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The Status of Legal Person Defined Under Private International Law

1.   Introduction:

The legal system recognises two kinds of persons viz., Human Being and Legal Persons identified by law, whereas the International Law recognises several personalities. They are mainly categorised into two: the state actors and the non-state actors. The state actors include the nation-states, governments, consulates, the authorities which are sovereign bodies. On the other hand, non-state actors include International, Transnational and Reginal Organizations, Corporations, Non-Government Organizations, cultural groups and associations, and Individuals. In short, non-state actors include non-sovereign bodies. With the development of International Law, though the state actors continue to play a significant role, in the contemporary States are no longer the exclusive subject of International Law and the non-State actors have emerged as the primary focus of international law. Today, non-state actors are also attributed to international personality, which further recognised under International law.

The Private International Law is applied whenever there is a conflict of laws or conflict of jurisdiction concerning more than one country. Even though the private international law has an international aspect, is necessarily a branch of municipal law. Therefore, every country has its private international law. However, private international law or a branch of municipal law, does not deal with any one branch of law, but is concerned practically with every branch of law and thus has a vast ambit.[1] The concept of legal personality and its recognition under the Private International Law is primarily depending upon the Municipal Law. However, the difference between foreign and the domestic juristic person requires to be taken into consideration to seeking the status and definition of Juristic or Legal Persons under the Private International Law. The Nationality of a person plays an essential factor to make a distinction between a domestic person or foreigner under the Municipal Laws.

2.   Juristic/Legal Person

Historically, the word ‘Person’ was used to refer to individual human beings. However, the Indian Penal Code[2] and General Clauses Act[3] defines a person as “Person” shall include any company or association or body of individuals whether incorporated or not. The word person is also defined under the Consumer Protection Act, also defines the ‘Person’ as “person” includes,— (i)   a firm whether registered or not; (ii)   a Hindu undivided family; (iii)  a co-operative society; (iv)  every other association of persons whether registered under the Societies Registration Act, 1860 (21 of 1860) or not.[4] Thus in a legal context, the person includes not only individual human beings but various categories as recognised by the law as a person as to refer to collective individuals or institutions. The Concept of Juristic person necessitated for the actions of the collective groups, which is pure fiction of law. The collective will of a group of men and women so acting and holding property, when recognised as a subject of law, or as having legal subjectivity, or more plainly, when recognised as capable of holding certain legal rights, is no more fiction than is the personality of any human being.[5] When the artificial element of juridical capacity was united to an abstract entity, this became a person. It was not such a person has had as the basis of its being the real existence of the individual; its foundation was the will of the law, by which it was created, and it was, therefore, called a “juristic person.”[6]

The rights and responsibilities are the main attributes to the Personality. A legal person is any subject matter other than a human being to which the law attributes personality.[7] The Legal Persons, being the arbitrary creation of the law, maybe as many kinds as the law pleases. The Salmond has argued that conception of legal personality is not so limited in its application and that there are several distinct varieties. According to Salmond there are three unique classes of persons firstly Corporations which are constituted by the personification of groups or series of Individuals; secondly the institutions such as church, library etc., and thirdly the corpus where the fund or estate is devoted for particular purpose, e.g. a trust estate or the property of dead human or of a bank corrupt.[8]  Unlike an individual, the corporations or institutions are having an element of perpetuity which survives even after the death of its official, which often replaced by other human beings.

The Dias argues that the purpose of corporations (legal persons) is to organised, concerted activities and to ascribe collective responsibility, therefore; so, there is, on the other hand, emphasise on the collective powers and liabilities.[9] Therefore, to summarise, the Juristic person is the creation of a law to govern and ascribe the collective activities, and its liability with perpetuity as the law pleases.

3.   The Definition of Juristic Person under the Private International Law

The different International Organisation defined juristic persons differently. The United Nations enjoys the status of Juridical Person having the capacity (a) to contract, (b) to acquire and dispose of immovable and movable property, (c) to institute legal proceedings.[10] The world intellectual property Organisation defines a Juridical Person:  A juridical person is a resident in any State or States in which: (a) it has a statutory seat; (b) it is incorporated or formed; (c) its central administration or chief executive office is located, or (d) it maintains its principal place of business.[11] The Art. 1 of the Inter-American convention defines the Juristic Person as ‘juridical person being understood to mean any entity having its existence and being responsible for its actions, separately and distinctly from those of its members or organizers, and classified as a juridical person in accordance with the law of the place of its organization.’[12]

From the above definitions, the following characteristics of Juristic/Legal persons can be drawn under the private International Law:

  1. The person has the capacity to contract,
  2. The capacity to acquire and dispose of the property
  3. The Capacity to institute legal proceedings.
  4. The legal person shall be a resident of one particular state.
  5. The state under its statute recognises such juristic person,
  6. The juristic Person must have been incorporated or formed
  7. The Person maintains in continuation its central office or principal place of business
  8. The person has its separate existence which is distinct from its members or organisers,
  9. The Person shall be responsible for its action separate and distinct from its members or organisers.
4.   The Application of Private International Law

The Private International Law applied in a case where a foreign element is involved while dealing with the cases under the Municipal Laws. If the person is domiciled in a country, the Municipal Law of the said country would be applied in a case cause of action arose. However, the circumstances arise wherein the cause of action accrues against a person related or domiciled in another country. The involvement of person domiciled in another country is a foreign element under the Municipal Laws, where the cause of action originated. In such a case, the Private International Law is applied. The Purpose of Private international law is to determine the jurisdiction where a foreign element is involved. The Application of Private international law depends upon the personal status of the person.

