Modern problems of corporate rights protection
Table of Contents
Introduction
2
1. Limits of corporate rights under 3
2. Problems of corporate right protection
5
2.1.
The separation of ownership and control.
5
2.2.
Diversity of corporate forms.
7
Conclusion
Reference
7
Ошибка! Закладка не определена.
Introduction
The acceptance of corporate rights under domestic and international law is part
of a general push to recognize companies as subjects of law, especially
international one. As entities, corporations not only enjoy a number of
international legal rights, but are also responsible for many international legal
obligations. The corporate rights movement addresses serious practical and
functional challenges. The most serious problem is determining whether investors
or management can assert and exercise those rights. But corporate rights
requirements also struggle given the sheer variety of national laws in which
companies are registered and operated. This diversity is further complicated by
the variety of business models, such as limited partnerships, limited liability
companies, trust funds, non-profit organizations and professional corporations.
These issues could be better handled by a policy-making process that allows
states to change specific rights, obligations, forms of business and so on. In
certain circumstances, businesses have the general rights under international law
only when those rights are expressly authorized through formal law-making
processes such as international treaties or national statutes. Corporate rights under
international law seem to have originated in treaties granting diplomatic
protection to foreign investors. Governments should make explicit and specific
references to the protection of corporations and uniform the modern investment
protection treaties.
1. Limits of corporate rights under international law
Traditionally, national law considered states to be monopolistic subjects. In this
view, only nations have international legal status and the ability to assert their
rights and obligations under the international law. This also means that non-state
entities and individuals do not exist internationally. Any agreements between
individuals or non-sovereign organizations and states are not governed by
international law and they have no right to assert claims under international law.
However, the countries can be the representatives, hold accountability under
international law for the acts of their own citizens.
But this traditional, old-fashioned definition has changed, as a consequence of
World War II, international organizations, corporations, individuals and national
liberation movements emerged and gradually gained the strength to interact
among countries in an international way. For example, from the case called the
Reparation for Injuries Suffered in the Service of the United Nations, the
International Court of Justice recognized that international organizations or
entities such as the United Nations (UN) has jurisdiction under international law
to seek remedies against states. In the aftermath of the September 1948
assassination in Jerusalem, Folke Bernadotte, the UN Mediator in Palestine, and
other members of the UN Mission to Palestine asked the Court whether the UN
competent to bring an international claim against the State responsible with the
objective of obtaining reparation for damage caused to the Organization and to
its victims. If the answer was affirmative, it was further asked about the action
taken by the UN in what manner could be restored with the rights which might
be owned by the State, where the victim was a citizen. After its Advisory Opinion
of 11 April 1949, the Court further declared that the Organization had the capacity
to bring a claim and to give it the character of an international action for
reparation for the damage that had been caused to itself, as well as for the damage
suffered by the victim or persons entitled through him. Although, according to
the traditional rule, diplomatic protection had to be exercised by the national
State, the Organization should be regarded in international law when it possesses
the powers which are conferred upon the Organization and capable of discharge
of its functions. The Organization may be required to entrust its agents with
important missions in disturbed parts of the world. In such cases, it is necessary
that the agents should receive suitable support and protection. Therefore, the
Court found that the Organization has the capacity to claim appropriate reparation
for damage suffered by the victim or by persons entitled through him. The
potential risk of competition between the Organization and the victims’ nation
could be eliminated either by means of a general convention or by a particular
agreement.
Likewise, individuals and companies have obtained various rights in many
international human rights treaties. International human rights law is arguably the
most important conceptual change in international law in general. International
human rights law not only grants individuals rights against certain forms of
foreign treatment, but also it can be used against its own state.
Although there is much skepticism that nations are still the main subject of
international relations. But, the focus of international law has shifted away from
the concept of states. Those subjects of international law are transnational
corporations and large-scale business organisations, private voluntary groups
such as labor unions and human rights groups, and international organizations
like the World Bank, International Monetary Fund, World Trade Organization.
However, not much academic attention was drawn to the transnational business
corporations until the 1970s many UN agencies have studied and published
various reports about the duties and responsibilities of business corporations
under international law. The most notable publication was the Norms on the
Responsibilities of Transnational Corporations and Other Business Enterprises
with regard to Human Rights, published in 2003 by the UN Commission on
Human Rights. The report promoted regulatory standards and mechanisms to
regulate the activities of transnational corporations in accordance with
international law. Although it is not intended to codify legal rules, it has played
an extremely important role in the process of reviewing and seeking to impose
legal obligations on corporations based on international law. International law has
thus become an important and necessary source for the containment and control
of modern transnational corporations.
These companies are often involved in large-scale cross-border investments, even
partnerships with governments. Because of the great economic size and
international importance of modern corporations, it is economically worthy that
corporations deserve international legal status.
2. Problems of corporate right protection
While corporations have acquired rights under both international investment
treaties and international human rights treaties, they provide only limited support
for corporate rights under international law. The limited development of
corporate rights under international law can also be partly explained by a number
of complications that must be overcome to recognize such rights. As both
international investment and international human rights courts have recognized,
corporate empowerment requires solving problems that are exclusive to
corporations.
