Human Right Corporate Viel

OVERCOMING THE CORPORATE VEIL CHALLENGE: COULD
INVESTMENT LAW INSPIRE THE PROPOSED BUSINESS AND

HUMAN RIGHTS TREATY?
ANIL YILMAZ VASTARDIS* AND RACHEL CHAMBERS**
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.
Keywords: Human rights, access to remedy, business and human rights, civil liability,
control, corporate veil, investment treaty.
I. INTRODUCTION
Transnational business is frequently conducted through a corporate structure of

subsidiary companies located and operating in host States.1 More often than not
the parent company will use layers of intermediaries to distance itself legally
from the host State subsidiary and/or to benefit from a favourable regulatory
framework. Where corporate related human rights abuses occur in host
States, victims in the first instance would be likely to seek to obtain remedy
for these in the host State, against the locally incorporated subsidiary. Where
the host State has an ineffective legal system or the local subsidiary is
underfunded or defunct, victims of such human rights impacts have sought to
attribute blame to the parent company for the actions of its subsidiary and to
* Lecturer, School of Law, University of Essex, ayilma@essex.ac.uk.

** PhD Candidate, School of Law, University of Essex, rechama@essex.ac.uk.
1
‘Host State’ is used in this article as a reference to the State where the victims have suffered the
human rights harm.
[ICLQ vol 67, April 2018 pp 389–423] doi:10.1017/S0020589317000471
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390 International and Comparative Law Quarterly
obtain a remedy through the courts of the parent company’s home State.2 A
pressing issue arising from the victims’ inability to obtain justice locally3 is
whether they can pursue the parent company in the home State’s courts for
the harm inflicted by its subsidiary’s activities that materialized in the host
State. In order to successfully advance such a claim, claimants need to
overcome, inter alia, the ‘corporate veil’ challenge, a path fraught with
difficulties. Obstacles posed by corporate veil in access to remedy have been
documented in case law,4 scholarly writing5 and recognized in the UN
Guiding Principles on Business and Human Rights (‘UNGPs’).6
The UNGPs, in their third pillar on ‘access to remedy’, reaffirm the duty of
States to provide effective remedies to victims of human rights abuses
committed by businesses as part of the States’ general duty to protect under
international human rights law.7 In fulfilling this duty States are asked to
remove legal and other obstacles, including those created by corporate group
structures and denials of justice in host States.8 The momentum gained by the
endorsement of the UNGPs now continues with a proposal to conclude an
internationally binding instrument on business and human rights (‘BHR’).9
One of the central aims of the UNGPs and the proposed treaty on BHR is to
enhance access to effective remedy for victims of corporate related human
rights abuses (‘BHR claimants’). In this article, we aim to move the
discussion forward on what protections a draft convention on business and
human rights should contain, and in particular make a concrete proposal on
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 G Skinner 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 S Joseph, Corporations and Transnational Human Rights Litigation (Hart
Publishing 2004); G Skinner et al. (n 3) and S Baughen, 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
7 8
June 2011, Guiding Principle 26. Principle 25, UNGPs. 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.
Overcoming the Corporate Veil Challenge 391
how it can enhance access to remedy. A treaty in this area promises to make a
significant contribution to enhancing access to remedy. We propose that as part
of a framework to enhance access to remedy, the treaty should contain a model
of treaty-based veil piercing. This model would carve out an exception to the
classic rule of separate personality for civil liability claims brought against
parent companies by workers and communities whose human rights have
been impacted by the activities of the subsidiary.
The essence of our proposal is guided by the treaty-based veil-piercing model
found in international investment law (‘IIL’), which treats the issue of the
corporate veil quite differently from the way in which it is treated in the civil
liability claims under consideration.10 Despite key parallels in obstacles in
access to remedy created by local denials of justice and by the corporate veil
in both areas, the existing legal framework contains a double standard which
favours international investors when it comes to the application of the
corporate veil principle.11 The corporate veil is more readily disregarded in
IIL decisions in order to protect the parent company’s access to benefits
under an investment treaty, as compared with the difficulty experienced by
BHR claimants in piercing the same corporate veil when seeking to hold
parent companies liable for harm caused by their subsidiaries. The reason for
this is the availability of IIL rules12 which allow a reverse piercing of the
corporate veil13 using a test of ‘legal control’, ie the parent can claim directly
against the host State for harm suffered by directly or indirectly owned
subsidiaries. As the current legal framework stands, there are no rules
analogous to the IIL rules on veil-piercing which would allow courts to
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 G Skinner, ‘Parent
Company Accountability: Ensuring Justice for Human Rights Violations’ (2015) ICAR, 9–10
<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).
disregard separate personality in civil liability claims brought by BHR
claimants against transnational businesses. States have long carved out
exceptions to the separate personality rule in order to maximize investor
protection in investment treaties. We argue that protection of human rights is
a goal that warrants an equivalent treaty commitment carving out a similar
exception for BHR claimants.
BHR and IIL have hitherto been perceived as having restraining effects on
their mutual advancement.14 The restraining effect of IIL on BHR is partly
due to the problem of asymmetry in IIL that it gives rights to investors but
places no or minimal obligations on them vis-à-vis the host States or host
communities in which they operate. In response to this, proposals have been
advanced to include substantive commitments from States in investment
treaties to ensure business respect for human rights,15 and one new
investment treaty goes as far as including rights for the benefit of third parties
adversely affected by investor activity in investment treaties.16 There have also
been numerous discussions on how to overcome the corporate veil challenge to
access to remedy.17 In this article, we are proposing a positive contribution from
the existing IIL system to the advancement of BHR. The IIL model of treaty-
based veil piercing is an efficient model for overcoming the corporate veil
obstacle and could guide the development of treaty practice in the field of
BHR. Granting BHR claimants the right under an international treaty to
pursue parent companies in their home jurisdiction, with home States being
responsible for ensuring that their laws would allow claims to be made
against the parent entity, would assist in closing the accountability gap in
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 C Jochnick and N Rabaeus,
‘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 R McCorquodale and P Simons,
‘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
16
on 3 December 2016 See art 20 of the Morocco–Nigeria BIT.
17
See Section VI(b) below.
cases involving harm by transnational businesses, bringing victims one step
closer to effective remedies.
This article begins by briefly explaining the corporate veil challenge to access
to remedy for BHR claimants in cases involving harm caused by transnational
business enterprises. This is followed by a discussion of the treatment of the
corporate veil under IIL. Having explained the treatment of the corporate veil
in both areas, we move on to an analysis of the commonalities and differences
between IIL and BHR claims concerning access to remedy and discuss the
reasons for piercing the corporate veil in both areas. Using Chevron’s legal
saga in Ecuador as a case study, this section exposes the differences in the two
systems. Building on that comparison and with a view to improving access to
remedy for BHR claimants, we then propose a model for treaty-based veil
piercing for BHR claims, inspired by the IIL model. While there is already
scholarship arguing that the corporate veil should be pierced in the context of
human rights violations, we are advancing a novel means of achieving this.
II. SEPARATE PERSONALITY AS AN OBSTACLE TO ACCESS TO EFFECTIVE JUDICIAL

