The principle of a corporate legal person is a key element in the United States. The principle is to the effect that a company is distinct from its members and one can only sue the company upon breach, but not its shareholders. A company can, thus, own property without necessarily engaging its members or using their names in the titles of the assets. There are various factors that are put into consideration for a company to acquire the instrumentality status. Direct ownership of the majority shareholding by the company gives it the instrumentality status as per the Foreign Sovereign Immunities Act (FSIA). Application of the American corporate law in determining instrumentalities was used in the present case (Schlossberg & American Bar Association, 2004). The court observed that the manufacturers were no instrumentalities of a foreign state since there was no evidence showing that a foreign state or its political subdivision owned the majority of the shareholding in the manufacturing company. It was further observed that the fact that a state exercised control over a company’s manufacturing operations was not tantamount to majority shareholding in the company. In case the company was engaged in a suit, the test of determining instrumentality was a retrospective one. In this regard, the court considered the time when the suit was filed. The relationship between the company and the state was not recognized by the FSIA before filing the suit. It, therefore, meant that the company was not entitled to instrumentality as per the FSIA given the commencement of the suit. In theory, the state was able to be conferred on the subsidiary, although that position was rejected in this case. The position of the law regarding the time of determining whether a company was an instrumentality was done by examining the relevant provisions of the FSIA Act. This is different in situations where the instrumentality status is in question to impose tortuous liability in a tort. Under the FSIA Act, the instrumentality status of a company is not determined during the time when the tort in question occurred or any other actionable wrong. It has been made clear that the time of filing the suit is when the existence of the instrumentality status is supposed to be determined. The time of filing the suit may be under attack and severally questioned. This differs from one jurisdiction to another. Instrumentality status is a type of immunity that is different from the immunity accorded a state actor (Sealy & Worthington, 2008).
The immunity of a state actor is mainly based on the status of the person since not all citizens are accorded immunity unless one is a diplomatic officer of the sending state. The immunity of a state actor should be differentiated from the status of instrumentality as provided for under the FSIA. It is important to take note of events, especially when actionable tort happened. Nevertheless, instrumentality is determined when the suit is filed. Determination of state actors’ immunity is paramount in determining liability. It has become clear from the discussion that the key factor in establishing instrumentality is the time when the filing of the case occurred as opposed to the time when the wrong subject to the case was committed. The rationale was that a company may have been having the instrumentality status during commission of the tort. However, such status may have been stripped off the company during filing of the status. In so doing, it means that the company will be liable just like any other individual, or company. It is important to note that the fact that a company has the instrumentality does not mean that it is to be held in perpetuity. This argument is based on the premises that the company may fail to satisfy the requirements of instrumentality as per the FSIA. On the same note, a company may have had instrumentality prior to filing the suit. This would not, for all intents and purposes, amount to instrumentality (Prescott & Swartz, 2010).
Employees are the only people who worked in the company during the commission of the tort. The corporate law lays major emphasis on employees of the company, but the company is held liable. In this case, it is also imperative to determine whether employees of the company worked within their mandate, or they exceeded the mandate. In a case whereby there is a breach, the company would be sued as the main tort feasor (Tarun, 2010). It is clear that employees will be joined in such a suit, but the main defendant is the company since it can be sued and sue in its name. In many instances, employees of the company cannot hide under the veil of the company. This means that the company may choose to join employees as co-defendants in the suit, even if the party suing omits them (Schaffer, Agusti & Earle, 2009). Lifting of the veil is applied in these cases to make sure that parties do not use the incorporation status to shield themselves from any liability. By lifting the veil, all the employees and directors are sued to determine their culpability. In so doing, the liability or the blame on the company is shared between the parties (Cody et al., 2007).
In other words, the company takes the blame, as well as the people behind it. It is during such moments that employees and the company’s directors are known. They are also sued in their individual capacity. Apportioning of blame is designed to avoid the corporate veil being used as a way of shielding parties from liability. If courts allowed such a thing to happen, it would mean that employees of a company would escape liability. Therefore, individual employees are considered and their contribution toward commission of the tort determined in many cases when the company is liable for a tort. The company in such cases is likely to take the bigger blame in terms of payment of damages and other costs, such as legal fees. However, courts may apportion the damages and costs in an equal share. It is not easy for the court to choose one type of punishment and leave the other in such situations (Eroglu, 2008). Employees should be affected solely when a court imposes a jail term since the company cannot be convicted to a jail term.
The best way to settle the issue of the corporation and employees is to appreciate the fact that a company is, in legal terms, protected by the corporation personality entity. This means that there are suits that the court will be interested in piercing the veil of incorporation. It is the act of unveiling that exposes the directors and employees. It is, therefore, important to note that the incorporation status can be unveiled (International Business Publications, USA. 2012). Employees are also held liable upon unveiling the status. It is imperative to note that the company cannot, at all material times, shield its employees. There are specific acts under the law that employees will be required to be answerable to. It is important for employees to work within their express mandate under the company’s articles and memorandum of association to avoid future acts whereby the employees are sued. If the acts of an employee are within the wording of the articles and memorandum of association, it means that the company is supposed to take the whole blame (Davies, 2010). This will act to safeguard the interest of the company in the eyes of the law in cases whereby employees’ acts were within the powers given to them. Worth noting is that there are categories of liabilities that employees of the company cannot avoid. Legally, there are certain acts that will attract liability, even though they are within the memorandum and articles of association (Sjögren, 2004).
A corporate subsidiary is not, at all, entitled to the instrumentality status. The status is accorded to a company basing on its shareholding. It means that the company is entitled to instrumentality status if the parent company has majority of the shareholding from a foreign country. The instrumentality status is held in respect to shareholding (Boom & Widmer, 2005). However, court determined the essential question as to when the instrumentality status is to be imposed on a company. The dispute before court was whether commission time was the right time to consider the instrumentality status, or it was during filing of the case. Court observed that a subsidiary company was not entitled to instrumentality before determining the issue. Court was of the opinion that the parent company was entitled to instrumentalities as opposed to the subsidiary company (Cassin, 2008). Court also observed that for purposes of ascertaining instrumentalities, the time of filing the suit was the proper time to come up with determination as to whether the company was an instrumentality (Brand, 2000). Court held that the time of committing the offence was not material in determining the instrumentality of the company. Court further held that the company in question was not an instrumentality since it was a subsidiary company, thus it was not entitled to instrumentality during filing of the suit (Gillies, 2004).
I think the case should have been decided on the basis of whether a company is an instrumentality during commission of the offence. The impact of the case is that a company may seek to acquire the instrumentality status after commission of an offence to shield itself from liability (Busnelli & Spier, 2003). Based on these reasons, I am of the opinion that the decision was not a good one. Further, a subsidiary company ought to be part of the company for purposes of ascertaining instrumentality. The results of the decision are that companies that are entitled to instrumentality may not be given the status since the tests applied are legally strict (Wood, 2001). The instrumentality clause under the FSIA will, with time, lose its meaning.
References
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