Vivian Grosswald Curran, Harmonizing Multinational Parent Company

Liability for Foreign Subsidiary Human Rights Violations, 17 Chi. J. Int'l L.

403 (2016)
After World War II, in U.S., the issue of extra territorial jurisdiction arose. The
main issue was that, the conflicting interests of the two states are there to control
trade against an enemy state and keeping the national policy as restricting the
trade of the third parties (countries). Then at that time the issue of individual
human right violations and the victims of it were reduced. But now the focus was
shifted on the Multinational corporations. As per the reports, in the world
according to the 1970, there are 7,000 MNCs and in 2009, it increased to 82,000.
And now there are almost 100,000 companies where as it has its own subsidiaries,
about 900,000. And among those, more than 50 become the largest economies.
And about 500 companies are producing the half of the world’s trade. UDHR
framed an International Legal standard for Human Rights. From then, these
human rights were effecting on every field. So, this led to observation of human
right abuses in the corporate era. Generally, there is a doctrine called, corporate
veil piercing which is used in the exceptional circumstances to lift it up when
there is a wrongdoing. As a single Multinational corporations has hundreds of
subsidiaries in different nations, this doctrine is used to make separate legal entity
to the parent company and subsidiary company. And these subsidiaries are
committing the human rights violations. This concept of corporate veil piercing
is to protect the investors of the subsidiaries who were not individually
responsible for the financial liabilities. The liability of an investor individually is
a financial disadvantage and harmful to the economy. But now there is a standard
structure, where the parent company should own its subsidiary. Before, 19 th
century, in U.S., all the corporate entities are not permitted to buy shares in other
corporations. So, there arise limited liability. As per the Blumberg report, “almost
all the big American corporate groups function through wholly owned
subsidiaries”. Basically, while comparing the tort victims and contract creditors,
the contract creditors knows about the structure of corporate in view of
transactions, but in tort, it is involuntary participation. So, the corporate veil
piercing is used often in tort cases because of the involuntary harm of victim and
inability to avoid the risk. But now a days, this corporate veil piercing is decreased
in tort cases. I countries like, Australia, U.S., England the corporate veil piercing
is very less in case of the defendant is a holding company than that of the
shareholder. Colombian law says that these doctrines, “limited liability” and
“separate legal entity” permits the courts to allow the parent and subsidiary
companies are as a single corporate entity for the purpose of imposing liability
on the both parent and subsidiary company as a single unit. in both the developing
and the developed counties, multinational companies have turned out to be less
subject to the jurisdiction of national courts when charged of infringement of
human rights, while human rights themselves have remained completely secured
in national system. As a result, if the victims are unable to get remedy from their
own country, then they have to give an attempt to file suit in the country of where
the company is incorporated. Then the issue of the legal obstacle, corporate veil
and the rules against the extra territoriality jurisdiction, forum non conveniens
arose. In the case of In re Union Carbide Corp. Gas Plant Disaster in Bhopal,
India, was transferred to India by New York court on the point of Forum Non
Conveniens. From the case of Daimler AG v. Bauman, court said that the
jurisdiction to the corporation is at the place where the company was incorporated
and the place where its place of business is located.

Buman are the residents of the Argentina are the plaintiffs in this case. Daimler
A.G is the defendant. Dimler company is the german based company. MB
Argentina is the subsidiary of the Daimler company which is collaborated with
the state forces to harass the workers of the MBA like kidnapping, detaining,
torturing and killing the workers during the war. so, they filed the suit against the
defendant in the U.S. district court. The plaintiffs filed case in the jurisdiction of
MB USA also the subsidiary of the Daimler. It has its place of business in New
jersey. MB USA’s business is to distribute cars of the Daimler to California. And
its office is in California. But the acts done by the MBA are neither occurred in
the California nor in U.S. Daimler filed a petition before the US district court to
dismiss the suit as there is a lack of in personam jurisdiction. The court held to
dismiss the suit filed by the plaintiffs as there is no personal jurisdiction. But court
of Appeal reversed the order of the District court. Supreme Court discussed that
the due to lack of connection to the forum state, the US court does not have the
jurisdiction. to have a jurisdiction the suit must be filed at the home in the forum
state. To consider it as home in the forum state, the company must be either
incorporated or at least it has a place of business in the forum state. But according
to the facts of this case, the defendant and defendant’s subsidiaries does not
consider the California as a home because the companies are incorporated in
different places. So, the District court’s decision was again come into force.

