Jurisdiction Over Corporations

International Civil And Commercial Litigation

De International Law Association (ILA) bevordert de studie en ontwikkeling van het (internationaal) recht. Deze doelen worden verwezenlijkt in het werk van de commissies en op de tweejaarlijkse conferenties.

INTERNATIONAL LAW ASSOCIATION

NEW DELHI CONFERENCE (2002)

COMMITTEE ON INTERNATIONAL CIVIL AND COMMERCIAL LITIGATION

FOURTH AND FINAL REPORT:
JURISDICTION OVER CORPORATIONS

I. THE HISTORY OF THE COMMITTEE

1. The committee began its work at the 65^th Conference of the Association held in April 1992 in Cairo, Egypt. From the beginning it was chaired by the Hon Dr Peter E Nygh (Australia) with Dr Campbell A McLachlan (UK) as rapporteur and M Philippe Blacquier - Cirelli (France) as Assistant Rapporteur. Its mandate was to explore the question of what problems are experienced in asserting jurisdiction over absent defendants and whether there is any similarity and consensus across different legal systems. For that purpose, it attracted a large number of eminent lawyers from a diversity of legal systems throughout the world. The Committee aimed at finding acceptable solutions at the expert level free from historical or national bias.

2. The first project of the committee was to explore the bases for exercising jurisdiction in respect of transnational torts. Research papers were prepared by members of the Committee on international tort litigation in respect of the following topics: Product Liability (Peter Schlosser), Transnational Fraud (Peter Nygh), Defamation (P B Carter), Intellectual Property (Peter Trooboff), Securities (Hans van Houtte), Competition (Catherine Kessedjian), Traffic Accidents (Kurt Siehr), Environmental Damage (Friedrich Juenger) and Restitution (Campbell McLachlan). There were also introductory papers explaining the principles of jurisdiction in the common law system (Peter Nygh) with an addendum on jurisdiction in the United States (Friedrich Juenger) and the principles of jurisdiction in the civil law system (Gerhard Walter

and Rikke Dalsgaard). The Committee reported on its findings at the 66^th Conference of the Association held in 1994 in Buenos Aires. 1 The essays were subsequently published in 1996 by the Clarendon Press. 2 They include an overview prepared by Dr Campbell McLachlan.

3. In its Second Report delivered at the 67^th Conference of the Association held in Helsinki in 1996, the committee addressed the question of Provisional and Protective Measures in International Litigation. Based on national reports prepared by members of the committee in Australia, Argentina, Belgium, England, France, Germany, Japan, Luxembourg, the Netherlands, Sweden, Switzerland and the United States, the committee drafted a set of Principles on Provisional and Protective Measures in International Litigation. Those Principles were adopted by the Association at its meeting in Helsinki in 1996. 3

4. In its Third Report delivered at the 69^th Conference of the Association held in London in July 2000, the committee addressed the question of Declining and Referring Jurisdiction in International Litigation. Based on papers on separate aspects such as: jurisdiction clauses (Patrick Kinsch), lis pendens (Peter Nygh), related actions (Samuel Baumgartner), 4 forum non conveniens (Friedrich Juenger), cross - vesting in Australia (Gavan Griffith), transfers of proceedings between courts of different countries (Louise Lussier) and declining jurisdiction (Peter Trooboff), the committee proposed a set of principles, to be known as the Leuven / London Principles on Declining and Referring Jurisdiction in International Litigation.

5. They were adopted by the Association at its 69^th Conference. 5. The committee resolved to adopt as its final project the topic of Jurisdiction over Corporations. This has become the subject of its fourth and final Report. Members of the committee are very much aware that the subject of international litigation has by no means been exhausted. Much remains to be done. One may for instance point to the topic of International Judicial Cooperation that has recently been addressed by one of its members, Professor Peter Schlosser, in his recent Hague Lectures. 6 But the committee feels that this requires a new committee with a more specific mandate. The committee has now been in existence for 10 years and can look back on an impressive record of achievement. It does not want to spoil this record as individual members become involved in other activities, including professional ones, and in other projects. It will therefore finish its work in New Delhi.

