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OVERCOMING THE CORPORATE VEIL CHALLENGE: COULD INVESTMENT LAW INSPIRE THE PROPOSED BUSINESS AND HUMAN RIGHTS TREATY?

  • Anil Yilmaz Vastardis (a1) and Rachel Chambers (a2)
Abstract
Abstract

This article proposes a model of treaty-based veil piercing for civil liability claims by victims of human rights harm inflicted by businesses. The primary inspiration for this model comes from investment treaty provisions dealing with corporate investors. Our examination of investment law for this purpose exposes the double standard in the treatment of the corporate veil between these two remedy regimes, and offers a way to address this. The test we propose for lifting the veil in order to allow victims to claim against the parent company in a corporate group is one of ‘legal control’. It aims to capture cases where the parent did not necessarily take an active role in the subsidiary's business, but it is still treated as being in control of the subsidiary by virtue of its direct or indirect ownership or ability to appoint management.

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References
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1 ‘Host State’ is used in this article as a reference to the State where the victims have suffered the human rights harm.

2 ‘Home State’ is used in this article as a reference to the State where the parent company, whose actions or omissions directly or via its subsidiaries resulted in or contributed to the human rights harm, is located.

3 Other significant barriers to access to justice include costs of litigation, intimidation of victims and witnesses, evidentiary burdens, and limitation periods; See Skinner G et al. , ‘Third Pillar: Access to Judicial Remedies for Human Rights Violations by Transnational Business’ (2013) ICAR CORE ECCJ <http://corporatejustice.org/documents/publications/eccj/the_third_pillar_-access_to_judicial_remedies_for_human_rights_violation.-1-2.pdf>.

4 Some well-known examples of such cases include, Presbyterian Church of Sudan v Talisman Energy 244 F Supp 2d 289 (SDNY 2003); In re Union Carbide Corp Gas Plant Disaster at Bhopal 634 F Supp 842 (SDNY 1986); Aguinda v Texaco, Inc 142 F Supp 2d 534 (SDNY 2001); Wiwa v Royal Dutch Petroleum 226 F 3d 88 (2d Cir 2000); Recherches Internationales Quebec v Cambior Inc [1998] QJ No 2554, Quebec Super Ct, 14 August 1998; Lubbe v Cape plc [2000] 1 Lloyd's Rep 139 (CA).

5 See for instance Joseph S, Corporations and Transnational Human Rights Litigation (Hart Publishing 2004); G Skinner et al. (n 3) and Baughen S, Human Rights and Corporate Wrongs: Closing the Governance Gap (Edward Elgar 2015) 179–90.

6 UNOHCHR, ‘Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, John Ruggie’ (2011) UN Doc A/HRC/17/31; UNOHCHR, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ (2011) UN Doc HR/PUB/11/04 <www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf>; UN Human Rights Council endorsed the Guiding Principles in its resolution 17/4 of 16 June 2011, Guiding Principle 26.

7 Principle 25, UNGPs.

8 Principle 26 UNGPs.

9 UN Human Rights Council Resolution on ‘Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights’ (2014) UN Doc A/HRC/RES/26/9.

10 Of necessity, given that our model is inspired by IIL, it does not address the situation where a transnational business is comprised of a series of companies connected by contractual relationships only, rather than through equity ownership; This therefore excludes victims who have suffered human rights abuses at the hands of such contractual partner businesses from access to remedy from our model eg Jabir et al. v KiK Textilien und Non-Food GmbH (Landgericht Dortmund) (Case concerning damages for death and personal injury resulting from fire at factory of primary supplier to the KiK clothing company); ECCHR Case Report available at <www.ecchr.eu/en/our_work/business-and-human-rights/working-conditions-in-south-asia/pakistan-kik.html>.

11 This double standard in application of corporate veil principle to investors and victims is not limited to remedies. For instance corporate veil shields shareholders from liability, preventing B&HR victims from having access to the funds received by the parent but it does not interfere with the upstream flow of profits from the subsidiary to the parent. Areas of law that aim to safeguard the healthy functioning of markets, eg securities law, competition law and IIL, recognize the necessity to disregard separate personality between the shareholders and the company to protect the free market interests, but policymakers have not embraced the same pragmatism to protect against human rights abuses by corporate actors. See Skinner G, ‘Parent Company Accountability: Ensuring Justice for Human Rights Violations’ (2015) ICAR , 910 <https://static1.squarespace.com/static/583f3fca725e25fcd45aa446/t/591c8ebdbf629a23e7e35da0/1495043779017/PCAP+Report+2015.pdf> 8–11.

12 Particularly in bilateral investment treaties and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (adopted 18 March 1965, entered into force 14 October 1966) 575 UNTS 159 (‘ICSID Convention’).

13 This concept was previously used in the context of securities litigation where the company is held legally responsible for the liabilities of its shareholders, See for instance Securities Investor Protection Corp. v Stratton Oakmont, Inc., 234 B.R. 293, 321 (S.D. N.Y. 1999).

