Extraterritorial application of laws in corporate groups and investigation of its foundations

Document Type : Original Article

Authors

1 Associate Professor of Law, University of Tehran

2 Ph.D. in private law, University of Tehran

10.29252/jlr.2022.185442.1761

Abstract

One of the challenging debates in the era of corporate law is the applicable laws in corporate groups. After the extension of the scope of the activities of the corporations in different countries via establishing subsidies, other laws than lex societatis arose to apply. The later laws are different from the law applicable to the company: the realm of execution and legal nature. From the perspective of the first viewpoint, these laws have excluded the classic principle of legislation i.e: territoriality, which means that they apply extraterritoriality. From the second aspect, the particularity of the mentioned laws is the overcoming disciplinary and public nature of these laws in comparison with lex societatis. In corporate groups, two theories of control and a single economic unit are the base of the extraterritorial application of the law. According to the theory of control, the parent company can control the subsidiaries' regulations, in addition to the management and economic dominance based on the theory of a single economic unit, the members of a corporate group, are governed by the same law, if the had economic unity. The conclusion of this research is that in spite of the fact that the laws governing corporate groups do not argue to prevent the application of foreign law like public policy, the status of corporate groups has affected the applicable laws and has obliged them to comply with a set of public and private laws including territorial and extraterritorial, the fact that indicates the increase of supervision of states on corporations.

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History

  • Receive Date: 02 November 2020
  • Revise Date: 07 July 2021
  • Accept Date: 27 April 2022

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