Wilmington, Delaware – Corporate law experts in the United States widely recognize the significance of Delaware’s legal compliance jurisprudence. While directors and officers have considerable leeway in making business decisions, they are not immune to being held accountable for corporate law violations. Directors and officers betray shareholders when they knowingly allow the corporation to break the law.
A forthcoming paper titled “Transnational Corporate Law Litigation” in the Duke Law Journal explores how Delaware’s legal compliance jurisprudence can be utilized to deter corporate lawbreaking in foreign countries. The paper presents a blueprint that explains why violations of foreign law can lead to powerful fiduciary duty claims against directors and officers of American corporations in the United States.
These lawsuits, driven by shareholders and the financial motivations of plaintiffs’ lawyers, have the potential to shift the paradigm in holding corporations accountable for lawbreaking with widespread societal consequences outside the United States. Previously, deterring corporate lawbreaking abroad has primarily relied on a legal theory that recognizes the extraterritorial application of American tort law for violations of international law involving corporations abroad. However, recent Supreme Court cases have significantly limited the scope of federal statutes, undermining the viability of such cases.
To address this, the paper proposes shareholder suits that frame illegal activities abroad as fiduciary duty claims against directors and officers for enabling American corporations to violate foreign domestic laws. Shareholder suits offer distinct advantages in deterring corporate lawbreaking abroad. Firstly, fiduciary duty claims under state law are not limited by the restrictive territorial reach of federal statutes. Secondly, courts in the state where the corporation is incorporated, such as Delaware, typically adjudicate shareholder claims even if the corporation has no operations in the United States.
These shareholder suits can have a powerful impact on director and officer behavior by shaping the social norms surrounding fiduciary responsibility in transnational business operations. They require the management of American corporations with significant operations in foreign countries to make good faith efforts to comply with local laws. Transnational corporate law litigation recognizes the range of external laws that bind American corporations in an increasingly globalized economy.
The nature of American corporate law necessitates the need for transnational corporate law litigation. State corporate laws have expanded beyond state boundaries due to the increase in interstate economic activity throughout the twentieth century. Today, major American corporations operate globally, transcending national borders. It is essential to acknowledge that American corporate law extends beyond national boundaries in response to the surge in transnational business activity.
In conclusion, Delaware’s legal compliance jurisprudence offers a framework for deterring corporate lawbreaking abroad through shareholder suits. These suits allow American corporations to be held accountable for violating foreign laws, emphasizing the importance of compliance with local regulations in an increasingly interconnected world.