14 On one hand IIL is perceived as restraining advancement of human rights protection from business activity, See for instance UNGA ‘Report of the Special Rapporteur of the Human Rights Council on the Rights of Indigenous Peoples on the Impact of International Investment and Free Trade on the Human Rights of Indigenous Peoples’ (7 August 2015) UN Doc A/70/301; On the other hand, further regulation of corporate activity in the name of human rights protection was perceived as a threat to promotion of investment; See Jochnick C and Rabaeus N, ‘Business and Human Rights Revitalized: A New UN Framework Meets Texaco in the Amazon’ (2010) 33 SuffolkTransnatlLRev 413, 416–17; On the substance of the relationship between these two fields and home State responsibility see McCorquodale R and Simons P, ‘Responsibility beyond Borders: State Responsibility for Extraterritorial Violations by Corporations of International Human Rights Law’ (2007) 70 MLR 598, 621–3. (They argue that home State facilitation and promotion of overseas investment for the benefit of its corporate nationals by, inter alia, entering into investment treaties could contribute to the failure of the home State to protect human rights, when those corporations commit violations, by creating the conditions for adherence to lower standards.)

15 Watered down commitments to ‘corporate social responsibility’ were made in some recent investment treaties; see for instance, art 15(2) of the 2014 Canada–Côte d'Ivoire Foreign Investment Promotion and Protection Agreement (adopted 30 November 2014, entered into force 14 December 2015); So far, the strongest safeguards are found in Section 18 of the Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria (Morocco–Nigeria BIT) signed on 3 December 2016

16 See art 20 of the Morocco–Nigeria BIT.

17 See Section VI(b) below.

18 See (n 4).

19 Lubbe v Cape plc [2000] 1 Lloyd's Rep 139 (CA); Bodo Community v Royal Dutch Shell Plc & Shell Petroleum Development Company (Nigeria) Ltd Case No HQ11X01280; Akpan v Royal Dutch Shell PLC, Arrondissementsrechtbank Den Haag [District Court of The Hague] (30 January 2013) Case No C/09/337050/HA ZA 09-1580 (ECLI:NL:RBDHA:2013:BY9854); Aguinda v Texaco, Inc 142 F Supp 2d 534 (SDNY 2001).

20 G Skinner (n 11) 3 uses the concept ‘high risk country’; See also van Dam C, ‘Tort Law and Human Rights: Brothers in Arms on the Role of Tort Law in the Area of Business and Human Rights’ (2011) 2 JETL 221, 228; For example the local law may prohibit the type of claim. An example of such a law is the immunity law passed in Papua New Guinea to give Australian company BHP Billiton immunity from prosecution for environmental damage stemming from the construction of its gold and copper mine in the 1990s, see Sydney Morning Herald, ‘PNG Government Takes Control of Ok Tedi Mine’ (18 September 2013) <www.smh.com.au/business/png-government-takes-control-of-ok-tedi-mine-20130918-2tzt4.html>; Another example would be local law limitations on the compensation available eg as a result of a national workers' compensation scheme.

21 The South African subsidiary of British company Cape plc was insolvent meaning that no claims could be brought against it by victims of asbestosis caused by the subsidiary in the case of Lubbe v Cape plc [2000] 1 Lloyd's Rep 139 (CA); van Dam (n 20) 228.

22 Meeran R, ‘Tort Litigation against Multinationals for Violation of Human Rights: An Overview of the Position Outside the United States’ (2011) 3(1) City University Hong Kong Law Review 3, 1319 ; van Dam (n 20) 228.

23 Joseph (n 5) 131.

24 Joseph (n 5) 131 and Blumberg PI, ‘Accountability of Multinational Corporations: The Barriers Presented by Concepts of the Corporate Juridical Entity’ (2001) 24 HastingsIntl&CompLRev. 297, 300–4.

25 Blumberg P., The Multinational Challenge to Corporate Law: The Search for a New Corporate Personality (OUP 1993) 139.

26 Muchlinski P, ‘The Changing Face of Transnational Business Governance: Private Corporate Law Liability and Accountability of Transnational Groups in a Post-Financial Crisis World’ (2011) 18(2) Ind. J. Global Legal Stud. 665, 669679 (Involuntary creditors are those that have been caused injury by the company without having entered into a bargain with the company over the allocation of risks).

27 J Zerk, ‘Corporate liability for gross human rights abuses: Towards a fairer and more effective system of domestic law remedies’ A report prepared for the Office of the UN High Commissioner for Human Rights, 66, <www.ohchr.org/Documents/Issues/Business/DomesticLawRemedies/StudyDomesticeLawRemedies.pdf>

28 See for an overview of various jurisdictions Vandekerckhove K, Piercing the Corporate Veil (Kluwer Law International 2007).

29 S Joseph, (n.5) 130.

30 Osborne M, ‘Apartheid and the Alien Torts Act: Global Justice Meets Sovereign Equality’ in du Plessis M and Pete S (eds), Repairing the Past? International Perspectives on Reparations for Gross Human Rights Abuses (Intersentia 2007), 241.

31 See Chambers R and Tyler K, ‘The UK Context for Business and Human Rights’ in Blecher L et al. (eds), Corporate Responsibility for Human Rights Impacts: New Expectations and Paradigms (American Bar Association 2014) 304 and R Meeran, (n. 22) 5.

32 For an overview of some of the attempts in England, see R Meeran (n 22).

33 See Chandler v Cape for a precedent holding the parent directly liable in negligence for physical harm to the employee of its domestic subsidiary.