The Application of Private international law depends upon the personal status of the person. The status of the person can be determined based on Nationality, Citizenship, and domicile of the person. The Person may be a human being or Juristic Person. Since a Juristic Person is a personification of collective individuals or institutions, the individual human being who is representing the Juristic Person may having deferent nationality or citizenship or may have domiciled in deferent States/Nations. The term Nationality, Citizenship and Domicile have different and distinct meanings from each other. The term Nationality represent the spirit of a person towards the nation. It implies the relationship of a person with a State and its people. Whereas, the citizenship underlines the legal status of an individual which the state recognised as its citizen. The Domicile is the phenomenon which defines the origin of a person or his birth and clarifies if the person absents his intention to have a permanent attachment to the country of origin and Resides in place for the certain period. The domicile may change if there is no intention to return.

Since the Juristic Person has separate legal existence from its members, the determination of Jurisdiction under the Private International Law may lead to absurdity and confusion if the jurisdiction is determined by the Nationality, Citizenship or Domicile of the individual human beings representing the juristic persons. Therefore, it is essential to determine the status of Juristic Person for Private International Law.

5.   The Status of Juristic Person under the Private International Law

The Status of Juristic Person can be determined based on Municipal Laws of the Country as the Private International Law is essentially a branch of Municipal Laws. The two different systems of law, viz; Common Law and Civil Law are having a different approach towards the status of Person based on the domesticity and nationality. The common law applies the law of State where a person is domiciled. Whereas, under the civil law irrespective of the domicile of person, the law of Nation of which the person is national applies to it. However, the situation arises when the common laws and civil laws come into conflict, which becomes the subject matter of the Private International Law. Paras Diwan and Peeyushi Diwan relied on the Judgement of Gasque v. Inland Revenue Commissioner[13] and thereby drawn the fundamental distinction between the domicile of natural person and domicile of a corporation is that of the domicile of origin or domicile of birth in respect of company clings to it throughout, and it cannot have a domicile of choice.[14]

E. Helton Young, in its article on The Nationality of Juristic Person, have considered the various theories in respect to the status of Juristic Person viz., Firstly, A juristic person is domestic in the state in which its members, or a majority of them (or the owners of the more significant part of its capital), are domestic. Secondly, a juristic person is domestic in the state by which it created (or by which it was expressly authorised). Thirdly, A juristic person is domestic in the state in which the acts (or someone of them) by which it came into existence were performed. Also, fourthly, a juristic person is domestic in the state in which it is domiciled. [15] The author E. Hilton Young relying upon the American Doctrine of Rule of Incorporation concluded that a juristic person is a creature of law, exists only in contemplation of the law which created it, and the same juristic person cannot be contemplated by two laws at once. If it seeks to pass from the contemplation of one law to that of another, it must obtain some express authorisation or recognition in the second state, which is, in reality, nothing less than a recreation. Domicile cannot affect its domesticity, for it can never be domestic in any state but that in which it first came into existence, either by express authorisation or by mere registration. The actual character and practical circumstances of modern juristic persons tend to increase the importance of natural domicile amongst their legal characteristics and to diminish that of the process by which they came into existence.[16]

The Institute of International Law adopted and recommended specific rules[17] to its members as to adopt in Municipal laws.  The recommended rules fall into four groups: (A) Rules on “the law governing the company; (B) Rules on recognition; (C) Rules on “places of business; and (D) Miscellaneous rules. Under the rules, “the law governing the company” is the law of the State of incorporation, while under English private international law the law of the State of incorporation similarly determines the domicile of the company. The result is that, as has been shown, the same system of law governs the most important topics relating to any company, such as its incorporation, the powers of its organs and its dissolution. The rules demonstrate that no reference to “domicile” is necessary for a draft on the systems of law governing companies and their places of business, but the concept is deeply established in the English authorities.[18] The Art. 4 and 5 of the rules refer to the principal centre of control and management as its actual seat of a company for recognition under the law of the state in which territorial jurisdiction seat exists subject to in conformity with the law of the state if the territorial jurisdiction is other than its incorporation. The Art. 9 of the Rules refers to the place of business in the State other than the State of its incorporation; the other State may impose certain obligations with regards to its financial activities, management and conformity with the local laws limited to the activities in a State.[19]

Thus, under the Private International Law, the juristic personality subjected to the jurisdictions of the municipal laws based on (a) its incorporation, (b) its actual seat of central management, and (c) its place of business.