II. THE BACKGROUND TO THE CURRENT PROJECT

6. The corporate structure has been a favourite instrument for commerce during the past 200 years. It can take many forms: from the traditional company endowed with a legal personality separate from that of its shareholders (be they individuals or corporations) and with limited liability, to partnerships and other bodies without separate legal personality and with unlimited liability for its members but that can sue or be sued in their own names. In a group of companies it is sometimes difficult to distinguish between the legal personality of one member corporation, such as the holding company, and its wholly owned and controlled subsidiaries. What they have in common, at least for the purposes of litigation, is a separate identity for the purpose of proceedings. At the margins stand structures, such as trusts, where the trust fund is separate from the other assets owned by the trustee but where it is debatable whether the trust fund has any standing to sue or be sued other than through the person or body who is the trustee.

7. In international litigation most defendants are likely to be corporations within the broad meaning outlined above. Often the fact that the person sought to be sued is a corporation will make little difference. Where jurisdiction is based on the commission of a tort or delict within the jurisdiction or the performance or breach of a contract within the jurisdiction, the test is the same regardless of whether the defendant is a corporation or individual. The same applies in cases where the issue is whether the defendant has agreed to

a particular forum or has submitted to the jurisdiction. But, unlike the case of individuals, it is anomalous to speak of a ‘domicil’ or ‘habitual residence’ of corporations. Lawyers in the common law system have traditionally identified the place of incorporation with the ‘domicil’ of corporations whereas most (but not all) civil law jurisdiction have referred to either the siège réel or the siège statutaire, the former having a meaning that is not always clearly defined. A corporation may operate in other countries through local branches. It may also register as ‘doing business’ in a particular country and be required to nominate a local address where it can be served with process. In common law countries traditionally the establishment of a local branch or the provision of a local address for service has led to ‘general’ jurisdiction, that is to say, jurisdiction in respect of any claims against the corporation whether arising out of its local activities or anywhere else in the world. On the other hand, lawyers in the civil law system would confine such jurisdiction to disputes arising out of transactions entered into by or through the branch.

8. There are other and more general issues where there is uncertainty. Thus, the question may arise in what circumstances a local subsidiary may be treated as a branch, or even as the alter ego, of its parent. This issue is of particular importance in cases where a group of corporations operates as a unified economic entity subject to central control. There is also the question to what extent commercial activity by a foreign corporation, including activity through the Internet, directed by it from off - shore at a particular country, may expose it to local suit in that country. This last issue is not unique to corporations, but in international commercial activities is more likely to arise as the result of activities engaged in by corporations.

9. At one stage of its discussions, the committee considered the question of the independent liability of a parent corporation for the defaults of its subsidiary, as in the case of a lack of proper governance or by virtue of some other principle similar to vicarious liability. 7 Ultimately, it was decided that this very interesting issue was beyond the scope of the committee's mandate. The committee therefore confined itself to questions of jurisdiction and excluded issues of substantive liability.

10. The first working session on jurisdiction over corporations was held at the meeting of the committee in Milan on 15 - 16 October 1999. The rapporteur had prepared 5 paradigm situations for discussion by members of the committee each to be considered from the point of view of the participant's national legal system. The paradigm cases involved: 1) the circumstances in which the presence of a wholly owned subsidiary within the jurisdiction attracts jurisdiction over its parent; 2) the question of jurisdiction in respect of a corporation incorporated for convenience in state A but in reality managed from state B; 3) jurisdiction over partnerships; 4) jurisdiction over a foreign corporation by reason of a branch office within the jurisdiction; and 5) the question of exclusive jurisdiction where issues relating to the validity of a decision of an organ of the corporation are raised. The discussion was interesting and illustrated the different laws and practices at national level. At the end of the discussion it was resolved that a clear distinction should be drawn between the grounds on which general jurisdiction could be taken over corporations and the cases of specific jurisdiction in so far as they were of particular relevance to corporations. Further studies should be made in respect of: a) corporations of convenience (including issues of alter ego and siège réel ); b) partnerships and other unincorporated entities; and c) head - offices, branches and subsidiaries. The meeting was very successful thanks to the wonderful organisation and hospitality of Professor Fausto Pocar.