34 This case is explored below in Section V; Maria Aguinda et al. v Chevron Corporation Lawsuit No. 2003-0002, Sucumbíos Provincial Court of Justice, judgment text available at <https://www.earthrights.org/sites/default/files/documents/Lago-Agrio-judgment_0.pdf>; For a finding on the contrary, see Adams v Cape Industries Plc [1991] 1 All ER 929.

35 C van Dam (n 20) 230 (‘In order for the European forum to have jurisdiction a link is required between the forum and the claim. To establish this link the court may need to consider the merits of the claim at an early stage.’)

36 In Recherches Internationales Quebec v Cambior Inc., unreported judgment of 14 August 1998 (Canada Superior Court, Quebec, no. 500-06-000034-971) the court dismissed proceedings brought by a public interest group against a Canadian mining company following the spill of cyanide contaminated tailings at a subsidiary mine's site, on grounds of forum non conveniens. Meeran, (n. 22) 11; Joseph (n 5) 88.

37 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), published on the Official Journal of the European Union on 20.12.2012; Case C-281/02 Andrew Owusu v N.B. Jackson [2005] ECR I-1383.

38 See His Royal Highness Emere Godwin Bebe Okpabi and Others v Royal Dutch Shell Plc 2017 EWHC 89 (TCC) para 69.

39 Two patterns can be observed post-jurisdiction stage: (1) cases get settled out of court without admission of liability, see Lubbe v Cape Plc [2000] 1 WLR 1545 (HL) and Bodo Community v Royal Dutch Shell Plc & Shell Petroleum Development Company (Nigeria) Ltd Case No HQ11X01280 and Wiwa v Royal Dutch Petroleum 226 F 3d 88 (2d Cir 2000); (2) parent company is not held liable on the merits, see Akpan v Royal Dutch Shell PLC, Arrondissementsrechtbank Den Haag [District Court of The Hague] (30 January 2013) Case No C/09/337050/HA ZA 09-1580 (ECLI:NL:RBDHA:2013:BY9854).

40 For example Akpan ibid. See also Chandler v Cape plc [2012] EWCA Civ 525, CSR Ltd v Wren (1997) 44 NSWLR 463 (CA NSW).

41 In these instances, there seems to be a rebuttable presumption that the subsidiary is in charge of its own policies/activities, since it has separate personality from its shareholders/parent. In these circumstances, the parent does not owe a duty of care to the victims. But this presumption can be rebutted if the claimants can show, inter alia, that the parent company itself has disregarded the corporate veil and has taken charge of/controlled certain policies/activities of the subsidiary, thus assuming a direct duty of care towards the victims. Rebuttal of this presumption allows for the court to hold the parent directly liable under the relevant civil liability principles. The threshold for rebutting this presumption by showing that the necessary level of involvement exists is a high one.

42 This was successfully done in Chandler v Cape plc. Arden LJ explicitly noted that the case was not about veil-piercing, para 69; however, it is possible to argue that in effect the decision disregarded the separation between the parent and the subsidiary where certain conditions were met; the claimants in Akpan (n 39) were unable to convince the court to find a direct duty of care on the parent, as the latter was a separate entity and did not satisfy the conditions set by the court in the Chandler judgment.

43 Substantive rights guaranteed typically include national treatment and most favoured nation treatment clauses, right to compensation for expropriation of investment, right to a fair and equitable treatment, the right to receive full protection and security and free transfer of funds.

44 Procedural rights contained in investment treaties typically include a right to settle disputes with the host State before an international arbitration tribunal.

45 See R van Os and R Knottnerus, Dutch Bilateral Investment Treaties: A Gateway to ‘Treaty Shopping’ for Investment Protection by Multinational Companies (October 2011) SOMO 9 (defines treaty shopping as ‘the conduct of foreign investors in acquiring the benefits of investment treaties in their actual or planned host State through third countries, through which their investment needs to be routed’); E Zuleta et al., ‘Treaty Planning: Current Trends in International Investment Disputes That Impact Foreign Investment Decisions and Treaty Drafting’ in MA Fernandez-Ballesteros and D Arias (eds), Liber Amicorum Bernardo Cremades (La Ley 2010).

46 The merits of the claim, and what States can be held liable for under the applicable investment treaty, contract, or legislation is a separate question and will be determined with reference to the substantive provisions of the applicable instrument.

47 The ICSID Convention concerns only the procedural rights of investors. It sets up a legal framework for the settlement of investment disputes between investors and host States, using international arbitration as the primary method of dispute resolution. Conciliation is also provided in the Convention, but not used often.

48 Art 25(2) ‘‘‘National of another Contracting State’’ means: (b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.’ Consent (which may be inferred) is the other requirement under this Article for a local corporation to be treated as possessing the nationality of the relevant contracting State.