These laws represent two of the most complex issues in providing corporate
rights, including the diversity of business forms and the division between
investors and management.
2.1.
The separation of ownership and control.
A well-known problem that has been faced many times by both national and
international courts when considering corporate rights is the difference of rights
and interests between the shareholders and management of a corporation.
A popular case example is the Barcelona Traction Case. In an effort to negotiate
an amicable solution, the Government of Belgium seeks to make amends for the
damages, which its citizens had to suffer, by the Barcelona Traction, Light and
Power Company, Ltd. However, negotiations broke down and Belgium filed an
application on 19th June 1962 against the shareholders in the Canadian Barcelona
Traction Company, by the conduct of various organs of the Spanish State. In
March 1963, Spain filed four objections to the Court's jurisdiction. In July 1964,
the Court delivered a Judgment dismissing the first two but joining the others to
the merits. Belgium claimed compensation for damages caused by the
shareholders of this Spanish company, as a result of acts contrary to international
law allegedly committed by organs of the Spanish State. On the other hand, Spain
submitted that Belgium's claim should be declared unacceptable or without
foundation. In February 1970, the Court found that Belgium did not have the legal
status to exercise diplomatic protection of shareholders in a Canadian company
in relation to the measures against that company in Spain. It demonstrates that the
adoption of the theory of diplomatic protection of shareholders as such would
open the door to competing claims on the part of different States, which could
create an insecure atmosphere in international economic relations. And in the
company’s national State, which in this case Canada, was able to act, the Court
is not of the opinion that the right to bring a legal action before a court of law was
conferred on the Belgian Government by considerations of equity. Accordingly,
the Court rejected Belgium's request.
Hence, The International Court of Justice considers that for the sake of diplomatic
protection, the nationality of the company should be determined by the place of
the corporation.The nationality of the shareholders (or even the nationality of the
majority of the shareholders) cannot determine the nationality of the corporation.
This approach has been followed by the European Court of Human Rights.
However, many international investment law tribunals have seemed more willing
to disregard the corporate form in favor of the shareholders' nationality when
determining corporate nationality for the purposes of jurisdiction. The
International Centre for Settlement of Investment Disputes (ICSID) allowed such
a shareholder group to satisfy the tribunal's jurisdiction requirements, finding that
there was nothing in "general international law" prohibiting treaties that allowed
shareholders to bring claims, even shareholders who held only minority and non
controlling stakes. For example, in a case of Gas Transmission Company and
Republic of Argentina, the tribunal held that recognizing shareholders' rights to
bring a claim made sense so as to not have the corporate personality interfering
with the protection of the real interests associated with the investment.
2.2.
Diversity of corporate forms.
Corporations and other legal entities come in many different shapes and sizes for
legal purposes. For example, in U.S. domestic law, corporate entities may take
the form of a standard corporation, a limited liability company, a limited liability
partnership, a limited partnership, or a trust fund, non-profit associations, sole
proprietorships, or other organizations. Furthermore, these forms can vary from
state to state. This diversity will undoubtedly create more complexity in the
international context when the structure and diversity of business forms are even
more remarkable.
Globally, there are law and standard law systems, post-socialist and developing
states, among other civil varieties. Such poses diversity a problem when granting
rights protection. However, it is not an insoluble problem. For instance, the
U.S. bilateral investment treaty (BIT) program helps to protect private
investment, to develop market-oriented policies in partner countries, recognize a
variety of corporate forms. The European Court of Human Rights has even
broader language recognizing petitions from any non-governmental organization.
Any general rule of international law recognizing corporate rights will have to
determine what kind of legal persons can hold these rights. Different areas of law
have developed different approaches to resolving this question. But no uniform
approach has emerged, further confirming the challenges facing a general rule
favoring protection of corporate rights.
Conclusion
In the past, a nation was the only subject under international law which has a legal
status and the capability to assert their rights and obligations under international
law. This means that non-sovereign entities and individuals do not exist
internationally. But since WWII, this concept has changed. International
organizations, corporations, individuals and national liberation movements
appeared and gradually gained interaction among countries in an international
plane. Nowadays, companies are often involved in large-scale cross-border
investments, or even partnerships with governments. Because of the great
economic size and international economic importance, the international legal
status of corporations has gradually been eliminated. While corporations have
acquired rights under both international investment treaties and international
human rights treaties, they provide only limited support for corporate rights under
international law. These laws represent two of the most complex issues in
providing corporate rights, including the diversity of business forms and the
division between investors and management. To address these problems,
international legislators are required to choose the most rational and appropriate
policies which seem to have little consensus under international law.
Reference
1/ International Court Of Justice.Barcelona Traction, Light and Power Company,
Limited. URL: https://www.refworld.org/cases,ICJ,402391b04.html
2/ International Court Of Justice. Barcelona Traction, Light and Power Company,
Limited (Belgium v. Spain). URL: https://www.icj-cij.org/en/case/50
3/ United Nations. Norms on the Responsibilities of Transnational Corporations
and Other Business Enterprises with regard to Human Rights. URL:
https://digitallibrary.un.org/record/501576?ln=en