11. The next discussion took place at the meeting of the committee in Kyoto on 31 March - 1 April 2000 at the invitation of the Japanese Branch and through the good offices of Professor Akira Takakuwa who made us feel very welcome in this historical city. Papers were presented by: Peter Nygh on ‘The Liability of Multi - national Corporations for the Acts or Defaults of their Subsidiaries’ 8; by Vaughan Black and Louise Lussier on ‘Corporations of Convenience’; by Friedrich Juenger on the ‘Jurisdictional Implications of the Parent - Subsidiary Relationship’; and by Samuel Baumgartner on ‘Jurisdiction over Partnerships’. This was sadly the last time that Professor Juenger attended a meeting of the committee. His

sudden death in early 2001 was a great loss to the committee. His incisive and often challenging contributions were greatly missed in the final deliberations.

12. Members of the committee met briefly during the 69^th Conference in London in July 2000. At this meeting it was decided to continue with the project and to request an extension of the mandate of the committee (due otherwise to expire at the end of 2000) until the 70^th Conference in April 2002 to allow its completion. That extension was duly granted. It was resolved that two further meetings should be held, both to be in Europe to permit the largest possible attendance of members.

13. The first of those meetings was held in Cambridge at the invitation of the Lauterpacht Research Centre for International Law at the University of Cambridge and the firm of Herbert Smith on 30 and 31 March 2001. We are very grateful to them for allowing us to meet in spring time in such beautiful surroundings. At this meeting the chairman presented a paper entitled ‘Jurisdiction over Corporations - An Outline’. The committee also had before it papers presented by Judge Bart Punt of the Netherlands and by Professor Akira Takakuwa. Although this meeting was not as well attended as had been hoped, it made considerable progress in defining the scope of the proposed Principles and the bases of general jurisdiction. The members present arrived at some tentative conclusions as to the problem of ‘sham’ corporations, corporations of convenience, and ‘alter ego’ situations. There was also agreement on branch jurisdiction issues and an attempt was made to define an acceptable ‘activity jurisdiction’. The tentative conclusions reached by the meeting were embodied in a document entitled ‘Notes of Discussions and Conclusions in Cambridge on 30 and 31 March 2001’ prepared jointly by the Chairman and the Rapporteur of the committee..

14. The final meeting of the Committee was held in Paris on September 2001. It was organised by Professor Catherine Kessedjian and we are deeply grateful to her and the Université, Panthéon - Assas (Paris II) for a very successful meeting which allowed us also to partake of Parisian cuisine and culture. The major basis for the discussions at this meeting was the ‘Notes of Discussions and Conclusions in Cambridge’ referred to above.

15. At this meeting the rapporteur, Dr Campbell McLachlan, drafted a set of Principles that, after some amendments were made, form the essential basis of the Principles that follow. In arriving at the final document, the committee followed the principle of consensus.

16. As was the case with earlier proposals by the committee, these Principles are put forward for further consideration and adaptation by national and international lawmakers and judges. They do not purport to present a complete system nor should they be considered as draft legislation. To a certain extent they build upon work already done, most notably the Brussels Regulation 2001 9 and the Preliminary Draft Convention on Jurisdiction and Recognition of Foreign Judgments in Civil and Commercial Matters of 30 October 1999. 10 But at the same time they both clarify and expand on those models. This will become clear from the detailed discussion that follows.

