Federalizing the Foreign Corporate Form

Authors

Sarah C. Haan

Document Type

Article

Abstract

(Excerpt)

In advocating federal entity law standards for foreign firms, this Article addresses the debate over the authority of the federal courts to fashion federal common law. It finds the restrictive theories that are currently popular with the legal academy insufficient here, where federal interests strongly outweigh state interests and where law has been judge-made by tradition and practical necessity. Only federal institutions have a full scope of lawmaking authority over entity law questions involving foreign firms because the Dormant Commerce Clause prohibits state law from distinguishing among entities chartered by different foreign governments, or between American and foreign firms. Thus, in practice, companies chartered by different foreign governments enjoy the same legal "personhood" under the law of any American state, regardless of differences between those foreign governments' own entity laws. Moreover, the federal courts already create and apply federal veil-piercing standards in support of federal laws. They are thus well equipped to do so more broadly. This Article argues that the entity laws that define the legal status of foreign firms in American courts should not be fashioned exclusively by parochial lawmaking authorities-state courts and legislatures-that are hamstrung by Dormant Commerce Clause constraints. The federal government, which uniquely possesses a full scope of lawmaking options, and which has experience crafting federal veil-piercing laws, should be the primary lawmaker.