foreign law 1. A foreign company is now known to be a legal entity the validity and effect of which must depend upon the laws of the country within which that company. is established 2.' Although it is a foreign company, its constitution as such should be respected and recognized by the legal tribunals of this country 3. The special rules of English law for the regulation of corporations, such as the Joint Stock Company's Acts, do not in general apply to it 1. The liability of its members towards third parties are the same in this country as in the country which created the corporation. And an Englishman who becomes a shareholder in a foreign company becomes subject to the articles and constitution of that company, construed according to the law of that country. The courts of the foreign juridical person's state of origin are, in consequence, the proper tribunals to decide upon its internal disputes, and an English court will not review their decisions. The application to foreign companies of the provisions of the English Joint Stock Company's Acts relating to winding-up is indeed in appearance a disregard of their personal law in favour of the territorial law. But it may be questioned whether it is so in reality. In so far as the application consists of a decision that the foreign company must be wound up and cease to carry on business, it is a mere withdrawal of the implied recognition and permission extended to all foreigners. In so far as it consists of a process of winding-up, the foreign law is applied to questions concerning the constitution of the company and the rights and liabilities of its members; and the territorial law is applied as the lex fori in matters of procedure only. As regards the latter even, respect is paid to the personal law on the principle that the courts of the state of origin of the company must act as the principal court, and other courts as ancillary to the principal liquidation. In certain other respects, however, more definite encroachments have been made upon the personal law. As to the effect of liquidation in effecting a release from contractual liabilities, the personal law is disregarded in favour of the lex loci contractus, so that it is no defence for a foreign company to plead a discharge in a foreign liquidation in an action upon a contract made and to be performed in England 9. But this principle is not 1 Henriques v. General Privileged Dutch Co. and National Bank of St. Charles v. De Bernales (supra). In re The Imperial Anglo-German Bank (1872) 26 L. T. N. S. 229. Colquhoun v. Heddon (1890) 24 Q. B. D. 497 (and 25 Q. B. D. 129). 3 Gilbertson v. Ferguson (1879) 5 Ex. D. 57. Bulkley v. Schutz (1871) L. R. 3 P. C. 764; Butt v. Monteaux (1854) 1 K. & J. 98. 5 Bateman v. Service (1881) 6 App. Cas. (P. C.) 386. 6 Vallée v. Dumergue (1849) Ex. 290; So R. R. 556. 7 Sudlow v. Dutch Rhenish Rly. Co. (1855) 21 Beav. 43. 8 In re English, Scottish, &c., Bank [1893] 3 Ch. at p. 394. 9 Gibbs & Sons v. La Société Industrielle, &c. (1890) 25 Q. B. D. 399. peculiar to juridical persons. It is applied equally to natural persons, and it is only one instance out of many of the special favour shown in English law for the lex loci contractus. Of more immediate interest is the reluctance which has been shown to recognize the personality of foreign juridical persons which show any great difference in character from an English corporation. In Scotland, as in France, a partnership is a legal person distinct from the partners of which it is composed'. But an English court has refused to recognize its personality on the ground that it was not a corporation 2. A similar difficulty in recognizing a juridical person which differs in type from English juridical persons appears to have been felt with respect to foreign sovereigns and states. It is admitted that 'every Government in its dealings with others necessarily partakes in many respects of the character of a corporation 3; that a state is a body so far corporate as not to present to the court as a suitor any one individual;' and that, in short, 'the case of a foreign government is the case of a corporation 5. In accordance with these ideas no difficulty has been found in recognizing the legal personality of Republics. But loyal adherence to the English theory that the state itself is no person, but is represented by a royal corporation sole, appears to have been the active cause in preventing a similar recognition from being extended to monarchic states. It has been said that the foreign monarch sues as a corporation sole, or as trustee for his subjects, or on his own behalf. But the juridical personality of the foreign state as distinguished from the natural personality of the foreign monarch is not recognized by our law 8. Since in most monarchical countries where the system of law is founded on that of Rome, which personified the fisc, the state is a person in private law, the English courts apply the territorial law in this matter in derogation from the personal law. It is evident from what has been said, that excepting the particular restrictions of the personal law referred to, the positive rules of English law may be referred either to the American doctrine or to the theories described as the liberal system. We have no decision such as that in Bank of Augusta v. Earle to commit us to one or the other. But there are indications that, as might be expected, the American doctrine, which has grown out of the common law, would 1 Partnership Act, 1890, s. 4 (2), declaring Scottish law. 2 Bullock v. Caird (1875) L. R. 10 Q. B. 276. 3 King of Two Sicilies v. Willcox (1851) 1 Sim. N. S. 301; 89 R.R. 89. 4 Prioleau v. U.S.A. (1866) L. R. 2 Eq. 659. 5 Republic of Peru v. Weguelin (1875) L. R. 20 Eq. 140. 6 King of Spain v. Hullett (1833) 7 Bli. N. S. 359; 1 Cl. & F. 333; 36 R. R. 123. 7 Hullett v. King of Spain (1828) 2 Bli. N. S. 31; 28 R. R. 56. 8 U.S.A. v. Wagner (1867) L. R. 2 Ch. 582. probably have been accepted, until lately at any rate, as good law by most English judges. Story's statement of the doctrine of comity1 has been referred to with approval by the Privy Council in speaking of the status of a foreign juridical person 2. Lately it has been said that the corporate existence of foreign corporations is only recognized in other countries by international comity 3.' Professor Dicey appears to adopt the same point of view, in referring the right of a foreign juridical person to enjoy its personal law to the principle that any right which has been duly acquired under the law of any civilized country is recognized and in general enforced by English Courts +.' Mr. Foote adopts the American doctrine as the law of England, adding, in spite of Henriques v. General Privileged Dutch Co., that the courts of all countries are open prima facie to natural persons and no others; and Mr. Seward Brice says that the views held in the United States are probably substantially the same as those held in this country. There is, however, little authority for these assumptions, and in special contrast to Mr. Foote, we have the high authority of Professor Westlake that in private international law 'in dealings with