Multinational Enterprises and Tort Liabilities

Multinational Enterprises and Tort Liabilities

An Interdisciplinary and Comparative Examination

Corporations, Globalisation and the Law series

Muzaffer Eroglu

This book conducts an interdisciplinary and comparative examination of tort liabilities of multinational enterprises (MNEs). In the first part, it examines the social, economic, managerial and legal characteristics of MNEs and compares the findings of this examination to the current understanding of MNEs in the way that tort liability is applied to them. In the second part, the book examines the existing laws and principles related to liability of MNEs from a variety of jurisdictions with the aim of assessing whether these laws are adequate for the challenges that modern MNEs create. In the final part, Muzaffer Eroglu proposes solutions to the problems of tort liability of MNEs.

Chapter 3: The Legal Structure of Multinational Enterprises

Muzaffer Eroglu

Subjects: law - academic, commercial law, company and insolvency law, law of obligations


Introduction Historically, both in civil and common law systems, company laws are based on the concept of separate legal personality. It is assumed that a company is a distinct economic unit, which enjoys economic and managerial independence, and therefore must be considered as a legal person separate from its members. Legal personality gives great flexibility to an organization in structuring its affairs and facilitates creative exploitation of property rights. It also gives representative rights; they can sue and be sued, represent themselves in a court and can undertake obligations independent from its shareholders. Consequently the English, American and even new emerging European Community company laws are still based on theory of the independence of companies. The independence theory covers all companies, including single-member companies and wholly owned subsidiaries of MNEs. On the other hand, companies are creatures of national legal systems since they are incorporated in certain jurisdictions. They are tied to definite nationalities from different perspectives as well.1 However, in transnational economic activities, a single and independent national company exists only in theory. Since the emergence of modern company laws in the second half of 19th century, there have been speeches, teachings, litigation and legislation about company law but the primary reality today is not only the company, it is also company groups that have dominated the business world.2 Even small-scale economic activities might be structured to operate their business under a corporate group structure. The domination of corporate groups can apparently be seen in the case of crossborder...

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