49 See for instance, Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v Plurinational State of Bolivia, (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/06/2 (27 September 2012) para 195; AES Summit Generation Limited and AES-Tisza Erömü Kft v The Republic of Hungary (Award) (ICSID Arbitral Tribunal Case No ARB/07/22 (23 September 2010) paras 6.1.4–6.1.6; Millicom International Operations BV and Sentel GSM SA (Sentel) v The Republic of Senegal (Senegal) (Decision on Jurisdiction of the Arbitral Tribunal) (ICSID Arbitral Tribunal Case No ARB/08/20 (16 July 2010) para 109; Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines (Award) (ICSID Arbitral Tribunal Case No ARB/03/25 (16 August 2007); Tidewater Inc, Tidewater Investment SRL, Tidewater Caribe, CA, Twenty Grand Offshore, LLC, Point Marine, LLC, Twenty Grand Marine Service, LLC, Jackson Marine, LLC, Zapata Gulf Marine Operators, LLC (Tidewater) v The Bolivarian Republic of Venezuela (Venezuela) (Decision on Jurisdiction) (ICSID Arbitral Tribunal, Case No ARB/10/5 (8 February 2013).

50 If the treaty provides for it, the investment treaty claim might be brought under the ICSID Convention or under another arbitral procedure. As such, the investment treaty constitutes the consent of the disputing parties to ICSID arbitration. The host State making a standing offer to arbitrate to home State investors by entering into the treaty. This standing offer can be accepted by the home State investor by initiating the arbitral proceedings.

51 See for instance, Article 1 of the Agreement Between Canada and the Republic of Serbia for the Promotion and Protection of Investments (adopted 1 September 2014, entered into force 27 April 2015) <http://investmentpolicyhub.unctad.org/IIA/country/35/treaty/3502>; For a detailed analysis of investment treaty trends see, Scope and Definition: A Sequel, UNCTAD Series on Issues in International Investment Agreements II (28 February 2011) UNCTAD/DIAE/IA/2010/2, 80–84.

52 See for instance, Article 1(b) of the Agreement on promotion and protection of investments between the Government of the Kingdom of the Netherlands and the Government of the Kingdom of Bahrain (adopted 5 February 2007, entered into force 1 December 2009) 2649 UNTS 13.

53 See for instance, Enron Corporation and Ponderosa Assets, L.P. v Argentine Republic (Decision on Jurisdiction) ICSID Arbitral Tribunal Case No ARB01/3 (14 January 2004) (the investor held 35.263 per cent interest in the local business); CMS Gas Transmission Company v The Republic of Argentina (Decision of the Tribunal on Objections to Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/01/8 (17 July 2003) (the investor held 29.42 per cent in the local business).

54 Treaty between the United States of America and the Republic of Ecuador concerning the Encouragement and Reciprocal Protection of Investment (adopted 27 August 1993, entered into force 11 May 1997).

55 ibid, art 6.

56 although the other Party may deny the benefits of the Treaty in the limited circumstances’ provided in art 1(2).

57 Some investment treaties provide limitations to the meaning of control by way of denial of benefits clauses. See for instance, art 17 of the Energy Charter Treaty (adopted 17 December 1994, entered into force 16 April 1998) 2080 UNTS 95; some treaties contain a vague definition like art 1(d) of the Agreement on Reciprocal Encouragement and Protection of Investments between the Kingdom of the Netherlands and the Republic of Turkey (adopted 27 March 1986, entered into force 1 November 1989); Others remain silent like the Agreement between the Swiss Confederation and Georgia on the Promotion and Reciprocal Protection of Investments (adopted 3 June 2014, entered into force 17 April 2015).

58 Art 1(e) of the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments; the meaning of ‘substantial interest’ is not provided in the treaty.

59 Liberian Eastern Timber Corporation (LETCO) v Republic of Liberia (Award) (ICSID Arbitral Tribunal Case No ARB/83/2 (31 March 1986) French translation of English original in 115 Journal du droit international 167 (1988) (excerpts).

60 Dissenting opinion of Prosper Weil in Tokios Tokelés v Ukraine (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/02/18 (29 April 2004).

61 See Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v Plurinational State of Bolivia (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/06/2 (27 September 2012) para. 195.

62 See Amco Asia Corporation and others v Republic of Indonesia (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/81/1 (25 September 1983) 23 ILM 351 (1984).

63 Banro American Resources, Inc. and Société Aurifère du Kivu et du Maniema S.A.R.L. (Banro American) v Democratic Republic of the Congo (DRC) (Award) (ICSID Arbitral Tribunal Case No ARB/98/7 (1 September 2000) excerpts of the award published on 17 ICSID Rev. – FILJ 382 (2002); TSA Spectrum de Argentina S.A. v Argentine Republic (Award) (ICSID Arbitral Tribunal Case No ARB/05/5 (19 December 2008); Standard Chartered Bank v United Republic of Tanzania (Award) (ICSID Arbitral Tribunal Case No ARB/10/12 (2 November 2012) para 200; Burimi SRL and Eagle Games SH.A v Republic of Albania (Award) (ICSID Arbitral Tribunal Case No ARB/11/18 (29 May 2013) paras 115–121.

64 See Autopista Concesionada de Venezuela C A v Bolivarian Republic of Venezuela (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/00/5 (27 September 2001) (the potential to control was found sufficient).

65 See Mobil Corporation, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc. v Bolivarian Republic of Venezuela (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/07/27 (10 June 2010).

66 Schreuer CH et al. , The ICSID Convention: A Commentary (2nd edn, Cambridge University Press 2009) 323; Sornarajah M, The International Law on Foreign Investment (3rd edn, Cambridge University Press 2010) 327–8.