REMEDIES BY BHR CLAIMANTS
Numerous attempts have been made to hold parent companies liable for human
rights abuses committed overseas ostensibly by their subsidiaries.18 Claimants
pursuing this route have frequently relied on causes of action in tort for personal
injury, environmental harm, and emotional suffering.19 Victims have attempted
to hold parent companies liable, sometimes jointly with their host State
subsidiaries, before home State courts due to the lack of sufficient legal
protections, including ineffective enforcement,20 in the host State and/or due
to the subsidiary not having sufficient assets to satisfy a judgment.21
Particularly in the former instance, pursuing the parent company before the
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 C van Dam, ‘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.
home State court might be the only effective path to a remedy. Litigating in a
parent company’s home State is also sometimes seen as advantageous as it may
open the door to favourable civil procedural arrangements such as class actions,
public interest litigation, wide disclosure rules and sophisticated case funding
arrangements, which make mounting this type of litigation feasible.22
However, company law principles applicable in such cases render holding the
parent company liable extremely difficult. The parent company is in law a
distinct entity from the subsidiary. The act of incorporation creates a separate
legal personality for the newly incorporated company, dividing it and its
shareholder-owners into separate spheres and bestowing limited liability on
the shareholders. The corporate veil with its corollary of limited liability,
which divides the separate juridical personalities of parent and subsidiary
company, is a device intended to protect shareholders so as to encourage
risk-taking and innovation through investment in the business.23 It is
important to bear in mind that the corporate veil operates in two directions. It
has the effect of shielding shareholders from the liabilities of the company, but it
also prevents shareholders from treating the rights held by the company as their
own. It has been pointed out by leading scholars that the concept of limited
liability originates from a time when corporations were generally not allowed
to hold shares in other corporations, meaning that corporate groups did not
exist.24 The use of the corporate veil to shield parent companies from liability
for the debts of their subsidiaries in such groups ‘opens the door to multiple
layers of insulation [from liability], a consequence unforeseen when limited
liability was [first] adopted’25 and one which is arguably hard to justify,
particularly in tort cases where the claimant is an involuntary creditor.26
The circumstances in which the corporate veil may be pierced vary from State
to State but, as a general rule, it is reserved for exceptional cases.27 A high
threshold is set by domestic company laws to depart from the rule.28 Veil
22
R Meeran, ‘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
23
Law Review 3, 13–19; van Dam (n 20) 228. Joseph (n 5) 131.
24
Joseph (n 5) 131 and PI Blumberg, ‘Accountability of Multinational Corporations: The
Barriers Presented by Concepts of the Corporate Juridical Entity’ (2001) 24
HastingsIntl&CompLRev. 297, 300–4.
25
P. Blumberg, The Multinational Challenge to Corporate Law: The Search for a New
Corporate Personality (OUP 1993) 139.
26
P Muchlinski, ‘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, 669–679 (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 K Vandekerckhove, Piercing the Corporate Veil
(Kluwer Law International 2007).
piercing may be considered where there has been fraud or where the level of
control by the parent company is so extreme as to render the corporation an
alter ego or a sham.29 As Michael Osborne explains, piercing the veil
between an overseas subsidiary and its domestic parent company is made
difficult by corporate law rules, and this ‘fiction of corporate personality
facilitates elaborate shell games, permitting responsibility to be deferred,
displaced and diffused across globe-spanning commercial empires.’30 It is
possible to hold the parent company liable for its subsidiary’s actions without
piercing the corporate veil by alleging, for example, that the parent company
was directly involved in the violation ostensibly committed by its
subsidiary.31 Attempts have been made to hold the parent directly liable in
the home State for human rights harm caused by its subsidiary’s business on
the grounds that the parent owed a direct duty of care to the victims.32 To our
knowledge, so far there has not been a judicial determination holding a parent
directly liable for overseas harm although there is English precedent for holding
the parent directly liable in negligence for physical harm to an employee of its
domestic subsidiary.33 The only judgment, to our knowledge, that pierced the
veil to hold the parent liable for the human rights harm caused by the subsidiary
was rendered by courts in Ecuador in a case brought against Chevron, discussed
below.34
There are typically three stages at which the corporate veil may interfere with
access to a judicial remedy for BHR claimants. The first is the jurisdictional
stage. While the home State court might have personal jurisdiction over a
parent company based on domicile, in order for it to assume subject-matter
jurisdiction a claimant bringing a civil claim against a parent company will
first have to show that there is sufficient link between the forum and the
claim. This generally requires establishing a prima facie case against
the parent for a violation committed by its subsidiary.35 Formally, since the
subsidiary and the parent company are separate legal persons, the latter may
be able to benefit from a corporate veil defence. In common law countries,
29
S Joseph, (n.5) 130.
30
M Osborne, ‘Apartheid and the Alien Torts Act: Global Justice Meets Sovereign Equality’ in
M du Plessis and S Pete (eds), Repairing the Past? International Perspectives on Reparations for
Gross Human Rights Abuses (Intersentia 2007), 241.
31
See R Chambers and K Tyler, ‘The UK Context for Business and Human Rights’ in L Blecher
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.’)
even where the court has jurisdiction over the case, it may nonetheless be struck
out under the forum non conveniens rule if the court decides that there is a more
appropriate forum elsewhere.36 The decision on whether there is a more
appropriate forum might be influenced by the fact that the defendant parent
company and its overseas subsidiary are separate entities. In European Union
jurisdictions, Brussels Regulation (Recast)37 eliminates the availability of the
forum non conveniens defence by allowing the parent company to be sued in
the country where it is domiciled, without having to show that the home State
is the most appropriate forum in which to hear the case. Nevertheless, the
requirement to show a prima facie case against the parent remains, and might
prevent home State courts from exercising jurisdiction over claims concerning
subsidiary business.38
The second stage, assuming the jurisdictional hurdle is overcome, is the
merits stage where the court decides whether to disregard the corporate veil
and to attribute liability to the parent company for harm caused by the
subsidiary’s activities. The outcome of this is rarely positive for BHR
claimants.39 They have to tackle the almost impossible task of demonstrating
that the parent created the subsidiary for fraudulent purposes, or that the
subsidiary was the alter ego or agent of the parent. In direct parent liability
cases claimants must prove that the parent owed a direct duty of care to
them,40 and thus it was not the subsidiary’s breach alone that caused the
harm, but also the parent’s breach of its own duty.41 This is difficult for
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
claimants to do: the strictures of the corporate veil loom despite the fact that
through the formulation of their legal claim, claimants do not actually seek to
pierce it.42
The third stage is the enforcement stage where the corporate veil might be an
obstacle to a remedy. BHR claimants might obtain a favourable judgment for
damages in the host State against the subsidiary, but nevertheless be unable
to enforce the judgment due to the subsidiary being impecunious or defunct.
They might wish to enforce such a judgment against the parent, but they are
likely to be unsuccessful as the corporate veil principle would prevent them
from holding the parent liable for the debts of the subsidiary.
III. IIL AND TREATY-BASED VEIL PIERCING: HOW DOES IT OPERATE?
IIL deals with the substantive43 and procedural rights of foreign investors vis-a-
vis host States. Its primary sources include a web of bilateral, regional and
sectoral investment treaties, the ICSID Convention and customary
international law. The procedural empowerment of investors by the IIL
instruments strengthens their access to remedies thus enabling the effective
enforcement of substantive IIL protections.44 But an entity must qualify as a
foreign investor in order to benefit from IIL protections. Investors who desire
the backing of ‘international law’ for their investments typically structure the
corporate relationships involved in their investment in a way that will secure
the protection of a strong investment treaty.45
The ICSID Convention and investment treaties contain personal and material
scope rules that allow direct or indirect shareholders or controllers of a host State
subsidiary to bring claims against the host State for the harm caused by the latter
to the subsidiary’s business. These treaty provisions allow investment tribunals,
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).
for the purposes of determining their jurisdiction and the personal scope of
application of an investment treaty,46 to disregard the separate personality
between the host State entity and its shareholders without having to justify
this under the limited domestic law grounds for lifting the corporate veil.
This is what we call a ‘treaty-based reverse veil piercing’. Treaty provisions
allow the veil or veils of a number of entities to be disregarded to enable the
direct or indirect shareholders or controllers to advance a claim which would,
under the company law rules on separate personality, have belonged to the local
subsidiary.
A. The ICSID Convention

