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Carsten Koenig
European Business Law Review
Volume 35, Issue 3/4 (2024) pp. 343 – 366
https://doi.org/10.54648/eulr2024022
Abstract
There is currently a great deal of interest in tort and corporate law doctrines that allow for what this article refers to as (corporate) cross-entity liability: holding companies liable for violations and harm caused primarily by the activities of other companies. One reason for the current attention to such liability is the growing effort to improve accountability in global supply chains. In many legal systems, several approaches can be considered, which differ significantly in their prerequisites and legal consequences. This article discusses the four most important ones: (1) veil piercing, (2) duty-based liability, (3) vicarious liability, and (4) enterprise liability. The aim is to distinguish the areas of application of these doctrines. To this end, their respective purposes are examined primarily on the basis of economic arguments. The underlying premise is that there can be no one-size-fits-all solution, but that there is a need for different approaches whose functions, however, should be distinguished more precisely in the future.
Keywords
Cross-entity liability, veil piercing, duty-based liability, vicarious liability, enterprise liability, corporate groups, parent companies, subsidiaries, independent contractors, supply chain due diligence
Extract
In the age of digital transformation, the boundaries of companies are beginning to blur. In the information society, the network economy is emerging as a new, paradigmatic economic order. With the ability to share information quickly and cheaply on a global scale, the importance of centralised decision-making and costly corporate structures is diminishing. Companies are giving way to interconnected networks, and the concept of ownership is gradually being replaced by the concept of access rights. From a company law perspective, this shift to the network economy leads to the emergence of new forms of governance. As access rights replace ownership, the governance of these rights becomes paramount for economic actors, but it transcends company boundaries and is instead rooted in contractual relationships. As a result, contract governance is gradually replacing corporate governance. With governance frameworks extending beyond the firm to contractual networks, directors’ duties are likely to extend beyond firm-specific boundaries to bridge the responsibility gap created by the increasing use of data technologies.