67 Banro American v DRC (Award) para 7 (the tribunal stressed that control would not be decided on formal appearances, but it also did not seek a high level of involvement by the parent in the subsidiary's business in order to determine who the ‘investor’ is. The tribunal chose to look behind the veil of the various subsidiaries holding shares in the local subsidiary ‘to reveal the parent company as the actual Claimant’ thereby ‘allowing the financial reality to prevail over legal structures’.). In SOABI v Senegal the tribunal held that the Convention was not solely concerned with the direct control of the local entity by its immediate shareholders. It was natural that investors may choose to channel their investments ‘through intermediary entities while retaining the same degree of control over the national company as they would have exercised as direct shareholders of the latter’. See Société Ouest Africaine des Bétons Industriels (SOABI) v State of Senegal (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No ARB/82/1 (1 August 1984) 2 ICSID Reps 165 (1994) paras 35–37.

68 This is explained by A Roberts in her work on analogies drawn to develop IIL. She states that ‘[w]hen a field is young, it is common for many issues to remain unresolved, leading participants to draw analogies with more established legal disciplines in seeking to provide content and form to the new field’. Roberts A, ‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System’ (2013) 107 AJIL 45, 50.

69 IHRL and IIL both aim to protect fundamental rights of private parties against State abuse, require States to provide protection against unjustified third-party interference with rights, and enhance access to justice when such abuses are committed by States and by third parties. Both areas enjoin States from invoking their national law to justify violations of their respective rules; and both areas have treaty frameworks that allow private parties to bring a treaty claim against the State directly; see Roberts (n 68) 69–75; Dupuy PM and Vinuales JE, ‘Human Rights and Investment Disciplines: Integration in Progress’ in Bungenberg M et al. (eds), International Investment Law (Nomos 2015) 15.

70 There are some fundamental differences between these two areas, the primary one being the identity of the defendants, but we do not view these as relevant to the treatment of corporate veil; Sunstein CR, ‘On Analogical Reasoning’ (1993) 106 HarvLRev 741, 745. (‘For analogical reasoning to operate properly, we have to know that A and B are “relevantly” similar, and that there are not “relevant” differences between them … The major challenge facing analogical reasoners is to decide when differences are relevant.’)

71 Schreuer C, ‘Do We Need Investment Arbitration?’ in Kalicki JE and Joubin-Bret A (eds), Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Brill Nijhoff 2015).

72 Shelton D, Remedies in International Human Rights Law (Oxford University Press 2006) 14 .

73 See for instance, M Waibel, ‘Investment Arbitration: Jurisdiction and Admissibility’ (2014) University of Cambridge Faculty of Law Research Paper No 9/2014 at 5 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2391789> (‘access to impartial fora is seen as essential to the realisation of the substantive legal obligations that States have undertaken’).

74 Availability of investment arbitration and the financial ability of the investors to pursue IIL claims are the other important factors.

75 UNGPs Principle 26's commentary lists among the legal barriers to access to remedy potential denial of justice in a host State and inability to access home State courts; Simons P and Macklin A, The Governance Gap: Extractive Industries, Human Rights, and the Home State Advantage (Routledge 2014) 6 (state that ‘a large proportion of corporate human rights violations take place in developing States’, where access to remedies might be challenging); see also Shelton D, ‘Normative Evolution in Corporate Liability for Violations of Human Rights and Humanitarian Law’ (2010) 15 ARIEL 45, 54–5.

76 H Ward, ‘Governing Multinationals: The Role of Foreign Direct Liability’ (2001) Royal Institute of International Affairs Briefing Paper New Series No 18 <www.iatp.org/files/Governing_Multinationals_The_Role_of_Foreign_D.pdf> 1 (Ward describes ‘foreign direct liability’ claims for human rights harm as the ‘flip side of foreign direct investment’.).

77 See Section VI(C).

78 In the company law context for corporate veil rules, this is done by primarily shielding investors from the risk of certain damages claims; and in the investment context by protecting investors from certain host State risks.

79 Chevron and Texaco joined forces in 2001 through a merger. It was Texaco that operated in Ecuador through its subsidiary TexPet until 1992; see the announcement on the completion of the merger <www.chevron.com/stories/chevrontexaco-corporation-announces-completion-of-merger>.

80 See for instance, Joseph S, ‘Protracted Lawfare: The Tale of Chevron Texaco in the Amazon’ (2012) 3(1) JHRE 70 ; Kimerling J, ‘Indigenous Peoples and the Oil Frontier in Amazonia: The Case of Ecuador Chevron Texaco, and Aguinda v. Texaco ’ (2006) 38 NYUJIntlL&Pol 413 ; Patel S, ‘Delayed Justice: A Case Study of Texaco and the Republic of Ecuador's Operations, Harms and Possible Redress in the Ecuadorian Amazon’ (2012) 22 TulaneEnvtlLJ 71 ; Giorgetti C, ‘Mass Tort Claims in International Investment Proceedings: What Are the Lessons from the Ecuador-Chevron Dispute?’ (2013) 34 UPaJIntlL 787

81 Yaiguaje v Chevron Corp, 2013 ONCA 758; Chevron Corp v Yaiguaje, 2015 SCC 42, [2015] 3 SCR.

82 E Garcia and A Valencia, ‘Ecuador Plaintiffs to File Lawsuit against Chevron in Argentina’ Reuters (Quito, 31 October 2012) <http://www.reuters.com/article/us-ecuador-chevron-idUSBRE89U18D20121031>.