III. DISCUSSION OF THE PRINCIPLES

PRINCIPLE 1 - SCOPE

17. The committee has defined corporations in the broader sense of persons, other than natural persons. This goes beyond the core concept of a corporation that has a legal personality entirely separate from that

of its constituent members or shareholders. 11 The definition includes many unincorporated associations and partnerships with a sufficient degree of separate personality to allow them to sue and be sued in their own names. This last qualification excludes trusts whose funds are regarded as separate from the other assets of the trustee but where the proper defendant is the trustee. After some discussion, it was also agreed to exclude partnerships in German and other laws (as described in Samuel Baumgartner's paper presented at the Kyoto meeting) whose funds are also regarded as being separate from the private assets of the individual partner and where a separate action must be brought to enforce the individual liability of the partners, but which do not have standing to sue or be sued as the partnership. Set aside also were international groupings and joint ventures which are not linked to any national law. The fact that the corporation is owned by the state or a state entity does not exclude it from the scope of the Principles. But they do not extend to public corporations exercising public law functions. The question whether a particular entity has corporate status in the narrower sense or has the capacity to sue or be sued in its own name will depend on the law of the country under whose law that entity was established or formed.

PRINCIPLE 2 - GENERAL JURISDICTION

18. The term ‘general jurisdiction’ means different things in the civil and in the common law. In the civil law it refers to the fundamental jurisdiction that exists at the domicil of the defendant. 12 It has priority and any specific jurisdiction is seen as an exception thereto. In the common law general jurisdiction is not necessarily fundamental: there can be several heads of general jurisdiction. Thus, in relation to corporations, in addition to the jurisdiction at the ‘domicil’ of the corporation, there can be general jurisdiction based on the registration by a foreign corporation of an address for service within the jurisdiction (viewed as a general submission) 13, the presence of a branch within the jurisdiction, or, in the United States, the ‘doing of business’ within the jurisdiction. Except for their width, these bases of jurisdiction do not have a particular hierarchical status over and above the various forms of specific jurisdiction. But, for reasons to be explained below, at least one of the options in Principle 2.1, namely that stated in paragraph a), 14 will always be available to a plaintiff and thus ensure that there is at least one forum where the corporation can be sued in all cases.

19. The committee proposes a convergence between these traditions. As in the civil law there will only be one head of general jurisdiction: comparable to the ‘domicil’ or ‘habitual residence’ of the individual. Thus, it is proposed that there will not be general jurisdiction based on registration of an address for service by a foreign corporation, or the establishment of a branch or the ‘doing of business’. But, as in the common law, this sole general jurisdiction will not have any special hierarchical value. In this way, it resembles the scheme of the Preliminary Draft Convention of October 1999, 15 rather than that of the Brussels Regulation.

20. It is not proposed that there be any particular hierarchy or priority as regards the options offered in paragraphs a), b) and c) in Principle 2.1. It is for the plaintiff to choose between such jurisdictions as are available in the circumstances.

21. As regards the places where the general jurisdiction may be invoked, the committee was guided by the models offered in the Brussels Regulation and the Preliminary Draft Convention. Both, despite some differences in drafting, arrive at the same result. In the Brussels Regulation Article 2, the basis for general jurisdiction is the domicil of the defendant. As regards corporations, this is defined in Article 60.1 with a special explanation for the United Kingdom and the Republic of Ireland of the term ‘statutory seat’ in Article 60.2. The Preliminary Draft Convention in Article 3.1 bases general jurisdiction on habitual residence. It defines this further for persons other than natural persons in Article 3.2 as the place:

1. where that person has its statutory seat;
2. under whose law it was incorporated or formed;
3. where it has its central administration; or
4. where it has its principal place of business.

