Jurisdiction over Foreign Business Entities & the Corporate Veil - Chapter 2.5.5 - The Hague Convention on Choice-of-Court Agreements - 2.6 - Transnational Litigation and Commercial Arbitration - 3rd Edition
Joseph Lookofsky is Professor of Private and Commercial Law at the University of Copenhagen. He received his B.A. in Economics from Lehigh University, his J.D. from the New York University School of Law, and was admitted to the New York State Bar in 1971. He received his Danish law degrees (cand.jur. and dr.jur.) from the University of Copenhagen and joined the Law Faculty there in 1982. Professor Lookofsky has lectured on the CISG and other international commercial law topics for the Danish Bar Association (Advokatsamfund), the Duke University Law School in North Carolina, the University of Bologna (Facoltá di Giurisprudenza), the Albert-Ludwigs-Universität Freiburg (Institut für Ausländisches und Internationales Privatrecht), and the Cornell-Paris I (Sorbonne) Summer Institute of International & Comparative Law. He is also Secretary General of the Danish Committee for Comparative Law (Association Internationale des Sciences Juridiques.
Ketilbjorn Hertz is Senior Consultant with the Danish Ministry of Justice, which he joined in 1997, and in that capacity he has participated in the drafting of important legislation, including the Bill, which led to the adoption of the Danish Arbitration Act 2005 He received degrees from the University of Copenhagen, B.A. in law in 1991, cand.jur. in 1993, B.A. in French in 1998, and Ph.D. in law in 1998.
2.5.5. Jurisdiction over Foreign Business Entities & the Corporate Veil
As discussed previously in the European (Brussels I Regulation) context,282 the method chosen by a given business enterprise to conduct its foreign operations is likely to affect not only the substantive liability of that enterprise for obligations incurred abroad, but also the very amenability of the enterprise to the jurisdiction of foreign courts. Obviously, these are not strictly European concerns.
First, as regards the substantive (liability) side, American law accepts the doctrine of respondiat superior, whereby a principal (the “superior”) is likely to be held liable for the “acts” of his or her agent (subordinate). If, for example, the local/American employee of a German manufacturer, during the course of his or her employment on American soil, breaches a contract or commits a commercially related tort, the German employer/manufacturer risks being held liable for the employee’s act. Similar considerations apply in the case of acts committed by (persons in) the local “branch office” of a foreign entity. If, on the other hand, a similar act is committed by an entity which is (legally) independent of the foreign company, the plaintiff will usually not be permitted to reach beyond that entity’s assets.283 In other words, as in Europe, so too in America: Salomon v. Salomon is nearly everywhere the rule.284
So, in America and elsewhere, shifting a high-risk venture into a subsidiary or affiliated corporation seems a logical way to limit the prospect of liability lawsuits. The key substantive question is whether — or rather, in what circumstances — the parent may actually be held liable for the debts of its subsidiary. In a transnational case, however, the related procedural issue will often need to be decided first: is the foreign parent subject to the jurisdiction of the forum court?
CHAPTER 2 EXTRATERRITORIAL JURISDICTION
2.5.5 Extraterritorial Jurisdiction and the Corporate VeilBulova Watch v. K. Hattori & Co. (1986) Notes, Questions & Commentary 2.6 Hague Convention on Choice-of-Court Agreements