83 E Garcia, ‘Ecuador Plaintiffs Target Chevron's Assets in Brazil’ Reuters (Quito, 28 June 2012) <http://in.reuters.com/article/ecuador-chevron-idINL2E8HRJX920120628>.

84 Texaco operated in the region as part of a consortium in which it held a 37.5 per cent stake for the last two decades of its activity in the area. It was the operator of the consortium. See Kimerling (n 80) 420 fn 17.

85 Jochnick and Rabaeus (n 14) 433.

86 Maria Aguinda et. al. v Chevron Corporation Lawsuit No 2003-0002, Sucumbíos Provincial Court of Justice; judgment text available at <https://www.earthrights.org/sites/default/files/documents/Lago-Agrio-judgment_0.pdf>.

87 Aguinda v Texaco 142 F. Supp. 2d 534 (SDNY 2001).

88 Yaiguaje v Chevron Corp, 2013 ONCA 758; Chevron Corp v Yaiguaje, 2015 SCC 42, [2015] 3 S.C.R.

89 Aguinda v Texaco 142 F. Supp. 2d 534 (SDNY 2001) (Among the reasons for filing the claim in the US, the claimants argued (to fight off the FNC claim) that class actions were not available in Ecuador, that there were procedural deficiencies, there was a need for protracted administrative proceedings prior to the suit, discovery restrictions, cross-examination restrictions and the tendency to have court appointed experts. They also claimed that Ecuador had no comparable procedure to grant plaintiffs the equitable remedy they are principally seeking.)

90 Aguinda v Texaco 142 F. Supp. 2d 534 (SDNY 2001) 13 (‘The record before the Court also clearly establishes that all of the Consortium's key activities, including decisions and practices here at issue, were managed, directed, and conducted by Consortium employees in Ecuador. By contrast, no one from Texaco or, indeed, anyone else operating in the United States, made any material decisions as to the consortium's activities and practices that are at issue here.’)

91 Jota v Texaco Inc 157 F.3d 153 (2d Cir., 10/05/1998).

92 ibid. (‘Texaco had participated in oil drilling in Ecuador exclusively through its fourth-level subsidiary, Texaco Petroleum Company (“TexPet”).’)

93 Aguinda v Texaco 142 F. Supp. 2d 534 (SDNY 2001).

94 Aguinda v Texaco 142 F. Supp. 2d 534 (SDNY 2001).

95 Chevron Corporation acquired Texaco in 2001.

96 Maria Aguinda et. al. v Chevron Corporation (n.86); Joseph (n 80) 75.

97 This was based on the fact that Chevron acquired Texaco via a reverse triangular merger, whereby Chevron created a subsidiary called Keepap Inc. which merged with Texaco, and the latter continues to exist as a separate legal entity and a subsidiary of Chevron. The Court rejected the claim and held that the real effect of the transaction behind the formal appearances was a de facto merger between Chevron and Texaco; see Maria Aguinda et. al. v Chevron Corporation (n 86).

98 Statement of Defence of Chevron Corporation to the Ontario Superior Court of Justice, dated 2 October 2015, para 26 <https://www.italaw.com/sites/default/files/case-documents/italaw4407.pdf>.

99 ibid, para 30.

100 This is a case of reverse veil piercing, where the assets of the subsidiary are pursued for liability of the parent.

101 Yaiguaje v Chevron Corporation 2017 ONSC 135, 20/01/2017.

102 Chevron argued that ‘[Ecuador] has pursued a coordinated strategy with the Lago Agrio plaintiffs that involves [Ecuador]’s various state organs … that [Ecuador]’s judicial branch has conducted the Lago Agrio litigation in total disregard of Ecuadorian law, international standards of fairness and Chevron's basic rights as to due process and natural justice, in coordination between [Ecuador] and the Lago Agrio plaintiffs.’ See Chevron Corporation and Texaco Petroleum Company v The Republic of Ecuador, PCA Case No 2009–23 Third Interim Award on Jurisdiction and Admissibility (27 February 2012) para 3.39.

103 In this respect, Chevron claims that Ecuador violated the a series of agreements signed by Ecuador and TexPet in 1995, 1996 and 1998 that aimed to release TexPet from liability for consequences of the environmental damage caused by the operations of TexPet in the Oriente Region; see ibid para 1.28.

104 ibid para 3.102 and 3.235.

105 ibid para 3.61.

106 ibid para 4.24.

107 Chevron claims in its pleadings to the tribunal that it is Ecuador that is trying to ‘have it both ways’ by holding Chevron liable in the Lago Agrio litigation while also arguing in the IIL claim that Chevron is not entitled to bring the arbitration as it has no investment in Ecuador; see ibid para 4.25.