22. The committee has made two changes to this model. In the first place it has combined paragraphs a) and b) in acknowledgement of the fact that they do not in reality offer options to the plaintiff to choose from. Common law systems do not know the concept of ‘statutory seat’ and hence reference is made to the place of incorporation. Where an unincorporated body has neither a ‘statutory seat’ nor a place of incorporation, the reference must be to the place under whose law it was formed. Within paragraph a) there is in fact a hierarchy of inquiry in the order indicated in that paragraph,

23. The second change was in relation to paragraph c) that bears some resemblance to the ‘principal place of business’ as used in paragraph d) of the Preliminary Draft Convention. There was a debate within the committee as to the meaning of ‘principal place of business’ or ‘principal établissement’. It was pointed out that the meaning of the French term would indicate the head office of the organisation, rather than the place of principal economic activity. The latter would be more correctly described as ‘centre d' exploitation’. If the former was meant, the place would hardly, if ever, deviate from that of the central place of administration and one would question its utility. However, the Nygh - Pocar Report on the Preliminary Draft Convention clearly adopts the ‘place of main economic activity’/ ‘centre d' exploitation’ meaning. 16 The formula adopted ultimately in Principle 2.1(c), makes it clear that the place of principal economic activity is being referred to.

24. This will broaden the choice for the plaintiff. In the paradigm case of a corporation having its statutory seat in Luxembourg by way of incorporation of convenience (see the paper prepared by Vaughan Black and Louise Lussier for the Kyoto meeting), but managed from Italy and conducting a tourist cruise business in Miami, the plaintiff can bring suit against the corporation in either Luxembourg under paragraph a), in Italy under paragraph b) or in the United States under paragraph c). There was some discussion within the committee about the situation where a corporation conducted several substantial activities in different countries and it was difficult to determine which was the ‘principal activity’. In such a case the existence of more than one place of ‘principal activity’ cannot be excluded, just as there may in a case of divided control be more than one place of ‘central administration’. The analogy with the habitual residence of the individual is relevant here: it is possible for an individual to have more than one habitual residence or even none at all. 17 The lastnamed possibility is not open under Principle 2. 1 since corporate bodies not formed under any national law are excluded. 18 But instances do occur of bodies whose management ‘meets’ only electronically and conducts it principal business on the Internet. In such a case, the options to the plaintiff in invoking general jurisdiction will be more limited, but specific jurisdiction remains available.

25. It was agreed in the committee that there should not be any other bases for general jurisdiction over corporations. There was a discussion of a proposal that in the case of a large multi - national corporation with many subsidiaries around the world, a general jurisdiction based on ‘doing business’ should be recognised : see the paper by Judge Punt prepared for the Cambridge meeting. But it was proposed that this

should not apply merely because a corporation had subsidiaries in two or three different states. The difficulties of distinguishing between ‘large’ and ‘small’ multinationals and the criteria that should apply (number of countries in which there were subsidiaries - annual turnover ?) were seen as unsurmountable. There was also a brief discussion of Professor Linda Silberman's suggestion made at the ILA Conference in London in July 2000, that there should be recognition of a general jurisdiction at the place of a branch of a corporation provided the plaintiff was also habitually resident in the same jurisdiction. It did not find favour.

PRINCIPLE 3 - SPECIFIC JURISDICTION

26. It was noted that corporations like individual persons as defendants could be subject to the jurisdiction of a court pursuant to choice of forum clauses, voluntary submission, the performance of a contract within the jurisdiction, the commission of a tort or delict or the suffering of direct harm caused thereby within the jurisdiction and other heads of jurisdiction that are available regardless of the nature of the defendant. It was not necessary to refer specifically to those situations beyond the general statement made in Principle 3.4. The committee therefore concentrated on the two jurisdictional bases most relevant to corporations: branch jurisdiction and activity jurisdiction.

27. As regards Principle 3.1 this jurisdiction is based on the notion of ‘branch agency or other establishment’ found in Article 5.5 of the Brussels Regulation and Article 9 of the Preliminary Draft Convention of October 1999. In contrast to the traditional common law position, this is a specific and not a general jurisdiction. There was a discussion within the committee on the meaning of each of these terms.

