How can a multinational corporation ever be successfully prosecuted in civil or criminal court? In theory, shouldn’t they just be able to pack it all up and move to a more friendly climate? I’m obviously not talking about small things, for which the cost of switching your legal jurisdiction would exceed the total cost of fighting and losing a court case. I’m talking about why MS didn’t legally move to, say, Liberia when the US DoJ was considering breaking it into itty-bitty pieces.
Plenty of US corporations are incorporated under the laws of the state of Delaware despite the fact they don’t have any offices or physical presence there (that I know of). What barriers prevent a corporation from being incorporated under the laws of some suitably corrupt banana republic?
Moving its legal seat won’t make a corporation immune from lawsuits and prosecution - at least with regard to its operations in X-country it has to follow the laws of X-country. In the case of the US a corporation’s exposure is even larger - it seems foreign corporations can be sued in US court (in order to profit from large US-style awards) in matters that only have a really tenuous connection to the US.
You are assuming that a corporation can only be sued in the jurisdiction in which it is incorporated, which is not the case for the reason you point out. The general rule that has been created by the U.S. Supreme Court is that the defendant must have “minimum contacts” with the state in which they are being sued, meaning that they have engage in systematic and continuous activity in the state, the cause of action arises from in-state activity, or that they could reasonably foresee being brought into court in that state. Of course every country has its own laws on jurisdiction, but a multinational corporation can expect to be subject to suit in any jurisdiction where it engages in business. The scenario you describe would be akin to allowing an individual to liability only in the jurisdiction where she was born, which would would be obviously unfair.
There are certain laws that apply to a corporation based on the state in which it is incorporated. Since I didn’t study Corporations in law school, I honestly don’t know what they are, but they don’t affect jurisdiction. Whatever these laws are, they are more favorable in Delaware, allowing that state to make some money off of the corporations who incorporate there. Also, ships are subject to certain laws of the country in which they register, and many ships that advantage of more favorable laws in Liberia (which is probably why that country came to your mind).
A corporation can be sued in any country where the courts have jurisdiction over the dispute in question. It is not necessary for the corporation to have an office there. The next step would be, to enforce the verdict in the country where the country is incorporated. U.S. courts generally allow foreign verdicts to be enforced in the U.S. if they are from jurisdiction in Western countries, with a few exceptions.
An example is the French verdict in Ligue Contre le Racisme et l’Antisemitisme v. Yahoo, which has been recognized by the Ninth Circuit Court of Appeals on 24 August 2004, No. 01-17424 (PDF file of verdict here).
So, if Liberia doesn’t allow foreigners to benefit from judgements made against Liberian corporations, the lawsuit would be rendered moot? Obviously, a corporation can stand trial in a foreign country if it has a certain amount of contact with that country. But if enforcement is up to the laws of the country of incorporation, I still don’t see a huge problem from the corporation’s viewpoint.
In theory, they wouldn’t even need to mount a legal defense, since no court could enforce any judgement related to contempt.
In theory a corporation in a country that doesn’t enforce foreign judgements would be ‘safe’. However, the scenario’s you sketch are unfeasible in practice.
If the company is already incorporated in a specific country, chances are it will not be allowed to move its seat without facing a substantial tax claim for the transfer.
If there is already a court procedure, chances are lots of its assets are tied up. Furthermore, under certain conditions it might be possible that the directors would be personally liable for moving the assets away.
Even if the company is incorporated elsewhere, you can enforce the judgement in a country where they have some assets, like a ship, or a bank account. If the company is doing business outside its country of incorporation (which it should, otherwise how could you have gotten a claim to it?), there are often some assets.
Companies incorporated in shady countries generally have a hard time doing business for precisely the lack of possibilities to take recourse, so business partners distrust them, so they have to provide costly bank guarantees. This is a disincentive for incorporation in such countries.