International law is considered as a vague ingredient of protection for human

rights where, foreign subsidiaries are accused of violation of human rights.
Generally. In U.S. there is a statute called, Alien Tort Statue. It is applied when
an alien did any tort wrong, he can file a suit in U.S.

As a result of Kiobel v. Royal Dutch Petroleum co., many countries are exploring
to find the legislative way of recovery for human rights victims of foreign
subsidiaries. But the France has taken a first step to make a law and to allow the
French courts to have a jurisdiction for corporate infringement of Human rights
by subsidiary companies of the French Holding companies all over the world.
This is allowed where the parent company of a French corporation consists of
minimum 5,000 employees or as a whole along with the subsidiary company
atleast 10,000 employees were working. Then the parent company has the duty
to take care. In the new law Article 1 describes about reasonable measures to
prevent the occurrence of human right violations. When the bill was kept in the
senate, the debate was that why only the France is taking a leading step in
humanitarian perspective by harming its own multi nationals. It was answered as
just to block the human rights violations by the foreign subsidiaries, the parent
companies are liable. Even there are many challenges, but the government
supports the liability of the parent company for the human right violation of its
subsidiary. In French law, there is a rule that the parent company is liable for the
environmental violations and harms caused by the subsidiary, but only in some
circumstances. It requires, the subsidiary company to be in the liquidation
proceedings, where then the parent company is responsible to finance it as the
subsidiary is lack of finance. In U.S. there are many statutes which are applied to
the subsidiary companies of U.S. corporations but those are only useful at the
time of war. But there are trade restrictions which are not dealt with the human
rights, but now, with the U.S. de facto jurisdiction, it set as a precedent that the
parent company is directly liable for the foreign subsidiaries. In the extra
territorial laws, the “actual or potential control” is the essential part. It is nothing
but a ownership. It acquires by majority of shares in a company. In the modern
era, many statutes are there for extra territorial interpretation. Foreign Corrupt
Practices Act of 1977 which is enacted in U.S. which is to impose penalties on
U.S. multinational companies those are bribing the foreign officials. In addition
to counties like, France and U.S. some other countries are also involved to make
up this part. In Switzerland, an initiative, which was inserted in the constitution
that it imposed human rights duties of swizz corporations and on its foreign
subsidiaries. In Canada, foreign Investment Review Act was passed and says that
it treats parent and subsidiary company as one business enterprise. Sweden also
dealt with extra territoriality jurisdiction regarding the foreign subsidiary,
provides that it has no conflict with the home state of the foreign subsidiary. Many
development had taken place for the recovery of the consequence to the human
right violation by the foreign subsidiary.
Beneath the single business enterprise liability, all entities that have the same
objective within a corporation are liable, as if they constitute a single corporation.
Supreme Court recognised the principle in the antitrust law that the parent
company and subsidiary company has the same goals.

In U.S. to lift the corporate veil, the agency law and quasi agency law is useful.
In Daimler, it clearly said that, It depends on the each case that whether the
subsidiary company is acting as an agent to the parent company or not. According
to the facts of this case, it said that there is no agency relation between them.
Liability of parent company in case of human right violation is limited in subject
matter.

