chapter  11
22 Pages

THE COMPANY LAW REVIEW AND MULTINATIONAL CORPORATE GROUPS

1 INTRODUCTION

This essay considers a specific question that has been highlighted in recent years by the growing concern over the operations of multinational enterprises (MNEs). How and to what extent should MNEs be subject to specialised regulation through laws and rules relating to their activities as cross-border corporate groups? In particular, should parent companies be directly responsible for the acts of their overseas subsidiaries by reason of specific rules of liability for those acts? Furthermore, should MNE groups be more accountable for their operations by reason of disclosure and governance systems that are adapted to the transnational nature of those operations? Such questions would appear to be exactly of the kind that a comprehensive review of company law should be addressing, if it is to be rooted in the realities of increased international economic integration encouraged by the transnational business practices of MNEs. In the event, and rather surprisingly, the Company Law Review Steering Group had little to say on these very important questions. Indeed, the issue of corporate groups was introduced only at a later stage in the Review process and consisted of a single chapter in the November 2000 Consultation Document Modern Company Law for a Competitive Economy – Completing the Structure.1 In that chapter, there is little said by the Steering Group on the specific question of group liability for tortious acts of affiliates, let alone on the specific problems surrounding MNE accountability. More strikingly, The Final Report of the Steering Group, published on 26 July 2001, contains nothing on corporate groups. Neither the Foreword, nor the opening chapter on ‘Guiding Principles, Methods and Output’, offer any explanation for this omission.2 In the meantime, litigation involving the liability of UKbased parent companies for the acts of their overseas subsidiaries has been instituted, and was until recently continuing, before the English courts, raising precisely the kinds of issues outlined above. The principal cases, which involved Cape plc and Thor Chemicals as defendants, arose out of the operations of the subsidiaries of these English-based parent companies in South Africa. In the Cape case, the litigation arose out of the exposure of large numbers of employees and local residents to asbestos mining and milling operations undertaken by the subsidiaries of Cape, with attendant consequences to the health of the claimants.3 In the Thor case, the parent company was pursued for the exposure of employees in its South African subsidiaries to highly toxic chemical processes

1 (London, DTI, November 2000) at chapter 10; hereafter Completing the Structure. 2 See The Company Law Steering Group Modern Company Law for a Competitive Economy: Final Report

(London, DTI, 2001) Vol 1; hereafter The Final Report. 3 See further Muchlinski ‘Corporations in International Litigation: Problems of Jurisdiction and the

United Kingdom Asbestos Case’ (2001) 50 ICLQ 1.