108 See for instance, art 2.3 of International Covenant on Civil and Political Rights and UNCHR, ‘General Comment No.31, Nature of the General Obligation Imposed on States Parties to the Covenant’, (26 May 2004) CCPR/C/21/Rev.1/Add.13, para 8. See also De Schutter O, ‘Towards a New Treaty on Business and Human Rights’ (2016) 1 BHRJ 41, 44.

109 The meaning of control for this proposal is explained in Section VI.B.

110 Particularly, where layers of corporate intermediaries are inserted into the investment structure.

111 This would not interfere with the operation of the existing bilateral or multilateral treaties on enforcement of foreign judgments in civil and commercial matters. Our proposal does not aim to overlap with those treaties but complement them with special rules on enforcement of judgments rendered against a subsidiary against the assets of the parent company located overseas. The recognition and enforcement of the judgment rendered in the host State before home State courts would follow the procedure prescribed in such treaties, or in the lack thereof, the domestic procedural rules on recognition and enforcement of foreign judgments. Our proposal would add to those rules by allowing the enforcement of the judgment otherwise recognized against the assets of the parent company.

112 Dearborn M, ‘Enterprise Liability: Reviewing and Revitalizing Liability for Corporate Groups’ (2009) 97(1) CLR 195, 211.

113 Enforcement of the Lago Agrio judgment has so far not been successful. Claimants are avoiding enforcement in the US, where Chevron is headquartered, due to a US court decision declaring the judgment as tainted by corruption; See Chevron Corp. v Donzinger No.14-0826 (2d Cir. 2016); an enforcement action was brought in Canada against the assets of a Canadian subsidiary of Chevron and the shares of Chevron parent in that subsidiary. This action was challenged by Chevron on numerous grounds, including the Canadian court's jurisdiction to enforce the Lago Agrio judgment (this portion of the challenge was dismissed), as well as the challenges on public policy grounds (these are yet to be decided by the Supreme Court) Yaiguaje v Chevron Corp, 2013 ONCA 758; Chevron Corp v Yaiguaje, 2015 SCC 42.

114 In Adams v Cape Industries Plc [1991] 1 All ER 929 the defendant parent company liquidated its US subsidiary and then successfully resisted in England the enforcement of a judgment obtained in the US for health harm caused by asbestos products.

115 CH Schreuer et al. (n 66) 296.

116 Simons and Macklin (n 75); De Schutter (n 108), Skinner (n 11); ‘Control’ is also advanced as one of the determinants of ‘connected claims’ for purposes of jurisdiction of a domestic court under the Sofia Guidelines for the Best Practices for International Civil Litigation for Human Rights Violations. In art 2.2, the Guidelines treat claims closely connected where defendants are related either because they form part of the same corporate group or one defendant controls the other; see The ILA Sofia Conference, International Civil Litigation for Human Rights Violations Final Report, 31 (The Report does not describe in detail what control means in this context, other than saying that it is ‘normally defined on the basis of stock ownership’, but it could be extended to contractual relationships where for instance there is a relationship of dependency between a supplier and a purchaser.).

117 Simons and Macklin (n 75) 286.

118 Simons and Macklin (n 75) 356 don't limit the indicators of control to share ownership, and also refer to the ability of one company to ordinarily direct or instruct the conduct of another company, power to elect at least 30 per cent of the BoD of an affiliate, power to direct the management and policies of the other entity, or otherwise have the ability to materially influence the behaviour of the other entity.

119 Simons and Macklin (n 75) 356, n 201.

120 Skinner (n 11) 24 (emphasis added).

121 O De Schutter (n 108) 53.

122 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings [2013] OJ L182/19.

123 Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L330/1.

124 Art 2(9) defines parent company as ‘an undertaking which controls one or more subsidiary undertakings’.

125 Art 2(10) defines a subsidiary as ‘an undertaking controlled by a parent undertaking, including any subsidiary undertaking of an ultimate parent undertaking’.

126 A similar definition is also found in section 1159 of the Companies Act 2006.

127 The latter was the case for Talisman's investment in Sudan. P Simons and A Macklin (n.75) 28 “On 17 August 1998 Talisman agreed to buy Arakis Energy's 25 per cent share in the GNPOC joint venture for approximately US$277 million. GNPOC was registered as a corporation in Mauritius. Talisman operated in Sudan through its Dutch-registered subsidiary Talisman Greater Nile BV (TGNBV).” 40 per cent of the JV was held by the China National Petroleum Corporation and 30 per cent by the national oil company of Malaysia.

128 Many cases filed against Argentina in the aftermath of the 2001 financial crisis were based on ‘shares’ as investment; See for instance, Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No.ARB01/3, 14 January 2004); AES Corporation v The Argentine Republic (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No. ARB/02/17, 26 April 2005); Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic (Decision on Jurisdiction) (ICSID Arbitral Tribunal Case No.ARB/09/1, 21 December 2012).

129 D Bilchitz, The Moral and Legal Necessity for a Business and Human Rights Treaty <https://business-humanrights.org/sites/default/files/documents/The%20Moral%20and%20Legal%20Necessity%20for%20a%20Business%20and%20Human%20Rights%20Treaty%20February%202015%20FINAL%20FINAL.pdf> at 9. D Bilchitz, ‘The Necessity for a Business and Human Rights Treaty’ (2016) 1 BHRJ 203, 215.

