Guest blogger Michiel Verhulst (KU Leuven) on the Sumal-case
Subsidiary companies, and presumably sister companies as well, can be held liable to pay damages for the EU competition law infringements committed by their parent companies. In its judgement of 6 October 2021, the Grand Chamber of the European Court of Justice shed light on the EU autonomous concept of ‘undertaking’. The undertaking as a whole, meeting the characteristics of an economic unit, is to be considered personally liable for the actions of its different components. This automatically entails the joint and several liability among the legal and/or other entities that make up the economic unit at the time of the infringement.
More than two and a half years have passed since a previous blogpost explained how the judgement of the European Court of Justice of 14 March 2019 applied the autonomous EU concept of ‘undertaking’ to the private enforcement of EU competition law. As a result of this judgement, both the principles of parental liability and economic continuity became applicable when claiming damages for an infringement of the EU competition rules. The economic reality thus caught up with the legal matrix.
A post by guest blogger Prof. Lisa Siraganian (Johns Hopkins University)
Scholars of corporate legal finance tend not to spend a lot of time worrying about how the corporation relates to novels, poems, literary movements. Or to political cartoons, like Udo Keppler’s fascinating 1910 magazine illustration of the shadowy corporation (more on that one below). But maybe they should. That’s what I argue in my new book, Modernism and the Meaning of Corporate Persons, out just now as part of the Law and Literature series from Oxford University Press, edited by Professors Robert Spoo and Simon Stern.
The story begins with the fateful US Supreme Court decision, Santa Clara v. Southern Pacific Railroad, which legitimatized the American legal fiction of corporate personhood in 1886. After that decision, the development of the idea that law could endow a nonhuman entity with certain rights expanded into American culture. And, not surprisingly, the notion that an eerie, insubstantial corporation could be considered similar to persons bothered many actual people throughout the first decades of the twentieth century.
In the book, I explore how and why the possibility that large collective organizations might mean to do what they do—and might mean like us, like persons—both excited and worried American creative writers, artists like Keppler, and theorists of the corporation. In roughly the first half of the twentieth century, these ideas stimulated new thoughts about what it means to act as a person or as a group. It also sparked new thoughts on what it means to intend to act at all. Of course, versions of that conversation continue today, most often as debates on blogs, scholarship, and in heated media discussions, whether on legal personhood, corporate social responsibility, veil-piercing, or corporate criminal liability. But the earlier deliberations on similar issues have remained, until now, an untapped resource to understand corporate action, worked out in entirely different forms.
For example, consider the law reviews and treatises on contracts and agency law by US Supreme Court Justice Oliver Wendell Holmes, Jr. and law professor Ernst Freund. Or, alternatively, take the inventive modernist poems of Gertrude Stein and the novels of F. Scott Fitzgerald, author of The Great Gatsby and The Love of the Last Tycoon. Whichever you choose, you can find each writer trying to work out the following problem. Namely, if you can’t be sure how to represent or describe a corporate entity, or who exactly intended what a corporation said or acted, then how can you really know what that corporation meant when it “said” something or acted in a certain way? But knowing, or not knowing, mattered. It would determine what you might fairly expect from the various human persons when they work for a corporation. And it would impact how society should treat (or regulate) these corporate entities and what they did in the world. Continue reading “Do corporate acts always count as some person’s actions?”
A parent company’s liability for damage caused by its subsidiary is grounded in control
On 10 April 2019, in Vedanta v Lungowe, the UK Supreme Court confirmed the England and Wales Court of Appeal’s decision that Vedanta may owe a duty of care to neighbours of the copper mine operated by its Zambian subsidiary. The judgment is important in three respects. First, Vedanta v Lungowe marks the first time the UK Supreme Court found that a duty of care vis-à-vis parties other than the subsidiary’s employees may be owed by the parent company (albeit in its capacity of operator). Second, this duty of care is not novel and, therefore, the lenient test for adjudicatory jurisdiction is applicable. Third, in dicta, the UK Supreme Court clarified the legal basis and scope of supply chain liability.
The CJEU judgement on the 14th of March 2019 in the Vantaan kaupunki case shows the increasing spillover effects of the public enforcement of competition law on the private enforcement thereof. The CJEU found that the concept of ‘undertaking’ as autonomously interpreted in competition law is applicable when claiming for damages on the basis of breaches of EU competition law. This has far-reaching consequences, since it implies that both the principles of parental liability and economic continuity are henceforth part of the national rules on the private enforcement of EU competition law. This triggers some reflections on corporate law on voluntary winding-up in general and the usefulness of focussing on the economic reality outside competition law. Continue reading “The CJEU Vantaan kaupunki case: piercing the corporate veil via private enforcement of EU competition law”
Allowing creditors of one member of a corporate group to pierce horizontally to reach the assets of other members
Belgian private law is traditionally very distrustful of asset partitioning in the shape of both owner shielding and entity shielding. It has inherited from the 19th century French doctrine (Aubry & Rau) the idea that: (i) only persons have an estate; and (ii) every person has only one estate. An ‘estate’ (‘vermogen’ / ‘patrimoine’) is a pool of assets which serves as collateral for a pool of liabilities. Accordingly, the traditional théorie du patrimoine entails that a person cannot have separate pools of assets which serve as collateral for separate pools of liabilities. This theory betrays a strong distrust of asset partitioning, both internal and external.
In the beginning of the 19th century the rule ‘one person, one and only one estate’ was generally understood as referring to natural persons. The incorporation of legal persons, particularly of legal persons with owner shielding (limited liability), was exceptional and restricted. It was limited to certain types of activities and subject to governmental authorization. As a result, the 19th century doctrine of ‘one person, one and only one estate’, while at face value barely modified, presently has completely different practical consequences. Presently a natural person can easily incorporate, control and benefit from, one or more legal persons.
Cass. 10 februari 2017 (F.16.0027.N) over het gunsttarief in de Vlaamse erfbelasting
Kan wie vandaag geen natuurlijke persoon als valentijnsdate krijgt opgescharreld, even veel bevrediging vinden bij een rechtspersoon? Een arrest van het Hof van Cassatie van 10 februari 2017 (F.16.0027.N) over de Vlaamse regels inzake erfbelasting geeft weinig hoop.
De Vlaamse erfbelasting voorziet een verlaagd tarief voor de verkrijging van aandelen uitgegeven door een familiale vennootschap. Eén van de voorwaarden is dat de aandelen van de vennootschap op het ogenblik van het overlijden voor ten minste 50% in volle eigendom toebehoren aan de erflater en zijn familie. De wettekst definiëert ‘familie’ als familieleden in de gebruikelijke zin, zoals de partner, ouders, kinderen, broers en zussen.
Hoe zit het nu met de aandelen die worden gehouden door een andere vennootschap met rechtspersoonlijkheid die wordt gecontroleerd door zulke ‘fysieke’ familieden? Moeten deze aandelen die toebehoren aan déze familiale holdingvennootschap – die dus aandelen houdt in een andere vennootschap om wiens aandelen het gaat – ook beschouwd worden als toebehorende “aan de erflater en zijn familie”?
Supply chain liability is the liability of a company for a harm caused by its business partners. Until recently, this was merely an academic theory. It no longer is: we are beginning to see court cases on supply chain liability, and more such claims will likely be filed. Continue reading “Supply Chain Liability: a Primer”