The ICSID uses ‘nationality’ as the criterion for determining the
Convention47
personal scope of jurisdiction. To benefit from the dispute settlement framework
created by the Convention, a corporate investor must be a foreign national. For
corporate investors, which make up the vast majority of IIL claimants, the
Convention envisages two scenarios for determination of foreign nationality:
(1) corporate investors that invest without a separately incorporated local
subsidiary are treated as ‘foreign’, and (2) corporate investors that operate in
the host State via a local subsidiary are prima facie treated as domestic, but
can be treated as foreign if the local subsidiary is ‘controlled’ by a foreign
entity.48 The latter type is the more common method of foreign investment,
and it is the treatment of this type of investment that falls within the scope of
this article.
Though Article 25(2)(b) stipulates the application of a ‘control’ test to
determine the nationality of the host State entity, it does not clarify what is
meant by ‘control’. The meaning of ‘control’ has been interpreted in various
arbitral awards.49 The significance of this part of Article 25(2)(b) is that it
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
looks behind the corporate veil of the host State subsidiary, for the purpose of
determining the foreign nationality of the investor, without having to justify this
under the limited domestic company law grounds for lifting the corporate veil.
B. Investment Treaties
An investor falling under the personal scope of an investment treaty, provided
temporal and material requirements are also satisfied, will be able to benefit
from the substantive protections of the treaty and enforce these under the
dispute settlement provisions of the treaty.50 For corporate investors, an
overwhelming majority of treaties refer, as the determinant of personal scope,
to criteria such as place of incorporation, seat or centre of management.51
Occasionally, bilateral investment treaties (‘BITs’) refer directly to the
‘nationality’ of corporate investors in order to determine personal scope, but
nationality is determined by reference to criteria such as place of
incorporation, seat or centre of management.52
If the investment in the host State is carried out through a local subsidiary,
reverse veil piercing allows the shareholder/parent company established in
the home State to claim in the place of its subsidiary. Most investment
treaties allow the direct or indirect controllers to benefit from the treaty’s
protections, so long as the controllers fall within the personal scope of the
treaty, ie they are nationals/companies of the home contracting State. In this
way a parent company is able to bring a treaty claim against the host State
for the harm suffered by its subsidiary. Many investment treaties also include
within their material scope direct or indirect ownership of shares as
‘investment’, which makes it possible for minority shareholders to advance
(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.
claims for the harm they suffered as the subsidiary’s shareholders, de facto
disregarding separate personality.53 This way, what might otherwise be
characterized as a domestic dispute between the subsidiary and the host State
is transformed into an international investment dispute that attracts the
protection of an investment treaty.
For instance, in the US–Ecuador BIT54 reverse veil piercing is made possible
by a number of provisions of the treaty. A ‘company’ that has an ‘investment’ in
Ecuador is able to benefit from the investment treaty protections, including the
right to bring arbitration proceedings against the host State.55 Pursuant to
Article 1(a), ‘investment’ includes investments ‘owned or controlled directly
or indirectly by nationals or companies of the [home state]’. The investment
itself could take the form of ‘a company or shares of stock or other interests
in a company or interests in the assets thereof’. This covers investments that
are owned directly or indirectly by the protected investor and take the form
of a company, ie a subsidiary, established in the host State.
Article 1(b) defines ‘company’ as one which is ‘legally constituted under the
laws and regulations of a Party’. The commentary attached to the treaty explains
that the word ‘company’ should be interpreted flexibly so as to afford protection
‘even if the parent company is ultimately owned by non-Party nationals’56 or
even where the investment is made by ‘a company of a third country that is
owned or controlled by nationals or companies of a Party’. The flexible
interpretation envisaged in the commentary allows a corporate group to
utilize the existence of the parent or a subsidiary in a particular jurisdiction
for the benefit of the whole group, no matter which particular entity is
carrying out the investment in the host State or no matter which particular
entity directly holds shares in that subsidiary, so long as that entity is within
the upstream ownership structure of the host State subsidiary. In this way,
corporate veils can be disregarded throughout the various layers of the group
structure.
C. ‘Control’ under IIL