28. As regards the meaning of the word ‘branch’, it was agreed that a subsidiary is not a branch. It is of the essence of a branch that it form an integral part of the legal structure of the corporation.

29. It was agreed that an agency must also be part of the whole organisation. This differed from the common law test of capacity to bind one's principal in contractual relationships. It was agreed that this should not be the test. It was agreed that in certain circumstances a subsidiary could be an agent. 19 It was agreed that jurisdiction could be based on the appearance of agency. If in the circumstances a party was genuinely led to believe by a corporation that a particular person or entity was an agent for that corporation, it should not be rebuttable by showing that an actual agency relationship did not exist. 20

30. Principle 3.1 omits any requirement that the dispute should arise ‘directly’ out of the operations of the branch or ‘be related to’ those operations. The wording of Article 9 of the Preliminary Draft Convention that uses the words ‘the dispute relates directly to’. was regarded as too limiting, especially in its French version ‘directement lié’. The committee preferred the ‘but for’ consequential test. Thus the nexus requirement is to be interpreted broadly along the lines of the traditional common law approach

where it suffices that the claim is a consequence of the activity of the branch, but need not be related to the specific activity of the branch. Thus, for example, one could consider the fact situation of the New York case of Frummer v Hilton Hotels International, Inc 21 where the plaintiff had booked his reservation at the London Hilton through a facility provided at the Hilton Reservation Service in New York. He brought action in New York for injuries received when he slipped in the bath at the London Hilton. The Hilton Reservation Service was regarded as the ‘agent’ for the London Hilton, although the hotels were owned by separate corporations. If the room had not been available on his arrival in London, jurisdiction based on that agency would clearly be justified as arising ‘directly’ from the reservation. This can be described as the ‘Latin’ approach. Under the ‘common law’ approach, on the other hand, it suffices that the claim is a consequence of the reservation - in the sense that but for that reservation Mr Frummer would not have slipped in the London bath. 22

31. On the other hand, Principle 3. 1 does impose a geographical limitation not found in its prototypes : the dispute must arise out of the operations of the branch within the state where it is established. If the dispute arises out of its operations in another state, for instance where it services several states, this head of jurisdiction is not available.

32. Principle 3.2 deals with the so - called ‘alter ego’ situation. There was agreement that the notion of ‘alter ego’ should be confined. It should not arise merely because one corporation was a wholly owned subsidiary of another and appoints its management. On the other hand, there was agreement with Professor Juenger that the traditional test whereby an ‘alter ego’ situation could only arise in cases where the controlling corporation ignored the corporate structure and made decisions concerning the other without even observing the formalities of a separate corporate structure 23, was too narrow. Instead the committee proposes a factual test inquiring whether the subsidiary had any autonomy in making material decisions. As Professor Takakuwa suggested in his paper the inquiry should be whether: ‘it performed the business as if it were a branch office or a place of business of its parent corporation’. If that is the case, the subsidiary should be treated as if it were a branch of the parent corporation for the purposes of Principle 3.1. It can also be argued that in such a case the ‘central administration’ of the subsidiary as a factual concept is situated at the same place as that of the dominant corporation.

33. Principle 3.3 deals with the so - called ‘activity jurisdiction’. This has been much discussed in the committee. There was agreement about the basic philosophy that should underlie the case for activity jurisdiction. This was defined as the proposition that, where a corporation seeks to derive economic or other advantage out of activities in a particular jurisdiction, it should be prepared to be subject to that jurisdiction in respect of any claims arising out of those activities. It should not matter whether those activities were conducted by the corporation itself, its branches, agencies, subsidiaries or through independent distributors. Provided the extent of the court's jurisdiction was limited to the activities in question, it was felt that there was a useful role for such a jurisdiction in addition to more conventional « cause of action » based heads of specific jurisdiction.

