Nationality
It is usual to speak of the nationality of legal persons,and thus to import something that we predicate of natural persons into an area in which it can be applied by analogy only.Most of the effects of being an “alien,” or a “citizen” of the state are inapplicable in the field of legal persons: duties of allegiance or military service,the franchise and other political rights do not exist.Nevertheless,the concept of a corporation of Chinese or American nationality cannot be dispensed with.In many countries aliens are prevented from acquiring land,from exploiting natural resources,from carrying on a commercial or industrial enterprise in certain fields.Or they are bound when bringing an action in court to give security for costs.In cases of this kind it does not matter whether the alien concerned is a natural or a legal person.Therefore,the test of nationality of the legal persons is important in private international law.
2.1 Determination of the Nationality of a Legal Person
There has been no uniform test to determine the nationality of legal persons.With the acceleration of globalization,it is more and more difficult to determine the nationality of a legal person,as transnational corporations are increasing significantly both in number and scale.Generally speaking,the following approaches are frequently used to determine the nationality of legal persons.
First,the nationality of a legal person is determined by whom it actually belongs to and who controls it,which is called “the theory of control.” In other words,the nationality of a legal person is determined by the nationality of its members who control its capital.The rationale of this approach is that a legal person is the institution established and operated by its members; therefore,it is logical that the nationality of a legal person depends on that of its members.This approach was first elaborated during the First World War,and received judicial application in combating violations of legislation on “hostile aliens.”
This was first done in English proceedings in the famous Daimler case.3 There the question was whether a company incorporated in England and therefore of British nationality,with a British secretary,but with all its shares in the hands of enemy aliens (Germans),could be looked upon as an enemy company within the meaning of prohibition of trade with the enemy.The Court of Appeal denied this on the ground that the company had “a separate existence which cannot be swept aside as a technicality.” The House of Lords,however,reversed the decision which held that in a given case it was necessary to determine who controlled the legal person and thereby resolved the question of to whom it actually belonged.Subsequently,the principle of control was adopted by a number of state legislation which provided that a hostile person is understood as a legal person controlled by persons of enemy nationality.
The principle of control was applied after the Second World War only in cases when it is especially important to determine the actual ownership of a legal person.Usually when a state wishes to prevent its national industry,commerce or agriculture from passing into the hands of aliens,the law then is bound to penetrate the screen of legal personality.A good example is the determination of the nationality of Shanghai Yong’an Corporation in the early 1950s when the Chinese communist government was carrying out the policy of “the socialist transformation.” When it was incorporated,the Corporation was of American nationality.After the outbreak of World War II,the Corporation changed its nationality to Chinese in order to safeguard itself from the Japanese oppression until the end of the War when it resumed its American nationality.After the establishment of the PRC,however,the Chinese government classified the Corporation as a Chinese corporation,disregarding its American nationality,on the ground that it was invested by Chinese nationals and had been operated and controlled by Chinese nationals.4
Though this approach has been proved to be necessary in certain situations,it is by no means reasonable and practical to consider the shareholders as the decisive factor always.Sometimes,it is very difficult to identify the person who is in actual control of a legal person,since the dominating person can be outsiders controlling the company by nominees.Sometimes,it may be the case that the nationals of different states control the legal person jointly which will make the nationality of that legal person indefinable under the principle of control.Furthermore,the dominating person of a legal person can change easily which would render the nationality of legal person unstable.Therefore,this approach is not as popular as it used to be.
The second criterion for determining the nationality of a legal person is the place of its establishment,or in other words,the place of the origin of the legal person (the registration of its charter),which is the prevailing approach employed in common law countries.[1]English authors call the law of the place where a legal person is established as the law of incorporation.5 Thus,if a legal person is established in England and if its charter is registered there,then it is considered to be a legal person of England.This approach has two apparent merits: first,it is very easy to determine the nationality of a legal person; second,the nationality of a legal person determined under this approach is very stable.Nevertheless,it invites some criticism in that it may be utilized by the parties to evade the law of a given state,and it may conceal the person who is actually controlling the legal person.(https://www.daowen.com)
In many civil law countries,for instance,Germany and France,the criterion for establishing the nationality of a legal person is the situs of the legal person.The situs of a legal person is understood to be that the place where the headquarters (or the center of management) of the legal person are located.Another criterion for determining the nationality of a legal person is the situs of its activities,which has been adopted by the legislation of Italy and some developing countries.6
Since different states adopt different tests to determine the nationality of a legal person,conflicts arise inevitably.For example,if a company has been incorporated in France but has its headquarter in England,it is neither an English company under English law nor a French company under French law.On the other hand,one legal person may have two nationalities.An example of this is a company incorporated in England but having its headquarter in France.Regrettably,there is no uniform approach to solving the conflict of nationalities of legal persons so far.
As far as China is concerned,though it once followed principle of control in the process of accomplishing socialist transformation,it switches to adhering to the criterion of the place of incorporation to establish the nationality of a legal person after adopting the open-door policy in the 1980s.This is reflected in various laws and regulations adopted in recent decades.For instance,the judicial interpretation on implementing the General Principles of Civil Law issued by the Supreme People’s Court stipulates that “[T]he law of the registered place of the foreign legal person is its national law.”7 Furthermore,Article 192 of the Company Law provides that “[A] foreign company referred to herein means a company registered and established outside China under foreign laws.” Therefore,it is not surprising that Volvo Car Corporation is classified as a Swedish company by the Chinese authority even though it is now owned by Geely,a Chinese company.
2.2 Nationality of Multinational Corporations
A multinational corporation (MNC) or transnational corporation (TNC),also called multinational enterprise (MNE),is a corporation or enterprise that manages production or delivers services in more than one country.It can also be referred as an international corporation.The first modern MNC is generally thought to be the Poor Knights of Christ and the Temple of Solomon,first endorsed by the Pope in 1129.The key element of multinational corporations was present even back then: the British East India Company and Dutch East India Company were operating in different countries other than the ones where they had their headquarters.Nowadays many corporations have offices,branches or manufacturing plants in different countries other than where their original and main headquarter is located.This is the very definition of a multinational corporation: having multiple operation points that all respond to one headquarter.
This often results in very powerful corporations that have budgets exceeding some nations’ GDPs.For example,the combined revenues of just General Motors and Ford—the two largest automobile corporations in the world—exceed the combined Gross Domestic Product (GDP) for all of sub-Saharan Africa in the year of 2007.Multinational corporations can have a powerful influence on local economies as well as the world economy and play an important role in international relations and globalization.The presence of such powerful players in the world economy is reason for much controversy.
Usually,MNCs are created as national bodies under the law of one single state.Their foreign branches are sometimes nothing more than dependent places of business,where mercantile agents are appointed to carry on the enterprise.Or they are in the hands of legally separate entities but the shares in the subsidiary companies are owned either by the same persons who control the principal company,or mainly by the principal company itself.Or it may be that in each of the territories concerned a separate company is constituted,economic unity being produced by a holding company which owns practically all the shares in various local companies,while the shares in the holding company are possibly made the subject of Stock Exchanges transactions.Because of the variety of the MNCs,the determination of their nationalities is a complex issue.Basically speaking,when determining the nationality of an MNC,we should distinguish the principal company from its subsidiary companies or branches,and judge the nationality of specific company pursuant to the law of the place where it is located.8