The ICSID Convention does not provide guidance on the meaning of ‘control’.
Some investment treaties, like the US–Ecuador BIT, refer to ‘direct or indirect’
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
55
force 11 May 1997). ibid, art 6.
56
‘although the other Party may deny the benefits of the Treaty in the limited circumstances’
provided in art 1(2).
control and ownership as descriptors, but this is very limited guidance. Other
investment treaties,57 like the Hong Kong–Australia BIT, go one step further
and define control by reference to holding a ‘substantial interest’ in the
subsidiary.58 In the absence of clear guidance from treaties, one might turn to
the arbitral awards applying and interpreting them for answers. Tribunals tackle
two main issues when deciding who the investor behind the host State entity is.
The first concerns the indicators of control. So far, ownership/shareholding,
voting rights, management rights59 and capital investment60 in the host State
entity have been considered when determining the identity of the controller.
Tribunals most frequently consider share ownership as an indicator of
control.61 The second issue concerns when shareholding is taken as an
indicator of control and the host State entity’s upstream ownership structure
is formed of multiple layers. In such cases, the question arises as to which
entity or person exercises ‘control’ over the host State entity within the
meaning of the applicable treaty. Is ‘control’ exercised by the immediate
shareholders62 of the host State entity or is there a need to look beyond the
immediate shareholders in the upstream structure to identify the controllers?
In the latter case, is it necessary to identify the entity exercising actual day to
day control? Or, could the tribunal attribute control to an entity within the
upstream ownership of the host State company that legally has the ability to
exercise control, regardless of the level of its involvement in the subsidiary’s
business operations?
A common feature observed from arbitral awards is that IIL tribunals do not
search for day-to-day control of the subsidiary, in order to attribute the
‘protected investor’ status to a direct or an indirect shareholder under the
applicable treaty. There is, however, a diversity of approaches in what level
of involvement is required short of day-to-day control. In some cases,
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).
tribunals have sought to identify whether the shareholder that claims to be the
investor is a genuine entity that has the ability to exercise control over the
subsidiary, and not a shell holding company.63 Other tribunals have
considered the ‘potential’ to exercise control via ownership/shareholding
sufficient,64 even where the entity invoking the investor status is a shell
holding company established in a jurisdiction with a favourable investment
treaty with the host State.65 These latter claims are brought by a shell holding
company as the ‘controlling entity’, which is in turn owned directly or indirectly
by a parent company established in a country that has not signed an investment
treaty with the host State. Since these shell entities are mere vehicles with no
actual activities, their ability to exercise ‘control’ is doubtful. This so-called
practice of treaty shopping via shell companies has led some scholars to
argue that tribunals should look beyond formalistic appearances and pay due
regard to economic realities when assessing control under IIL in order to
prevent exploitation of the protection mechanism, an approach that we agree
with.66 The awards that support this approach also do not hesitate to look
beyond the corporate veils of any entity in the upstream ownership structure
of the host State subsidiary to identify the entity which is genuinely able to
exercise legal control over the investment.67
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
CH Schreuer et al., The ICSID Convention: A Commentary (2nd edn, Cambridge University
Press 2009) 323; M Sornarajah, 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.
It is difficult to make generalizations as to the meaning of control under IIL
due to the diversity of the applicable legal instruments and the diversity in the
approaches of arbitral tribunals. In our proposal, we borrow the one common
feature of control present in all the awards we have reviewed: when
international investment arbitration (‘IIA’) tribunals determine the personal
scope of their jurisdiction through a search for the controllers, they deviate
from the tight level of control required by the traditional rules on piercing the
corporate veil. The IIL model does not look for a heightened involvement of the
controllers in the subsidiary’s business. At most, IIL requires the controllers to
be a genuine entity, and not a shell holding company, acting as the economic
force behind the local subsidiary with an ability to provide a general direction
to the subsidiary’s business. The permissive language used in BITs and
interpretations adopted by IIA tribunals demonstrate that the threshold of
control required by IIL to trigger treaty-based veil piercing is significantly
lower than that which is typically required by domestic law as grounds for
piercing the veil in BHR claims. It is the model of treaty-based veil piercing
and this permissive approach to control under IIL that we aim to borrow from
the IIL remedial regime for a treaty-based veil piercing in BHR claims involving
transnational businesses. Building on this permissive treaty-based approach, for
purposes of increasing legal certainty, our model contains a clear definition of
control.
IV. COMPARING THE POSITION OF FOREIGN INVESTORS WITH BHR CLAIMANTS
The corporate veil can pose an obstacle to access to remedy for both BHR
claimants and foreign investors. We argue that an exception to the separate
personality rule should be carved out for BHR claimants under international
human rights law (‘IHRL’), similar to the exception carved out for the
protection of investors under IIL. It is useful to draw appropriate analogies
from more established areas of law in order to develop solutions to
particular challenges in newly emerging areas of law.68 Although IIL itself
is an emerging area of law, BHR is an even younger field which can
benefit from being analogized to the more established principles of the IIL
regime. They share a sufficient number of relevant characteristics69 that
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’. A Roberts, ‘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; PM Dupuy and JE Vinuales, ‘Human Rights and
allow us to draw certain analogies between the treatments of corporate veil in
these fields.70
Most generally, IIL protections have been developed with the underlying
assumption that foreign investors are in a position of vulnerability vis-à-vis
host States and, therefore, they need substantive and procedural rights
guaranteed under international law.71 BHR claimants are arguably in an even
more vulnerable position in relation to transnational businesses in defending
their basic rights and they strongly deserve substantive and procedural
support of international law. States often include procedural guarantees in
their investment treaties to enhance access to remedies for investors. Under
the IHRL framework, States have a duty to protect against abuses by third
parties, including business enterprises. As part of this duty, they are required
to establish effective remedy mechanisms when third party abuses occur. IIL
and BHR both have a strong emphasis on access to remedy to safeguard the
basic rights of their respective beneficiaries.
Besides the relative disadvantaged position of these two sets of defendants,
having the fragmented transnational business enterprise as a key actor in both
domains necessitates veil piercing in order to enhance access to remedies for
their beneficiaries. IIL has effectively dealt with this issue by introducing
treaty-based veil piercing, which we argue below is a constructive example to
follow in dealing with the same challenge in the BHR context. Given that lack of
access to remedies for individual victims is a problem in the IHRL context,72 a
similar approach to IIL can be taken by States to assist in fulfilling their duty to
provide access to effective remedies to BHR claimants harmed by transnational
business activity.
IIL grants unique treaty-based rights to foreign investors and treaty-based
veil piercing contributes to the effective enforcement of these rights.
Internationally guaranteed substantive and procedural rights73 are viewed as
safeguards against host States that have the power to detrimentally alter the
substantive legal framework applicable to an investment or fail to afford
Investment Disciplines: Integration in Progress’ in M Bungenberg 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; CR
Sunstein, ‘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
C Schreuer, ‘Do We Need Investment Arbitration?’ in JE Kalicki and A Joubin-Bret (eds),
Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Brill
Nijhoff 2015).
72
D Shelton, Remedies in International Human Rights Law (Oxford University Press 2006) 1–4.
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’).
effective judicial protection to investors. Treaty-based veil piercing is an
important pillar of the procedural empowerment of foreign investors,
allowing them to present claims before arbitral tribunals which would have,
under the principle of separate personality, belonged to their subsidiaries and
been litigated in host State courts.74 The IIL rules on treaty-based veil
piercing maximize the number of foreign investors that can benefit from IIL
protections.
In the BHR context, claimants are in a similarly disadvantageous position in
relation to transnational corporations, both substantively and procedurally. The
lack of binding IHRL obligations for businesses, weak legal standards and weak
enforcement in host States necessitate unique rights for BHR claimants, to be
codified in an international treaty accompanied with treaty-based veil piercing,
in the same way that foreign investors have unique rights against host States.
Procedurally, there is a similar lack of confidence in the ability of victims to
obtain effective remedies locally,75 and save for exceptional circumstances,
BHR claimants are unable to reach the pockets of the parent company due to
the latter being a separate person from its local subsidiary. Both types of
dispute usually involve a local subsidiary carrying out business in the host
State and a parent company based in the home State holding the shares of the
local subsidiary, sometimes indirectly through a complex upstream corporate
structure. In both cases, the local subsidiary is usually directly linked to the
violation, but the parent company might not be. In investment cases, it would
be the local subsidiary’s property that has been expropriated or licence that has
been cancelled. In BHR claims, it is the local subsidiary’s activities that
ostensibly cause the harm suffered by the victims. In both fields, the question
arises as to whether the parent company should be a party to the dispute in
lieu of or in addition to its subsidiary in a transnational context, and thus
benefit from or suffer the consequences of the judgment or award made.
When considering these similarities in corporate structures involved, we
should bear in mind that it is often the same transnational businesses that
benefit from IIL protections that act as defendants in the type of BHR claims
addressed here.76
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; P Simons and
A Macklin, 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 D
Shelton, ‘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’.).
The similarities in the corporate structures and relationships involved in the
BHR and IIL claims make the IIL approach to veil piercing a suitable model for
BHR claims. A main difference between IIL and BHR in this respect is that in
IIL veil piercing allows the parent to benefit from the award, while in BHR it
would make the parent suffer the consequences of the judgment. At this point, it
is important to remember that corporate veil operates in two directions. It has the
effect of shielding shareholders from the liabilities of the company, but it also
prevents shareholders from treating the rights held by the company as their own.
IIL introduces an exception to this general rule by allowing shareholders to
advance claims against host States for abuses suffered by the local subsidiary,
a right that is normally reserved for the local subsidiary. The same economic
realities and structures of transnational business affect access to remedy in
both domains. In both instances, the availability of veil piercing determines
whether the case can be heard by a court or a tribunal outside the host State’s
legal system and whether it can proceed with the parent company acting as a
party to the dispute instead of its subsidiary. While the defendants and
claimants in these two types of claim are different, and under IIL it is the
State that assumes the obligations under the treaty, in essence, IIL treaties are
entered into by States and create enforceable rights for private parties. The
framework we propose here envisages a similar arrangement, under which
States would sign up to treaty commitments to create rights enforceable by
BHR claimants before domestic courts of the home State.77 We argue here
that policymakers should not shy away from introducing a principled
exception to the corporate veil principle to fulfil their duty to protect human
rights, even if this means extending liabilities of companies.
The underlying reason behind IIL taking a more lenient approach to corporate
veil is because of its having a different objective: extending rights for claimant
companies rather than liabilities for defendant companies with a view to
encouraging economic activity and risk taking. There appears to be a
heightened desire by policymakers to protect economic activity compared to
the desire to protect human rights. There is openness to disregarding
corporate veil to protect market interests, but extreme caution when it comes
to the protection of human rights. This is paradoxically exemplified by
looking at how the goals of IIL exceptions on corporate veil and the
company law rules on corporate veil overlap, as they both intend to increase
economic activity by facilitating risk taking by investors.78 There is an
eagerness to introduce rules and exceptions necessary to protect investment
whilst placing lesser importance on improving human rights protection
against business abuses. We argue that the protection of human rights is a
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.
policy goal at least as worthy as the promotion of economic activity meaning
that, on occasion, the latter should be subjugated to the former.
V. CHEVRON IN ECUADOR: THE DOUBLE STANDARD COMES TO LIGHT
The inconsistency outlined above is clearly illustrated in the legal saga

