University:
University College London
Course:
LAWS0013 | Tort Law
Academic year:

2024
Views:

53

Pages:

2
Author:

Nam B.

Expanding the Boundaries of Tort Law in Parent Company Liability: An Appropriate Solution? Presented by: Mrs. Petrin Date: 19 January, 2023 Question - Is Broader Liability Justified? The 'Stakeholders' View on Parent Liability - Corporate purpose beyond SH wealth - Responsibilities to a variety of constituents that deserve the same protection as SH interests - Tort victims' uncompensated harm caused by groups difficult to reconcile with stakeholders - Company • Society • Customers • Regulators • Environment • Suppliers • Employees • Shareholders The Law & Economics View on Parent Liability - Starting point: basic case for limited liability • Facilitates aggregation of capital • Reduces SH's monitoring costs • Enhances capital market liquidity - Limited liability seen as welfare maximizing - L&E scholars concede that justifications for limited liability do not (fully) apply to corporate groups - Allowing creditors of subsidiaries to reach parent company assets would still preserve limited liability for ultimate (individual) investors of the parent itself - Monitoring, capital aggregation, and diversification aspects tend to be less important in group context - Moral hazard problems are exacerbated in groups Presumed Liability? - Parent can escape liability by showing effective control, preventive measures, or due diligence - UN Business and HR Treaty Working Group; various jurisdictions agreed/plan to proceed - Liability dependent on parent's misconduct Proposal: Two-Tiered Liability - Enterprise liability for traditional corporate groups • Groups established via equity ownership/voting rights Tort victims able to claim against any group member - 'Modified vicarious liability' for 'network' companies • Covers non-traditional groups, based on contracts etc. • Imposes vicarious liability on companies/groups into which the network company is sufficiently integrated

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