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 7: Liability Options Beyond the Group Liability Discussion

Muzaffer Eroglu

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


Introduction As discussed in the first part of this book, the strict principles of company law have caused problems in the MNEs’ tort liability context. Therefore scholars and regulators are searching for relief of the MNEs tort problems outside the narrow sphere of group liability discussions as alternatives to deadlock in company law principles.1 Here I wish to discuss some examples of alternative solutions suggested, within commercial law, to the MNEs’ tort liability problems: mandatory insurance, parent guarantee for subsidiaries’ debt, and changes in insolvency laws. Also, I will briefly mention some options within company law: directors’ duties and disclosure requirements. As a wider alternative to accountability and liability problems, corporate social responsibility (CSR) movements and voluntary code of conducts will be discussed in more detail. Options within Commercial and Company Law The preference in favour of involuntary creditors in insolvency can be considered as a solution to tort liability problems for group of companies. Leebron and Thompson have argued that financial creditors should be deferred to tort claimants in a liquidation procedure.2 Professor Davies also suggested that, in some jurisdictions, part of a solution to the group problem is to be found in insolvency law, where the court may be given discretion in certain circumstances to bring a solvent company in the group into the insolvency of another company in that group.3 However, this option is very superficial because changes in in- 1 Easterbrook, Frank H. and Fischel, Daniel R., The Economic Structure of Corporate Law (Harvard University Press,...

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