130 Simmons BA, Mobilizing for Human Rights: International Law in Domestic Politics (Cambridge University Press 2009) 125 (argues that ‘treaties are causally meaningful to the extent that they empower individuals, groups, or parts of the State with different rights preferences that were not empowered to the same extent in the absence of the treaties’).

131 Simmons BA, ‘Bargaining over BITS, Arbitrating Awards: The Regime for Protection and Promotion of International Investment’ (2014) 66(1) World Politics 12, 17.

132 Bilchitz, ‘The Necessity for a Business and Human Rights Treaty’ (n 129) 218–19.

133 A multilateral convention that aims to establish universal jurisdiction in signatory States over civil suits for remedying human rights violations was previously proposed; See Stephens B, ‘Translating Filartiga: A Comparative and International Law Analysis of Domestic Remedies for International Human Rights Violations’ (2002) 27 YaleJIntlL 1 . Similarly incorporation of a civil liability framework, offering three options to overcome the separate personality challenge (enterprise liability, liability insurance or posting a bond as security), in investment treaties was proposed by JA VanDuzer et al., ‘Integrating Sustainable Development into International Investment Agreements: A Guide for Developing Countries’ (2012) Prepared for the Commonwealth Secretariat, <www.iisd.org/pdf/2012/6th_annual_forum_commonwealth_guide.pdf>; While our model finds inspiration and support in those proposals, (1) it does not advocate universal jurisdiction, (2) it takes IIL rules on treaty-based veil piercing as a model and not the enterprise liability model (3) provides greater detail regarding the elements of the treaty-based veil piercing exercise in the context of B&HR litigation.

134 Cassel D and Ramasastry A, ‘White Paper: Options for a Treaty on Business and Human Rights’ (2015) 6 Notre Dame Journal of International and Comparative Law 1 (they identify the key options and challenges for a potential treaty on business and human rights); McConnell L, ‘Assessing the Feasibility of a Business and Human Rights Treaty’ (2017) 66 ICLQ 143 (advances a theoretical model for a treaty that addresses non-State actors directly).

135 See Section 20 of the Morocco–Nigeria BIT.

136 Simmons (n 131) 20–1(causing a sharp increase in the number of BITs in the 1980s and 1990s).

137 Whether BITs have been beneficial to host economies is disputed; see Sauvant KP and Sachs LE The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (Oxford University Press 2009); Tobin J and Rose-Ackerman SWhen BITs Have Some Bite: The Political-Economic Environment for Bilateral Investment Treaties’ (2011) 6(1) The Review of International Organizations 1 ; Kerner A, ‘Why Should I Believe You? The Costs and Consequences of Bilateral Investment Treaties’ (2009) 53(1) International Studies Quarterly 73 .

138 See for instance, the work of Corporate Europe Observatory on corporate lobbying for TTIP, <https://corporateeurope.org/international-trade/2015/07/ttip-corporate-lobbying-paradise>.

139 For a detailed account of the problem of prisoners’ dilemma and collective action in the context of international law, see Abbott KW, ‘Modern International Relations Theory: A Prospectus for International Lawyers’ (1989) 14 YaleJIntlL 335 .

140 See for instance, the EU's investment and trade policy at <http://ec.europa.eu/trade/policy/in-focus/new-trade-strategy/>; The Morocco–Nigeria BIT; The Model Text for the Indian Bilateral Investment Treaty, available at <http://dea.gov.in/sites/default/files/ModelBIT_Annex_0.pdf>.

141 The EU Commission's DG on Trade has set out its investment and trade policy at <http://ec.europa.eu/trade/policy/in-focus/new-trade-strategy/>.

142 Cassel and Ramasastry (n 134) 38.

143 This could prove problematic if the host State has not ratified major human rights treaties, or if the B&HR claimants invoke a right contained in a treaty ratified by the host State but not by the home State before the latter's courts.

144 There is yet no consensus on the precise substantive scope of the B&HR treaty within the intergovernmental working group; see Lopez C and Shea B, ‘Negotiating a Treaty on Business and Human Rights: A Review of the First Intergovernmental Session’ (2016) 1(1) BHRJ 111, 114.

145 Under our model, victims could sue in home or host State courts, the former more commonly as a result of the access to remedy issues in certain host States, discussed above.

146 See Denza E, ‘The Relationship between International and National Law’ in Evans MD (ed), International Law (4th edn, Oxford University Press 2014) 412–40.

147 See for a comprehensive analysis of balancing competing interests in the context of foreign investment Leader S, ‘Human Rights, Risks and New Strategies for Global Investment’ (2006) 9(3) JIEL 657 .

148 Shelton D, ‘Protecting Human Rights in a Globalized World’ (2002) 25(2) BCIntl&CompLRev 273, 279–80.

149 van Dam (n 20) 225–6.

150 See Shelton (n 148) 273ff; Muchlinski (n 26); Ho V Harper, ‘Of Enterprise Principles and Corporate Groups: Does Corporate Law Reach Human Rights?’ (2013) 52 ColumJTransnatlL 113 .

151 The first example of a mandatory human rights due diligence requirement for certain very large businesses is established by the new French legislation on Duty of Vigilance for parent companies LOI n° 2017-399 du 27 mars 2017 Art. L. 225-102-4.-I.

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