involving Chevron’s activities (formerly Texaco)79 in Ecuador. The main
actors of this legal saga are Chevron, Ecuador and the residents in Ecuador’s
Oriente region. Accounts of Chevron’s ‘lawfare’ in Ecuador have been
provided in numerous publications,80 and will not be repeated here in detail.
For the purposes of this article, we will group the claims into two categories.
The first group involves those brought by the residents against Chevron
(beginning in the US, continuing in the courts of Ecuador, and now seeking
enforcement around the world, including in Canada,81 Argentina82 and
Brazil83) seeking damages for personal injuries suffered as a result of
Texaco’s operations in the region.84 These consist of infringements of the
right to health, right to a healthy environment, right to water, right to food
and indigenous rights such as land rights, cultural rights and consultation
rights.85 The second group consists of the investment treaty claim that was
brought before an arbitral tribunal by Chevron against Ecuador under the
US–Ecuador BIT seeking compensation for the latter’s violation of
provisions of the BIT arising from, inter alia, denial of justice in the Lago
Agrio86 litigation.
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, S Joseph, ‘Protracted Lawfare: The Tale of Chevron Texaco in the Amazon’
(2012) 3(1) JHRE 70; J Kimerling, ‘Indigenous Peoples and the Oil Frontier in Amazonia: The Case
of Ecuador Chevron Texaco, and Aguinda v. Texaco’ (2006) 38 NYUJIntlL&Pol 413; S Patel,
‘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; C Giorgetti, ‘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
85
80) 420 fn 17. 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>.
The first group of actions brought against Chevron for environmental and
health damage by the Ecuadorian victims include the initial Aguinda87
litigation in the US, followed by the Lago Agrio litigation in Ecuador, and
the Yaiguaje88 enforcement action in Canada. In each of these proceedings,
Chevron has argued that it is a separate entity from its subsidiary TexPet,
whose activities allegedly caused the harm, and TexPet’s former parent
Texaco Inc., and thus cannot be held liable for the harms in question. The
initial lawsuit was filed in 1993 in the US.89 The plaintiffs argued that the true
site of the alleged environmental torts was the US, as the relevant policy
decisions had been made at Texaco’s US headquarters. The District Court
dismissed the case on forum non conveniens grounds, finding that ‘a
meaningful nexus between the United States and the decisions and practices’
which formed the subject of the case was missing.90 In Jota v Texaco,91 the
appeal before the Second Circuit, Texaco elaborated its motion to dismiss the
action on forum non conveniens grounds with reference, inter alia, to the legal
separation between itself and TexPet.92 Similarly in Aguinda v Texaco93 the
District Court dismissed the claim on forum non conveniens grounds. It held,
inter alia, that ‘only conduct arguably involving sued oil company was
participation by fourth tier subsidiary, not joined as party, in consortium
causing damages, with most of subsidiary’s activities occurring in Ecuador’.
The court found no direct involvement of Texaco parent in the operations of the
subsidiary in Ecuador which would warrant disregarding the separate personality
between the entities and proceeding to the merits of the claim against Texaco. The
District Court conditioned the dismissal on Texaco consenting to submit to
personal jurisdiction in Ecuador and to waive the relevant statute of limitations.94
Following the dismissal in the US, the Lago Agrio action was brought in
Ecuador in 2003 against Chevron and TexPet.95 In this litigation, Chevron
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
94
95
Chevron Corporation acquired Texaco in 2001.
raised two objections to the Ecuadorian court’s jurisdiction that relate to the
corporate veil.96 First, it claimed that it was not a legitimate defendant as it
was not the successor of Texaco Inc., therefore, it could not succeed to
Texaco’s liabilities, including the latter’s obligation to submit to the
jurisdiction of the Ecuadoran courts as per the Aguinda judgment.97 Second,
even if it was treated as the successor of Texaco Inc., it was a separate entity
from TexPet, thus could not be held liable for the alleged harm caused by its
subsidiary. Both objections were dismissed by the court, a rare occasion.
The second objection on separate personality is useful in illustrating the
inconsistency discussed in this paper. Here, Chevron argued that it has never
had operations in Ecuador, and TexPet was a separate entity whose liabilities
could not be attributed to it. The court stated in respect of this defence that it
would need to evaluate whether grounds for lifting the corporate veil existed
in order to hold Texaco (and its successor Chevron) liable. At the outset of
its assessment, the court emphasized that veil piercing was limited to
exceptional situations, such as undercapitalization of the subsidiary to the
detriment of third parties and excessive control and involvement over
the subsidiary’s business that makes the latter the alter ego of the parent. The
court held that TexPet could not be considered a distinct legal entity from
Texaco (Chevron) as all TexPet’s business, financial and technical decisions
were made by Texaco. It sought authorization from the parent for the
simplest day-to-day running of the company. Furthermore, TexPet was left
undercapitalized by Texaco and was unable to meet its obligations. For these
reasons, the court sanctioned the piercing of the layers of veil between
Chevron and TexPet, as not doing so would cause a manifest injustice. The
outcome of the court’s interpretation of the traditional veil piercing doctrine
here in relation to the Texaco-TexPet-Chevron constellation is an exceptional
one.
The Lago Agrio plaintiffs obtained a judgment against Chevron from
Ecuadoran courts in the amount of $9.5 billion in 2011, which they have not
yet been able to enforce. The issue of corporate veil was resurrected once
more during the Yaiguaje enforcement action. Here, the plaintiffs target
Chevron and its wholly-owned 7th tier Canadian subsidiary. In its statement
of defence to the enforcement action,98 Chevron stated that ‘a subsidiary of
Chevron Corp. merged with Texaco and thus, Texaco and TexPet became
indirect subsidiaries of Chevron Corp. Following this transaction, Chevron
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>.
Corp., Texaco and TexPet continued as separate legal entities and they have
remained so ever since.’ Chevron argued there that it has never operated or
owned assets in Ecuador, has not participated in any way in the Consortium,
Texaco and TexPet are legally separate entities from Chevron, and there has
never been any valid reason to disregard the separate personalities of these
entities.99 The plaintiffs sought to pierce Chevron Canada’s corporate veil to
satisfy a judgment rendered against Chevron.100 The first instance court
dismissed the plaintiff’s request for piercing the veil in the absence of
complete domination of the subsidiary coupled with ‘wrongdoing akin to
fraud’.101
Chevron’s arguments run in the opposite direction in the IIL claim it brought
against Ecuador. There, Chevron claims, inter alia, that Ecuador’s conduct
regarding the Lago Agrio case violated the US–Ecuador bilateral investment
treaty’s denial of justice provisions, 102 as well as its protections on fair and
equitable treatment.103 In this claim, Chevron invoked the treaty against
Ecuador relying on its historical investment in Ecuador via Texaco and
TexPet. As the parent company, Chevron is seeking the protection of the
treaty which explicitly allows parent companies to advance claims, as
protected investors, for the alleged harms done by the host State to their
subsidiary.104 According to Chevron, its investment in Ecuador that deserves
the protection of the BIT consists of ‘TexPet’s underlying oil operations in
Ecuador’, and ‘[TexPet’s] rights under the Settlement Agreements’ signed by
and between Ecuador and TexPet, releasing the latter from liability.105 The
tribunal held that ‘as TexPet’s parent company, Chevron is a covered
investor under [the BIT] because it indirectly owns or controls an
“investment” in Ecuador’.106 This is a prime example of treaty-based reverse
veil-piercing.
In the IIL proceedings, Chevron argued that it met the threshold of
involvement with its subsidiary’s business in Ecuador, whilst in the domestic
claims by the BHR victims; it argued that it did not meet that threshold of
99
ibid, para 30.
100
This is a case of reverse veil piercing, where the assets of the subsidiary are pursued for
101
liability of the parent. 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
104 105
Region; see ibid para 1.28. ibid para 3.102 and 3.235. ibid para 3.61.
106
ibid para 4.24.
involvement with its subsidiary’s business in Ecuador.107
This was possible
because, as discussed above, the level of involvement sufficient in IIL to
disregard corporate veil is much less than that required under company law
rules in most jurisdictions. Even though both cases involve the same
constellation of facts regarding corporate structure, in the first group of cases
mentioned above, Chevron, in an attempt to distance itself from TexPet,
repeatedly invoked the corporate veil, while in the IIL claim it was able to
successfully argue for disregarding the corporate veil in order to benefit from
an investment treaty protection. The latter was readily accepted by the
investment tribunal, as the US–Ecuador BIT explicitly allows reverse veil
piercing. The former had to be argued up and down the legal process over the
past 23 years in various jurisdictions including the US, Canada, and Ecuador.
VI. ADOPTING THE TREATY-BASED VEIL PIERCING AND THE ‘CONTROL’ RULE IN THE BHR
CONTEXT
The State duty to protect under international human rights law comprises a duty
to ensure that victims of human rights abuses committed by third parties have
access to effective domestic remedies.108 This core principle is reflected in the
BHR context in the third pillar of the UNGPs, requiring both States and
businesses to provide remedies when abuses occur. Particularly relevant here
is the UNGP 26, which requires States to remove obstacles to access to
judicial remedies, by reducing ‘legal, practical and other relevant barriers that
could lead to a denial of access to remedy’. The commentary to UNGP 26 lists,
as examples of legal barriers, the ability of businesses to avoid liability using
strategic corporate structuring and the inability of victims to access home
State courts even when they face a denial of justice in the host State. The
framework advanced in this article aims to allow BHR claimants to pursue
the parent company in its home jurisdiction for harm caused by the latter’s
subsidiary.
A. ‘Veil Piercing’
The model we propose here allows disregarding the veil between the host State
entity and the parent company, as well as the veils of the layers of subsidiaries
between the two entities where necessary. This is made possible by the adoption
of a ‘control’ test, primarily borrowed from the IIL model, to identify the proper
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 O De Schutter, ‘Towards
a New Treaty on Business and Human Rights’ (2016) 1 BHRJ 41, 44.
defendant/s in the upstream ownership structure of the subsidiary. Veil piercing
under this model aims to overcome the obstacles created by separate personality
and limited liability in three stages of access to a judicial remedy by BHR
claimants: jurisdiction, substance and enforcement. At each of these stages,
the question of whether the veil can be pierced will have to be answered
separately.
At the jurisdictional stage, veil piercing would operate to allow courts in the
home State of the entity controlling109 the subsidiary to assume jurisdiction over
the claim, despite the overseas locus of the harm and distinct identity of the
overseas subsidiary. This way, the BHR claimants would overcome the
