legal form, or ownership, of the undertakings. The OECD definition is the one I adopt going forward. The ICP, by contrast, focuses on a specific characteristic of the MNE. Namely, the characteristic of being bound to international law as a subject – as a holder of rights and as a bearer of duties or obligations.

The final two definitions are necessary to describe the organizational structures of MNEs: Corporate Groups and Corporate Networks. CGs are typically characterized by a hierarchical structure in which one firm exercises control over other firms in a multinational group. The most common example of this is when one firm owns a majority of voting shares in another firm, but control can arise from a variety of arrangements, including from minority shareholdings. For example, circular holdings might create equality between three firms, but it could be that two of them are dependent in some other way upon the third. Two quick examples: if A holds 40% of B, B holds 40% of C, and C holds 40% of A, but all three firms share common management and A provides services without which B and C could not operate, A controls B and C; or if A holds 40% of B and B holds 40% of A, but both firms share common management and hold controlling shares in C, D, and E, then A and B jointly control C, D, and E. The key factor that distinguishes a CG from a CN is this hierarchical element of control.

CNs are systems of contracts, medium-term commitments, or repeated transactions. In the case of Networks, the element of control is notably absent. Moreover, the varied members or ICPs that can make up a Network do not need to share any joint purpose. Presumably, they all share the aim of being profitable, but they are not coordinated toward that aim together. They are rather using each other to achieve that aim. Contrast this with a Group which might operate a controlled member at a loss so long as it increases the profits for the Group as a whole.

b. Distinctions

The ICP is legally (if not physically) distinct from the MNE. It is a term I introduce to describe a post-millennial phenomenon in international law. Most of the aforementioned conceptualizations were settled in the late 1970s and early 1980s, before the U.S. concept of corporate personhood began to manifest widely and internationally through the auspices of arbitral awards concerning international trade and investment agreements. Many scholars have wrestled with the question of what duties corporations might owe to States or to individuals under international law, and these are important parts of my concept of the ICP, but what I add to the conversation here is the phenomenon of judge- and self-made rights owed to corporations through international law. As we have seen, the conventional definitions of the MNE are primarily concerned with ownership and control. Because these definitions come from economically focused organizations, they concern themselves with how corporate property and corporate liability can be structured on the international stage, that is, under which circumstances can a home state parent company be said to ‘control’ a host state subsidiary, thereby opening a path to parent liability for a claimant in the host state? MNE definitions are therefore focused on the transactional, territorial, and property-based aspects of international business organizations. By contrast, the ICP is a term that describes the phenomenon of profit-driven corporate forms acquiring rights of two types: (1) rights historically accorded only to natural persons on the international stage, for example, social and political rights in international law; and (2) rights that belong only to ICPs, not to natural persons, States, or any other form of legal personality, for example, access to deferred prosecution agreements under international anti-corruption law. Both persons and things can have passive rights (rights exercisable ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication Page
• Contents
• Introduction: the status quo
• 1 The emergence of international corporate personhood
• 2 The international corporate person in international law: judge-made law
• 3 The international corporate person in international law: texts and practices
• 4 Theorizing international corporate personhood
• 5 Political bodies and the bodyless
• Conclusion: beyond sovereignty, beyond the veil
• Index