Generally, in case of human right violations in relation to the parent company and
the subsidiary company, the victims of it files suit in the place where the parent
company is located, not on where the human right violation had taken place.
There is a belief that if an individual was harmed, then his state was also offended
and then the protection to be taken as per the legal action.

the Paris Court of Appeals made legitimate history in France when it granted help
to 857 Congolese plaintiffs against the Gabon mining company COMILOG for
unfair release of workers and they failed to pay pension in Gabon when the reason
for the French court's jurisdiction over the litigant was the French nationality of
COMILOG's parent company, ERAMET. The case had started when a train
transporting COMILOG's manganese had crashed into a passenger train, causing
the death of in excess of a hundred people. After this occurrence, COMILOG quit
shipping crude materials via train, and subsequently it laid off almost thousand
workers without paying guaranteed severance pay or pensions. The French
Supreme Court reversed lower court decision of purview on the thinking that the
plaintiffs had been denied justice in their nation of origin.
Asserting Human Rights against Multinational Corporations under United States Law:
Conceptual and Procedural Problems.

Author(s): Phillip I. Blumberg

One corporate group which forms hundreds of companies has serious

consequences for U.S. actions claiming infringement of human rights in foreign
subsidiaries. Public investors are protected from the debts of parent company by
the entity law and the parent law is protected from the acts of subsidiary. Under
the law of entity, law considers the companies separately, like parent company
and subsidiary as a separate legal person. These are only liable for the acts done
by the directors, employees and officers of the companies, but vicarious liability
is based on agency law, lifting of corporate veil and these play a very less
important role in the concept of human rights litigation. Doctrine of forum non
conveniens arises when the acts of the members of company are occurred in any
other country. Subsidiaries in the U.S. faces a difficulty i.e., in personam
jurisdiction. Where it has no link with the forum but only relation is that with the
parent company located in America. In the case of Doe v. Unocal Corp., U.S.
Company partnered with the Burmese military to construct a gas pipeline. while
construction of pipeline project in Burma, the employees were suffered to forced
labour, human rights violations, wrongful death, false imprisonment, assault
during the construction of pipeline project. Burmese villagers filed a suit under
Alien Tort Statute against Unocal and also against its parent company i.e., Union
Oil Company which is in California and also against a French parent company
which has subsidiaries in the California. American company is subject to the local
jurisdiction but the French based company is lacking its in personam jurisdiction
because it has no connection with the forum but only have the relation with its
subsidiaries in the California. Court dismissed the suit and the decision was based
on the general principle that, as the parent and subsidiary companies are acting as
the separate entities, to establish a jurisdiction, just mere relation between the
parent and subsidiary company is not sufficient.
Doctrine of Forum Non Conveniens:

If any case satisfies the requirement of subject matter and in personam

jurisdiction against the defendant and other requirements of forum with respect
to the venue makes the plaintiff to proceed to the filing the suit. If any other forum
is appropriate than the plaintiff moved, the defendant has still the opportunity to
ask the court. This doctrine helps to understand that when the court finds that
plaintiff’s choice of forum is absolutely inappropriate, then give a choice of forum
to the defendant, because the burden was on the defendant. Trial court has this
discretion to meet the ends of justice. This doctrine is more helpful to the foreign
plaintiffs when they are affected by the human rights violation.

Union Carbide Corporation v. Union of India

Union Carbide Corporation is the parent company incorporated in America,

where Union Carbide India Ltd is the Subsidiary company. And the parent
company has 50.9% shares in its subsidiary. In the subsidiary company in India,
the Methyl Isocyanate was leaked and the people near the factory were injured.
Then the government of India filed case against the UCC in America, where the
American court dismissed the suit by giving a reason that the America has no
jurisdiction. And then the government of India filed suit against the subsidiary
where the action was occurred. As there are low financial assets in the subsidiary
company the government of India agreed with the UCC that as a parent company
it is liable because of the reason that the subsidiary has no sufficient assets to pay
the compensation, it affects the people human rights. So, the parent company is
liable for the acts of its subsidiary. Supreme court imposed 417 million U.S.
dollars as the compensation on the parent company which is incorporated in
America.