potential obstacles, such as the forum non conveniens principle or the lack of
sufficient proximity between the forum and the claim, when pursuing a parent
company and its subsidiary in home State courts. Overcoming this obstacle
would mean that the claim will proceed before the home States’ courts to the
merits stage, rather than being dismissed on the grounds that the host State is
a more appropriate forum despite the serious challenges to obtaining a
remedy there. This could, for instance, have allowed the Aguinda litigation to
proceed in the US against Texaco, as long as Texaco fulfilled the definition of a
‘controlling entity’ within the meaning of this proposed framework.
The ability to pierce the veil to enable home State courts to exercise
jurisdiction does not automatically establish the liability of the parent
company. The second stage of the enquiry will be whether the parent can be
held liable for its subsidiary’s actions or omissions. There will be two
elements to this. One side of the liability coin is whether the veil can be
pierced to overcome the limited liability principle. If this can be answered in
the positive, the plaintiffs would still need to establish that their rights under
the applicable domestic law or treaty were breached by the subsidiary or the
parent. So at this juncture, an ability to pierce the veil alone will not
automatically establish parent liability. It needs to be accompanied by
substantive protections concerning the rights of the BHR claimants and a
standard of care expected from the parent or the subsidiary established in
domestic law or in the applicable treaty. At the merits stage, veil piercing
would assist in attributing liability to the controlling entity for harm
ostensibly caused by the host State subsidiary, regardless of the legal distance
created by layers of intermediary companies. This would allow for (1) the
pursuit of the parent company before host State courts, where the local
subsidiary is defunct or underfunded; and, (2) pursuit of the parent company
before home State courts. In the Aguinda litigation, our proposal would have
allowed the US court to consider whether to hold Texaco liable for the harm
allegedly caused by its subsidiary, as long as Texaco fulfilled the definition
of a ‘controlling entity’ within the meaning of this proposed framework.
Again, the BHR claimants would have thus sidestepped the domestic law
109
The meaning of control for this proposal is explained in Section VI.B.
requirements for piercing the corporate veil, which are extremely difficult to
satisfy,110 to hold shareholders of a company liable for harm caused by the
latter’s activities.
Finally, at the enforcement stage, the model will allow judgments made
against the subsidiary to be enforced against the parent company where the
judgment debtor subsidiary is defunct or does not have enough assets to meet
its debts. This will allow, for instance, judgments rendered in host States against
such defunct or impecunious subsidiaries to be enforced against the assets of the
controlling entity, as long as those assets are located in a State signatory to the
treaty introducing our model.111 The proposed rules on enforcement would,
however, not allow enforcement against sister corporations (so called
‘horizontal veil piercing’112) within the same group that do not qualify as a
‘controlling entity’. Thus, the proposed model would not make a difference
for the enforcement of the Lago Agrio judgment, as the latter was made
against the Chevron parent in the first place, and as such should be
enforceable against the parent’s assets, as long as the judgment complies with
the rules on recognition and enforcement of foreign judgments in the chosen
place of enforcement.113 The proposed enforcement rules would make a
difference for the victims that are able to obtain award for damages against
the subsidiary in the host State for the human rights harm suffered, but who
are not able to enforce the judgment against the subsidiary for the reasons
explained earlier.114
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
M Dearborn, ‘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.
B. ‘Control’
The trickiest part of proposing a model for a treaty-based veil piercing is to
develop a satisfactory and sufficiently encompassing definition of ‘control’
that will determine the target entity, ie the defendant, behind the corporate
veil. Even a detailed prescription of this concept would have to be applied in
individual cases through judicial interpretation, sometimes with potentially
unforeseen outcomes. Thus, a meaning of control is presented here with that
caveat in mind.
The understanding of ‘control’ under IIL provides guidance by analogy.
Despite the lack of a uniform definition of control adopted in IIL, there is a
level consistency in the understanding of ‘control’ throughout the system
owing to its investor-friendly spirit. This spirit is reflected in how generously
the concept of ‘control’ has been defined in treaties and interpreted in awards,
aiming to push for greater protection of investors via a broader application of
treaties and exercise of jurisdiction by arbitral tribunals.
IIL accepts that control of the local subsidiary could be exercised via
ownership of shares, voting rights or management rights, or a combination
thereof. IIL definitions of control recognize that control can be exercised by
direct or indirect holders of shares, voting rights or management rights in a
company, thus catering for there being layers of intermediaries between the
host State subsidiary and its controlling parent. Thus, IIL adopts a legal
‘control’ approach and not a day-to-day control approach. Control in the IIL
context is not used as a reference to active involvement in the business
activities and decisions of the subsidiary. It is also not linked to whether the
controlling entity was under a due diligence obligation for the behaviour of
its subsidiaries. Nor does it question whether the parent had assumed
responsibility under a standard of duty of care vis-à-vis the persons harmed
by the activities of the subsidiary. It is a reference to the interest of the
foreign party who is ‘behind’ or has ‘made’ the investment.
By adopting a liberal ‘control’ rule, IIL aims to cater for the realities of
making a foreign investment, when investments are carried out via a local
subsidiary.115 If treaty-based veil piercing was not allowed under IIL, foreign
investors operating via local subsidiaries would be significantly limited in their
ability to invoke IIL protections. IIL does not require investors to show that they
had any active involvement in the policies or the activities of the subsidiary to
establish control. Instead, it simply recognizes the need for protection due to the
economic interest of the parent in the subsidiary. This economic interest of the
parent in the subsidiary is also a reality in the BHR context. We propose that a
new treaty on BHR should take this economic interest into account in regulating
access to remedy by allowing claims to be brought against direct or indirect
controllers of host State subsidiaries. Sometimes the ability to reach the
115
CH Schreuer et al. (n 66) 296.
deeper pockets of the parent company will make access to remedy possible for
BHR claimants. Beyond the remedy provided to individual victims, exposing
the parent to liability can have a preventative effect by potentially pushing the
parent to ensure better institutional behaviour throughout the group. Even if
potential liability deters some businesses from making otherwise
economically and socially beneficial investments, that is a risk worth taking
to improve respect for human rights.
The IIL model makes parent companies more accessible to claimants by
eliminating the necessity to show a certain level of parent involvement in the
harmful activity of the subsidiary. It is often extremely difficult for business
and human rights claimants to prove the required levels of involvement, as
they often have no access to internal company documents that might prove
such involvement. To overcome these challenges, we propose to transpose
the liberal understanding of ‘control’ observed in IIL into our model, based
on direct or indirect ownership rights and not on the level of active
involvement in subsidiary policies. The treaty could also stipulate the
threshold of control proposed below as a trigger for the substantive
obligations of a parent company, such as the duty of care or human rights
due diligence obligations, vis-à-vis the BHR claimants.
IIL does not provide clarity as to the extent of ownership rights that would
amount to ‘control’ within the meaning of IIL. We consulted several
proposals from leading scholars writing on the issue of the corporate veil in
the context of BHR, which range from 20 per cent to 51 per cent
shareholding when defining control.116 The lowest threshold was proposed
by Simons and Macklin in their proposal for a negligence-based home State
civil liability regime.117 Among the indicators of control proposed in their
book is direct or indirect ownership of ‘20 per cent of the voting interests in
an affiliate or other business entity’.118 They find support for this threshold in
securities law by reference to the meaning of control under the Ontario
Securities Act which ‘creates a rebuttable presumption that someone can
materially control an entity through a 20 per cent interest’.119
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
117
supplier and a purchaser.). 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
119
the behaviour of the other entity. Simons and Macklin (n 75) 356, n 201.
Skinner proposes a statute-based model that will allow courts to:
disregard limited liability of parent corporations for claims of customary
international human rights violations and serious environmental torts where a
parent corporation takes a majority interest or creates a subsidiary as part of a
unified economic enterprise … .120
The report does not elaborate on the meaning of ‘majority interest’ or ‘creation
of a subsidiary as part of a unified economic enterprise’. Majority interest is
usually understood as holding at least 50 per cent interest in the company. In
terms of the material scope of the proposal, Skinner does not elaborate on
what would constitute customary international human rights violations and
serious environmental torts, but states that she opted to limit the claims, as it
would be more difficult to persuade policymakers to adopt this type of
parental liability for general torts.
In his article in support of the proposed treaty on business and human rights
De Schutter recommends the adoption of an extraterritorial obligation on home
States to impose on parent companies located in their jurisdiction a due
diligence obligation, defined by statute, to effectively monitor the behaviour
of the subsidiaries which it ‘controls.’ He then defines control with reference
to stock ownership of 50% and above, and this way removes the need to
assess, on a case by case basis, the involvement of the parent in the policies
and activities of the subsidiary.121
We find additional inspiration in each of these proposals in unpacking the
elements of our model, while our primary inspiration remains IIL. Common
to all the above proposals is the aim to incorporate an exception to the
traditional corporate veil doctrine into a legally binding instrument. The
instrument of choice in these proposals is statute, while in ours it is a treaty.
The reason why we opted for the treaty is that, if successful, it would have
the effect of creating a level playing field. While Skinner and De Schutter
refer only to ‘majority interest’ as determinant of control, we propose a
model which is more flexible and accommodating to variants of group
governance models, similar to Simons and Macklin.
In more precisely defining the meaning of control we found most useful the
legislative guidance in the EU Accounting Directive122 describing ‘control’ in
corporate groups for purposes of consolidated reporting. Instead of prescribing
a single indicator or percentage of ownership for control, it provides a definition
that accommodates the potential variations in the governance of a corporate
