Document Type : Original Article from Result of Thesis
Authors
1 Ph.D. Student in International Law, North Tehran Branch, Islamic Azad University, Tehran, Iran.
2 Associate Professor at Law Department, North Tehran Branch, Islamic Azad University, Tehran, Iran.
3 Assistant Professor at International Law Department, Kharazmi University, Tehran, Iran.
4 Assistant Prof. at Law Department, North Tehran Branch, Islamic Azad University, Tehran, Iran.
Abstract
Highlights
Introduction
Initially, international law only recognized states as their own nationals/subsidiaries. However, the development of international law and its scope has added new nationals/subsidiaries, most important of which are international organizations and multinational companies. But the latter is controversial due to international treaties, and there is no consensus on them. It is believed that companies are beginning to abide by international law. The veil piercing doctrine is a legal initiative to deal with right abuse; this doctrine is applied to administer justice, which may be conducted using different corporate means such as hiding behind the corporate veil.
Nowadays, companies play a key role in the enforcement of international rules or even the creation of new ones on an international scale. Typically, companies are either under the control (sovereignty) of states where states tend to abuse their right, or they are under the control of their non-governmental stockholders where stockholders refrain from fulfilling their financial and non-financial obligations under the pretext of the limited liability nature of the company; they may even violate human rights or other international law standards. Such circumstance, consequently, necessitate resorting to tradition-bending exceptions such as veil piercing in order to administer justice and avoid right abuse. An important question that seeks an answer in this regard is, how does veil piercing affect the development of international law? The relevant hypothesis is that the veil piercing (doctrine) affects the development of international arbitration scope (its application to third parties), treaty shopping, companies’ nationality (abiding by the laws of a country and avoiding right abuse), principle of sovereignty, and legal personality of companies.
Methodology
This was a descriptive-analytic study, in which the author sought the true nature of the subject and intended to know how a phenomenon, variable, object, or issue is like. In other words, this paper delved into the current state of affairs and set to describe it systematically; the paper also examined its characteristics and elements, and, where necessary, investigated into the interrelationships of variables.
Findings
The legal status of companies poses a fundamental challenge to international law. International law vacillates between the necessity to answer the emerging socioeconomic events and international corporate phenomena and the difficulty of introducing such a phenomenon into the international law mainstream. This vacillation was most visible in the case of Barcelona Traction, where the International Court of Justice (ICJ) brings to the fore the personality of the company as a new development caused by novel emerging economic necessities on the one hand, and underscores that international law should recognize local law firms, which play a major role in international law. This does not necessarily refer to a distinction between international and local law firms. When the Cold War ended, the issue of corporate status resurfaced in international law in critical cases such as those pertinent to egregious violation of human rights and environmental catastrophes caused by companies’ misconduct. The reason for the re-emergence of the issue of corporate status is complicated. On one hand, corporate entities have been able to acquire economic power enough to challenge that of several states. They have also entered an area which used to be exclusive to states such as public utilities, power, gas transfer, and certain private projects. They gradually turned into sporadic power gateways that could act independently. A few decades ago, it made no sense to dedicate international rules and regulations to companies; however, since 1990s, international law activities, especially those related to human rights and international criminal law, came to the fore in regard to companies as the key targets in efforts to deal with corporate misconduct.
Results
Over time, companies have secured a better position than before in international law, and legal rules have developed to include company laws, rules, and regulations. The reason for breaking international rules through right abuse is the fact that legal personalities/entities have rights. For instance, the structure of a limited liability company contradistinguishes between the legal personality of the company and that of its stockholders; this prevents the application of corporate liabilities and responsibilities to stockholders or members. This is why opportunist companies establish limited liability subsidiaries on host countries; they intend to shirk the responsibilities arising out of their activities. For example, in the Bangkok case, where the case was referred to a court of arbitration against the subsidiary, the court, under specific circumstances, pierced the veil between the parent company and the subsidiary, considering their personalities as one so as to bring the violating party to justice. Shaking rigid legal structures, the veil piercing doctrine has caused justice to be delivered and abuse to be avoided; it has been a major step in the development of international law in regard to the legal personality of companies, as shown in difference cases provided in this paper. In other words, veil piercing has narrowed the scope of right abuse made possible through corporate veil, and in some cases, pierces this veil so justice can be delivered and punishment be meted out for rule violation. Sometimes, investing companies conduct treaty shopping to gain the greatest degree of support in the host country. In such cases, the arbitration court pierces the veil over the real nationality of a company using the principle of right abuse and prevents the company from enjoying support resulting from bilateral and multilateral treaties between the host country and other countries; a major example is the case Banro American Resources, Inc., Société Générale, Acuvon, Phoenix Action, Philip Morris IQOS, and Aguas del Tunari, which is built upon the Barcelona Traction case, and further develops it in public international law and international arbitration. The veil piercing doctrine plays a key role in developing different aspects of international law in general and international investment law in particular, in a manner that if it is ignored, rights will be trampled.
Keywords
Main Subjects
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