others [an artificial person] stands on the footing of natural persons domiciled abroad';' and a recent observation in the Court of Appeal shows that it is still open to an English lawyer to contend that comity is no adequate basis upon which to found the position of foreign juridical persons. The American cases, it was said by Lord Collins, then Master of the Rolls, say that a Corporation can have only one domicile or residence, but may carry on business in a foreign country, which possibility they derive from the comity of nations. Whether it rests on comity or on the view that a Corporation being an entity that entity is legally capable of existing within a jurisdiction other than that of the country which gave it birth, the result is that it can carry on business in a country other than that in which it was incorporated .' It may still turn out to be the law of England that a foreign juridical person possesses status and capacity on the ground that, for these purposes, it is indistinguishable from a natural person. The proposed legislation. The recently introduced Bill to amend the Companies Acts provides that in future a foreign company, having any place of business in this country, shall be required to file (a) a copy 1 See p. 159, supra. 3 2 Bateman v. Service, supra. De Beers Consolidated Mines, Ltd.v. Howe [1905] 2 K. B. at p. 630 (per Phillimore J.). Dicey, loc. cit., Rule 126 and General Principle 1. 5 Foote, P. I. L., 3rd edit., p. 126. 6 Brice, Ultra Vires, 3rd edit., p. 6. 7 Westlake, loc. cit., p. 358. 8 De Beers Consolidated Mines, Ltd. v. Howe [1905] 2 K. B. at p. 635. of its charter, statutes, or memorandum and articles of association, with the names of all its directors, and with the name of some person resident in the United Kingdom authorized to accept service of process on behalf of the company; and (6) in every year such a statement of its affairs as it would have to file if it were an English company; and that there shall be a penalty in default. It is now easy to test these proposals by means of the principles already stated; and they come well out of the test. To enforce them would be to alter no rule of English law, and to infringe no principle of jurisprudence, even of the liberal system. They are consistent with the recognition by the state of the civil personality of foreign companies on the same basis as that of natural persons. Since they need be fulfilled only by companies with a place of business in England, they would apply only to companies which desired to discharge their functions here, and not to companies which sought to exercise here civil capacity only; and the imposition of conditions precedent to the enjoyment of functional capacity is, as it has been pointed out, open to none of the objections to the imposition of restrictions on the enjoyment of civil capacity. They are also consistent with the possession by a foreign juridical person of a personal law. Such rules as these relating to the publicity of constituting documents and of financial position, and to the facilitation of service, are essentially rules for the protection of the interests of third parties; and this, as already said, is the sphere of action with which the state may legitimately concern itself in regulating foreign juridical persons. More doubt may be felt as to their practical utility. Under our fiscal system a proposal to place any difficulties, however slight, in the way of international commercial intercourse, and of the free circulation of capital, may be said to be suspect. The burden of showing that it would do more good than harm is upon its proposers. It is not clear that the particular proposals in question would remedy any evil, or that there is any evil to be remedied. Service can already be effected on any company which has a place of business in England and a responsible officer there. To enact, therefore, that a company carrying on business in England must file the name of some person to receive service adds little to the present law. The only effect of the enactment would be to facilitate service in the rare cases in which a company carries on business here without having any place of business, or has a place of business at which it has no responsible officer. The policy of enforcing publicity of accounts is one of doubtful wisdom and more doubtful utility. Contracts are made with a view to being kept, not broken; and in practice business men will not pay a visit to Somerset House or a district registry and make searches before striking a bargain. They rely, and will continue to rely, on reputation, or, in case of doubt, on a banker's or a consul's reference. But perhaps the most weighty of practical reasons against proposals of this nature is their effect upon other nations. They may appear of slight importance to us, and to lay but a light burden on foreign companies. But it is hard to calculate their exact effect abroad. Without intending to do so, they may be in fact imposing conditions on some class of foreign companies which they are unable to fulfil, and thus practically prohibiting them from carrying on business here. To the state to which such companies belong it must then appear that England is instituting a highly restrictive régime: a condition of affairs which is only too likely to lead to a war of retaliation. At the present moment English chambers of commerce are vigorously agitating to prevent the enactment of somewhat similar provisions contained in a Projet de la Loi sur les Sociétés étrangères par actions now before the French Chamber, which it is said will have the effect of making it impossible for English companies to carry on business in France. Finally, a hope may be expressed that some provision will be included in the bill before it becomes law to determine the legal effect of actions performed in this country by a foreign company which has not complied with the provisions of the statute. The absence of any such provision in similar statutes in the United States, Italy, and elsewhere, has given rise to the greatest confusion and many conflicting decisions. In the United States it has been held at different times that contracts made under such circumstances are totally void; that they are voidable at the option of the other party, either wholly, or in so far as unexecuted; that they are neither void nor voidable, but that the remedy is suspended; that the remedy is not suspended, but that forfeiture of the penalty is the only consequence 2. To arrive at the first and second of these decisions the statute must be looked upon as enacting conditions precedent to the enjoyment of civil capacity, so that the foreign company which has not observed them can do no act in the law. In Italy, after some difference of opinion, it has been decided that this is not the true interpretation of such provisions; but that in spite of not having complied with the prescribed regulations, a foreign commercial association has status as a person and is capable of performing valid acts in the law 3. 1 Chambre des Députés, Session de 1906, No. 121. E. HILTON YOUNG. 2 See cases collected. Thompson, Law of Corporations, ss. 7950-7960. |