group. Its rules are realistic and sufficiently detailed. Furthermore, certain
large companies in the EU are now required to include in their consolidated
120 121
Skinner (n 11) 24 (emphasis added). 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.
annual report information on human rights,123
and there might be more
jurisdictions adopting this type of human rights reporting. It would be useful
to align the meaning of control for purposes of civil claims with that of the
reporting requirement. Pursuant to Article 22 (1) of the Directive a parent
company124 controls a subsidiary125 if it:
(a) has a majority of the shareholders’ or members’ voting rights in
another undertaking (a subsidiary undertaking);
(b) has the right to appoint or remove a majority of the members of the
administrative, management or supervisory body of another
undertaking (a subsidiary undertaking) and is at the same time a
shareholder in or member of that undertaking;
(c) has the right to exercise a dominant influence over an undertaking (a
subsidiary undertaking) of which it is a shareholder or member,
pursuant to a contract entered into with that undertaking or to a
provision in its memorandum or articles of association, where the
law governing that subsidiary undertaking permits its being subject
to such contracts or provisions.
…
(d) is a shareholder in or member of an undertaking, and:
(i) a majority of the members of the administrative, management or
supervisory bodies of that undertaking (a subsidiary undertaking)
who have held office during the financial year, during the preceding
financial year and up to the time when the consolidated financial
statements are drawn up, have been appointed solely as a result of
the exercise of its voting rights; or
(ii) controls alone, pursuant to an agreement with other shareholders in or
members of that undertaking (a subsidiary undertaking), a majority of
shareholders’ or members’ voting rights in that undertaking… .
We propose the adoption of the same approach.126 The existence of control for
purposes of treaty-based veil piercing will be satisfied where an investor,
directly or indirectly, holds a majority of the voting rights in the local
subsidiary; or the amount of shares or other rights held give it the right to
appoint or remove a majority of the subsidiary’s management board
members; or contractual arrangements between shareholders or provisions of
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.
the subsidiary’s constitution give it the right to exercise influence that would be
otherwise exercised by a majority shareholder.
A final point on control involves investments carried out in the host State
through joint venture structures with other partners. These joint venture
investments might operate through a separate legal entity incorporated in the
host State or in another jurisdiction.127 In other cases, the joint venture might
operate without a separate entity, only via contractual arrangements. If it is
possible to identify a joint venture partner that satisfies the description of
‘control’ provided in the preceding paragraph, the liability would lie with that
entity. If no single entity participating in the joint venture fulfils the above
definition, who should bear the responsibility? Drawing an analogy from IIL
cases where non-majority partners in investments brought claims against host
States for their share of loss,128 it should be possible for BHR victims to pursue
each joint venture partner, including the operator of the joint venture, and their
parent companies, under a joint and several liability framework.
C. ‘Treaty-Based’
We propose this model to be incorporated into a draft convention with the effect
of creating directly enforceable rights by covered BHR claimants capable of
enforcement against parent companies who violated their human rights. In
this sense, it is analogous to IIL protections found in treaties signed by
States, enforceable by non-State actors, i.e., investors, or to the regional
human rights treaties that create rights enforceable by individuals before the
regional human rights courts. One of the reasons behind the success of the
international framework for the protection of foreign investment is that it is
supported by an extensive network of treaties. Unlike BHR claimants,
investors do not have to rely merely on soft law principles or domestic law
standards to safeguard their rights, but they receive the backing of legally
binding international commitments.
A treaty-based protection framework for human rights harm caused by
businesses would help ensure that human rights obligations of businesses
have ‘at least equal status’ as the rights guaranteed to them under IIL and
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).
international trade law.129
In the more specific context of access to remedy for
BHR claimants, a treaty commitment would procedurally empower the victims
by opening new avenues for making ‘rights demands’ with higher likelihood of
success than would be the case in the absence of treaty provisions enhancing
access to remedy.130 Procedural empowerment of investors via a right to
bring direct international law claims against host States is considered IIL’s
most revolutionary aspect.131 Our model proposes a similar kind of
procedural empowerment backed by international law for BHR claimants.
In addition to its force, a treaty-based model would allow this framework to
be implemented more effectively. Due to the multi-jurisdictional nature of the
corporate structures involved, having, for instance, only a group of individual
host States incorporating the model into their national law sporadically without
home State adherence to the same principles would undermine the functioning
of the model. Without an international instrument threading commitments
together and matching host State–home State commitments, individual States
would be less willing to sign up to a race to the top.132
We envisage two possible host instruments for the model proposed here: (1) it
could be incorporated into the proposed BHR treaty, or (2) into investment
treaties, existing or future.133 While a multilateral treaty on BHR would
potentially provide a wider coverage of protection, the obvious disadvantage
of taking that path is the difficulty of reaching consensus on a global treaty, if
consensus is reached at all.134 Even if a consensus is seemingly reached, if only
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
BA Simmons, 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
BA Simmons, ‘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 B Stephens,
‘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
D Cassel and A Ramasastry, ‘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
a small number of States give ratification, the proposed model is unlikely to
fulfil its goal. The investment treaty route appears more achievable in that
sense, as it requires the consensus of two States, or at most a limited number
of States within a particular region. It also secures host and home State
commitments. There are recent examples of investment treaties from the
global south that move towards recognizing the rights of host communities to
seek remedies in the investor’s home State.135 The disadvantage of the
investment treaty route is its ad hoc non-centralized nature. This feature
actually motivated more States to conclude BITs due to host States’ desire to
attract capital and home States’ desire to enter into new markets under
favourable terms.136 In competing for markets and capital, treaty
commitments protecting investment were perceived beneficial for all parties
involved.137 Lack of comparable powerful incentives in the BHR context to
convince States to adopt the model proposed here is unfortunately a
limitation of our proposal. Opening up a new avenue of liability for
businesses, as proposed in this article, is unlikely to attract a race between
States to sign up. States’ perception that regulation of business would
adversely affect flows of investment and opposition of powerful economic
actors with strong influence, via lobbying, on the investment treaty
negotiation process138 are likely to discourage States from committing, unless
they can be convinced they will not be at a competitive disadvantage by doing
so.139 In this respect, a multilateral BHR treaty could secure a level playing field
in this area. However, the investment treaty regime is going through a reform
process as States from all levels of development negotiate new generation
investment treaties, and the inclusion of investor obligations and rights of
third parties in these treaties is becoming increasingly salient.140 A
reasonable middle path might be the adoption of the model initially in
key options and challenges for a potential treaty on business and human rights); L McConnell,
‘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 KP Sauvant and LE
Sachs The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double
Taxation Treaties, and Investment Flows (Oxford University Press 2009); J Tobin and S Rose-
Ackerman ‘When BITs Have Some Bite: The Political-Economic Environment for Bilateral
Investment Treaties’ (2011) 6(1) The Review of International Organizations 1; A Kerner, ‘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 KW Abbott, ‘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>.
regional investment treaties, such as those that are being pursued by the EU.141
D. ‘Scope of Application’
A major question about a treaty on BHR is which human rights it would
cover.142 It goes beyond the scope of this article to provide an appropriate
solution to that question. However, it is necessary to touch on the subject in
order to determine the scope of application of the proposed treaty-based veil
piercing. The material scope of the proposed framework would depend on the
host instrument. If the model is adopted in an investment treaty, the material
scope could be limited to civil liability, ie tort or delict, claims against the
investor by individuals for violations that amount to harm to human rights
recognized in the two Covenants, or it could be limited to the IHRL
obligations signed up to by the host State.143 If the model is incorporated into
a future treaty governing human rights responsibilities of businesses, the
material scope of the proposed civil liability framework would be determined
by reference to the human rights included within the scope of that treaty.144 In
both cases, the law governing the substance of the civil claim would be
determined with reference to the conflict of law rules of the lex fori.
The personal scope of the framework would also depend on the host
instrument. If the model is implanted into a BIT, it would include a second
group of beneficiaries to the treaty, ie BHR claimants, in addition to
investors. This would render covered investors indirect duty bearers under
the treaty in addition to being right holders. It would be enforceable by
individuals harmed in the host State to the BIT against ‘investors’ located in
the home State. If it is included in a specialized treaty on BHR, the rights
provided would be enforceable against controlling entities located in home
States signatory to the treaty for harm caused in both signatory and non-
signatory host States.
Finally, IIL protections are safeguarded via the IIA mechanism outside local
courts, and thus they do not require signatory States to incorporate these
protections into their national law. The rights envisaged for BHR claimants
in our model require enforcement at the local level by national courts in the
host and home States.145 The proposed treaty-based model would oblige the
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 C Lopez and B Shea, ‘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.
signatory States to adjust their domestic law to accommodate the claims
envisaged. However, depending on the domestic constitutional requirements
of the signatory States, the framework might require implementation into
national law to take effect.146
VII. CONCLUSION
Laws governing business enterprises and business transactions were designed