34. Provided it is substantive enough, a single activity should suffice. It should be remembered that a specific, and not a general, jurisdiction is proposed. It is a question of the degree of activity rather than its repetition. Thus, the soliciting of business will suffice provided it was efficaceous and resulted in a contract. It must also be substantive and not merely fortuitous. In discussions at the Cambridge meeting the instance was given of a meeting in a New York hotel between a Canadian and an Italian whereby the parties conclude an agreement to be performed in Italy. This should not suffice to give the New York court jurisdiction. The defendant must have gone into the market for some purpose - to do business there.

35. A proposal was made that specific jurisdiction should exist where the defendant, whatever the nature of the claim, ‘pursues a substantial and efficaceous activity in, or that is directed to, the market of that state’, provided that the claim arises directly out of that activity.

36. As regards, ‘directed at’ it was suggested that a passive advertisement on a website directed at the world at large (ad orbem), would not be ‘directed at’ any particular country. Something more was required along the lines of ‘purposeful availment’ in the United States. 24 It would be different if the advertisement was directed at a particular country through use of a language specific to that country such as Latvian, the giving of contact addresses within a particular country (such as : ‘available at Bloomingdales, New York’) and the like. The provision of an interactive site should meet the test of direction since the information provider could exclude any particular country.

37. However, this proposal did not achieve consensus and the committee adopted a narrower test. Under the test adopted in Principle 3.3, the activity must be carried on by the defendant corporation in the state concerned. This means that the corporation or its agents and other persons acting on its behalf must have performed that activity entirely within the state claiming jurisdiction. Messages sent electronically from a site in state A to persons in state B would not suffice to give the courts of state B jurisdiction, let alone, a website accessible in state B. There is a further restriction imposed by the requirement that the dispute must arise directly out of that activity. This stands in immediate contrast with Principle 3.1 discussed above. 25

PRINCIPLE 4 - GROUPS OF CORPORATIONS

38. This Principle introduces an innovation for which there is no direct prototype. It is designed to deal with the type of situation encountered in the decision of the US District Court for the Northern District of Illinois in In re Oil Spill by the Amoco Cadiz off the Coast of France on March 16, 1978. 26 The claim arose out of an oil spill off the coast of France from the ship Amoco Cadiz. That ship was owned by a Liberian corporation whose only asset was the ship that had perished. This company was ultimately owned through an intricate chain of intermediate subsidiaries by the United States corporation the Standard Oil Company. The plaintiffs who had suffered damage as a result of the oil spill brought suit in the United States not only against the Liberian immediate owner of the ship, but also against the Standard Oil Company and one of the intermediate companies. Principle 4.1 does not intend to impose a substantive liability on parent or related corporations. That is outside the scope of these Principles. But it seeks to facilitate related jurisdiction in cases where the court has jurisdiction over one member of the group, be it the parent or a subsidiary, and there is a closely related claim against another member of that group, for instance, a claim against a company higher up in the hierarchy for lack of proper governance of the culprit corporation, or vice versa. If the subsidiary is closely controlled by the parent, jurisdiction may also be available under Principle 3.2. 27

39. A ‘group of corporations’ may be defined as a number of individually incorporated corporations related to each other through common ownership and/or control and operating as a commercial entity in which the individual corporations perform specialised tasks. 28

PRINCIPLE 5 - EVIDENCE AND PROCEDURE

40. It was agreed that a plaintiff seeking to rely on a head of jurisdiction need only establish a ‘good arguable case’ that such jurisdiction existed. It should not be necessary to prove to a ‘balance of probabilities’ standard the facts on which the existence of the jurisdiction depended, such as that the activity had actually taken place. It should suffice that a prima facie case was made out. Even if it appeared afterwards that the facts alleged did not exist or could not be proven, the jurisdiction upon which the court proceeded would not be affected. Any issue as to jurisdiction should be raised early in the proceedings and be determined promptly and should not be postponed to the hearing of the substantive dispute. 29 The decision as to jurisdiction should normally be made ‘on the papers’, that is to say, on the written evidence as to jurisdiction filed by the parties without the need to receive oral evidence.