 The Residence of Artificial person is equally essential for taxation. Under the English Law as well as the Indian laws, the person who is resident of the Country has liability to pay income tax irrespective of his source of income from domestic or a foreign country. The juristic person may have a residence in one State, and it’s business entirely or partly in another State/States. Therefore, the residence of an artificial person under the English Private International Law, a company is a resident of a country where its central management or control is exercised.[20] If Central management and control are exercised from more than one country, the company may become a resident of those countries.[21]

The Indian Private International law following the similarity with the English Law. The Companies Act, 2013 defines the ‘Foreign Company’ means any company or body corporate incorporated outside India which,— (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and (b) conducts any business activity in India in any other manner.[22] The chapter XXII of the Companies Act, 2013 deals with the Companies Incorporated Outside India. The said chapter applies to all the foreign companies having a place of business in India or conducting business activity in India through an agent, physically or through electronic mode or in any other manner.[23] In case of a company incorporated outside India, not less than 51 percent paid-up share capital held by any Indian citizens or any Company incorporated in India in aggregate then, the entire provisions of the Companies Act apply to such foreign company.[24]

6.   Conclusion

The International Law recognises, several International Personalities inclusive of state actors and non-states actors. The State Actors enjoys the immunity under the municipal laws being sovereign personalities. However, the other (non-state) International Juristic Personalities, which possesses its essential characteristics under the legal system are subjected to Private International Law. The material factors to determine the status of juristic person are: (a) its Incorporation, (b) place of business through an agent, physically or through electronic mode, (c) business activities within the territorial jurisdiction in any manner, (d) the shareholding or ownership by the residents of a country. The consideration of all these factors controls the status of the Juristic Persons under the Private International Law. The law relating to juristic persons in the 19th Century was restricted to the domicile or nationality of the person. In the 20th Century, the scope of juristic persons gone beyond the rule of incorporation. The place of central management and control of a juridical person or its business activities in other than the place of its incorporation came within the purview of Private International Law. At present, due to the technical advent of the internet, the status of the Juristic Persons gone beyond the territorial place of its incorporation, or its place of central management and control, or it’s business activities by physical presence, or through its agent. The remote activity from one state to control of management or business activity in any other State has been made possible without any physical presence or through its agent. Thus, now under the Indian Private International Law, it has been made possible to bring any juridical person under its jurisdiction if the person is found to be involved in any business activity in India through electronic modes of communications.

Footnotes:

[1] Paras Diwan, Peeyushi Diwan, Private International Law Indian and English, 37 (4th Revised Edition, 1998)

[2] S.11, Indian Penal Code,1860

[3] S. 3 (42), General Clauses Act, 1897

[4] S.2 (m), Consumer Protection Act, 1986

[5] George F. Deiser, The Juristic Person – 1, [57 O.S. 48 N.S.] Vol. 3, University of Pennsylvania Law Review and American Law Register, 131 (December 1908)

[6] Carlo Calisee, Private Law: Persons, 310, in History of Italian Law, Book III, Part – 1 (1928)

[7] P J Fitzgerald, Salmond on Jurisprudence, 305 (Indian Economy Reprint, 2007)

[8] Ibid at 308.

[9] R.W.M. Dias, Jurisprudence, 270 (5th Edition, Reprint 2017)

[10] UN General Assembly, the Privileges and Immunities of the United Nations, 22A (I), 1, (13/02/1946, available at http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/22(I), last seen on 18/02/2019 2.30 pm.

[11] Intellectual Property: Principles Governing Jurisdiction, Choice Of Law, And Judgments In Transnational Disputes, https://www.wipo.int/edocs/lexdocs/laws/en/us/us218en-part4.pdf, last seen on 18/02/2019, 2.40 pm.

[12] Inter-American Convention On Personality And Capacity Of Juridical Persons In Private International Law, Third Inter-American Specialized Conference On Private International Law, LA PAZ, BOLIVIA, 24/05/1984, https://www.oas.org/dil/CIDIP-III-capacitypersons.htm, last seen on 18/02/2019, 3.00 pm.

[13] (1940) 2 K.B. 80

[14] Supra 1, at 382

[15] E. Hilton Young, The Nationality of Juristic Person, Vol. 22, Harvard Law Review, pp 1-26, November 1908

 https://www.jstor.org/stable/1325453, last seen on 18-02-2019 2:40 pm.

[16] Ibid at 26.

[17] Companies in Private International Law, The Institute of International Law, Session of Warsaw, 1965, http://www.idi-iil.org/en/sessions/warsaw-1965/?post_type=publication, last seen on 18/02/2019 7.00 pm.

[18] Thomas C. Drucker, Companies in Private International Law, 17 Int’l & Comp. L.Q. 28 (1968), downloaded from HeinOnline 18/02/2019, 5.55 pm.

[19] Supra 14.

[20] Supra 1, at 389.

[21] Supra 1, at 390.

[22] S.2 (42), Companies Act, 2013.

[23] S.379 (1), Companies Act, 2013 notified on 9th February 2018.

[24] S.379 (2), Companies Act, 2013