Multinationals and the Antiquities of Company Law
| Author | Christopher Gardner‐Thorpe,Mervyn E. Bennun |
| DOI | http://doi.org/10.1111/j.1468-2230.1984.tb01639.x |
| Date | 01 January 1984 |
| Published date | 01 January 1984 |
NOTES
OF
CASES
MULTINATIONALS
AND
THE
ANTIQUITIES
OF
COMPANY LAW
“THE
growth of large multinational corporations links economies
together ever more closely by virtue of normal corporate opera-
tions”; and national authorities are today constrained “by an inter-
national corporate order.”’
In
the absence of an “international
companies law, administered by a supranational body
as
a means
of
effecting social control on the supergiants,”* national company laws
must cope as best they can with the new transnational enterprises.
Multinational
Gas
and Petrochemical
Co.
v.
Multinational
Gas
and
Petrochemical Services Ltd3
shows that English law is in poor shape
for this difficult task.
The case concerned three giant oil companies (incorporated in,
respectively, the United States, France and Japan) operating a joint
venture. For it they formed a company registered in Liberia
(M.),
the plaintiff. They were sole shareholders and appointed its directors;
all
of
its business was done abroad; and the directors all resided
abroad.
(M.
was to be incorporated in England but was moved to
Liberia for tax reasons.) They also formed another company
(S.),
which was registered in England, to act as
M.’s
adviser and agent.
M.’s
directors made various decisions, allegedly negligently, between
1973 and 1975 concerning the operation of gas tankers.
All
these
decisions were made at the behest of the oil company shareholders.
By 1978, having minimal assets, it was wound up, bringing “a
financial disaster” to its creditors, including
S.,
which the three oil
companies did not offer to meet.4
S.
gave advice to
M.
which was
also alleged to be negligent. It too went into liquidation in 1978.
In the
Multinational
Gas
proceedings,
M.,
at the instance of its
liquidator, sued
S.,
the oil companies (its shareholders) and its own
directors, alleging various breaches of duty based upon the advice
from
S.
and the activities and decisions
of
its own shareholders and
directors. The real plan behind the litigation was to “get at the oil
companies” by making them pay up to its “creature,”
M.
The
companies and some of M.’s directors had funds enough
to
do
so;
and the suit against
S.
was really a route by which to attack the
other defendants. But in the absence of
malafides
there was nothin
improper in that in the view of a majority of the Court of Appeal.
The trouble was that, except for
S.,
the proposed defendants
operated and resided abroad, prohibiting service
of
a writ unless
M.
G
E.
Herman,
Corporate Power, Corporate Control
(1981), p.243.
A.
Miller,
The Modern
Corporate.
Stare, Private Governments and the American
Constitution
(1976). p.85; see too,
D.
Wallace,
Legal Conrrol
of
Multinational Enterprise
(1982);
K.
Simmonds (ed.),
Muitinarional Corporurions Law
(1978),
Voh.
1-111.
’
[I9831
3
W.L.R.
492,
C.A.
‘
Lawton
L.J.
[1983] 3
W.L.R.
498;
loss
to creditors was alleged to
be
more than f75
million;
assets
within the jurisdiction were leu than
f400,oOO.
May
L.J.
ibid.
at p.511; Dillon
L.J.
at p.518; Lawton
L.J.
at p.501. held that where
the
predominant motive
of
suing
S.
was
to enable others to be joined, leave to serve out
of
the
jurisdiction should be denied. The value judgments inherent in his approach to multinational
groups,
at pp.500-501, are very relevant to the general issues raised below, notes
27-38.
87
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