and have developed, nationally and internationally, to increase, and facilitate
economic activity, without necessarily taking into consideration other
interests in society. These underlying rationales of laws governing business
activity dictate how legal principles are interpreted when there is ambiguity
or clash with a non-economic interest.147 In parallel to developments in the
economic field, human rights law has also developed into significant body of
law, with the aim of eliminating abuse of power by States, compelling States
to ensure basic rights are guaranteed and holding States accountable
nationally and internationally where violations occur.
These two streams of legal principles have, for the most part and for many
decades, developed in isolation from each other.148 Corporate/commercial
lawyers dealt little, if at all, with human rights law, likewise human rights
lawyers for the most part have paid little attention to economic actors and
laws governing businesses.149 This, however, is no longer the case. The
increasing interaction between these fields has been recognized in the past
few decades and the need to think about human rights obligations of business
enterprises has already been advanced and discussed by many, whether through
State regulation or by direct attribution of these obligations to companies, the
latter less successfully.150
Following in this wind of change, we argue that this new thinking calls for
redrawing the boundaries of the most basic principles of corporate law, ie
separate personality and limited liability, without leaving these basic
principles devoid of meaning. Instead of treating the disregarding of the
corporate veil as a no-go area that can only be visited in extremely rare
occasions allowed by corporate law, policymakers should introduce new and
carefully thought out exceptions to these core corporate law principles which
aim to safeguard the protection of fundamental rights of the wider society. In
this spirit, theories of enterprise liability, direct parent liability, and due
146
See E Denza, ‘The Relationship between International and National Law’ in MD Evans (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 S Leader, ‘Human Rights, Risks and New Strategies for Global Investment’ (2006) 9(3)
JIEL 657.
148
D Shelton, ‘Protecting Human Rights in a Globalized World’ (2002) 25(2)
149
BCIntl&CompLRev 273, 279–80. van Dam (n 20) 225–6.
150
See Shelton (n 148) 273ff; Muchlinski (n 26); V Harper Ho, ‘Of Enterprise Principles and
Corporate Groups: Does Corporate Law Reach Human Rights?’ (2013) 52 ColumJTransnatlL 113.
diligence standard have been proposed by leading scholars as models to
overcome the accountability gap by separate personality. Policymakers and
courts have been slow in embracing these proposals so far.151
We propose to import the IIL rules on treaty-based veil piercing that operate
to protect investors into a framework for protection of individuals against
human rights harm inflicted by the same investors. Like previous proposals,
ours aims to open up the possibility of assessing which entity within a
corporate group should bear responsibility by allowing courts to look behind
the formality of corporate legal structure in appropriate cases and to
apportion blame more fairly. It aims to do so by putting human rights
claimants on a similar footing with investors in IIL claims. A treaty
commitment to remove the corporate veil obstacle to access to remedy would
support the ongoing efforts at national and the international levels to guarantee
corporate respect for human rights.
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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OVERCOMING THE CORPORATE VEIL CHALLENGE: COULD

INVESTMENT LAW INSPIRE THE PROPOSED BUSINESS AND

ANIL YILMAZ VASTARDIS* AND RACHEL CHAMBERS**

Abstract This article proposes a model of treaty-based veil piercing for

Transnational business is frequently conducted through a corporate structure of

* Lecturer, School of Law, University of Essex, ayilma@essex.ac.uk.

[ICLQ vol 67, April 2018 pp 389–423] doi:10.1017/S0020589317000471

II. SEPARATE PERSONALITY AS AN OBSTACLE TO ACCESS TO EFFECTIVE JUDICIAL

III. IIL AND TREATY-BASED VEIL PIERCING: HOW DOES IT OPERATE?

A. The ICSID Convention

C. ‘Control’ under IIL

IV. COMPARING THE POSITION OF FOREIGN INVESTORS WITH BHR CLAIMANTS

Investment Disciplines: Integration in Progress’ in M Bungenberg et al. (eds), International

V. CHEVRON IN ECUADOR: THE DOUBLE STANDARD COMES TO LIGHT

The inconsistency outlined above is clearly illustrated in the legal saga

Laws governing business enterprises and business transactions were designed

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