What Fundamental Rights, if any, should Companies Enjoy? - A Comparative Perspective
Peter John OliverVisiting Professor at the Institut d’Études Européennes of the Université Libre de Bruxelles
Every year, the US Supreme Court, the European Court of Human Rights (ECtHR) and the Court of Justice of the EU (CJEU) all deliver a significant number of judgments relating to the fundamental rights of companies 1 . For reasons which will become clear to the reader, the US case law has spawned a vast amount of literature in that country 2 . In contrast, with the notable exception of EU competition (anti-trust) law 3 , there is a marked dearth of literature on this topic on this side of the Atlantic. With this article and his forthcoming book 4 , this author seeks to make a contribution towards filling that gap.
No-one could seriously deny that human beings always have been, and must continue to be, the primary beneficiaries of fundamental rights; and of course some of the most important rights of all (e.g. the right to life and freedom from torture) can only apply in favour of natural persons. Yet the fact is that companies enjoy fundamental rights in all the domestic jurisdictions which this author has examined (the US, the EU, France 5 , Germany, Ireland 6 and the UK 7 ). The same applies to the European Convention of Human Rights (ECHR). In any event, apart from the ECHR, international law only recognises fundamental rights enjoyed by natural persons 8 , which has provoked some criticism from very eminent international quarters 9
Many lawyers consider the very idea of companies enjoying such rights as preposterous 10 , and of course this is fully understandable. So why have so many legal systems endorsed the contrary view?
Any doubts on the need to do so should be dispelled by the egregious treatment of Yukos at the hands of Russia. Merely because Mikhail Khodorkovskiy, the controlling shareholder of Yukos, had had the temerity to oppose President Putin politically, the Russian authorities imposed an exorbitant and arbitrary tax bill on the mammoth oil company and committed major procedural irregularities in prosecuting it for tax fraud, resulting in its demise 11 . Manifestly, without the right to property, companies cannot function at all 12 . Moreover, such action wholly undermines the rule of law, quite apart from its catastrophic effect on the economy and thus the welfare of the population as a whole 13 .
As regards certain fundamental rights, it is particularly obvious that companies should enjoy certain fundamental rights not merely for their own benefit, but for the benefit of others or even the public as a whole. Freedom of speech is a case in point: in the contemporary world where all publishing houses are corporate bodies, this fundamental right would be an empty letter if it did not protect the publishing company as well as the author and other individuals 14 . Another clear example of the utilitarian rationale is the rule against double jeopardy (ne bis in idem), which is intended not merely to protect the accused against repetitive harassment, but also to prevent the courts being encumbered with repetitious prosecutions which would waste public resources 15 .
Crucially, however, two different questions arise. First, should companies enjoy a particular fundamental right? Second, if so, should they enjoy that right to the same extent as natural persons? For instance, as we shall see, corporations should enjoy most, but not all, aspects of the right to a fair trial.
II What is Corporate Personality?
But first of all we need to consider what corporate personality is. Put simply, three broad theories of the corporation can be discerned 16 :
- the aggregate theory, which views the corporation as an aggregate of its members or shareholders (i.e. it is no more than a bunch of individuals);
- the artificial entity theory (sometimes known as the ‘grant theory’), which treats the corporation as a creature, or even extension, of the State which is therefore at liberty to close it down at its will; and
- the real entity theory, according to which the corporation is to be regarded as a genuine legal person quite distinct from the sum of its owners and as no mere extension of the State 17 .
These theories must be understood against their historic background 18 . Corporations 19 were a familiar feature of Roman law. However, it was only in the second quarter of the 19th century that it became the norm for businesses to be incorporated, as the advantages of limited liability became clear with the advent of the railways.
Accordingly, in the late 19th century some progressive lawyers began to espouse the real entity theory 20 . The plain fact is that only this theory takes the concept of legal personality seriously and recognises the realities 21 . After all, companies enjoy at least three crucial advantages which natural persons do not, namely:
- the benefits of limited liability;
- longevity and even (theoretically) immortality; and
- a system of direct taxation which is often more favourable than the income tax imposed on natural persons.
Consequently, the aggregate and artificial entity theories gradually receded into the background, but they have not disappeared. Indeed, as we shall see, the majority judgment of the US Supreme Court in Burwell et al. v Hobby Lobby Inc. 22 is based on the aggregate theory, with highly questionable effects.
For completeness, it should be stressed that all of these theories take into account the need to pierce the corporate veil in exceptional circumstances such as fraud.
III The United States
In the US 23 , neither the Constitution (1789) nor the Bill of Rights (1792) expressly mention corporations’ fundamental rights – which is scarcely surprising, given that hardly any businesses were incorporated at the time. Nevertheless, according to the case law, companies enjoy very far-reaching fundamental rights 24 . Just like the CJEU, the US Supreme Court has failed to develop a general approach to the two difficult questions set out in the final paragraph of section I above – but neither court can be criticised on this count, since it is no easy task. Admittedly, the US Supreme Court has held that, in determining whether a fundamental right enshrined in the Constitution or the Bill of Rights extends to corporations, regard must be had to its ‘nature, history and purpose’ 25 ; but this approach is as vague as it is sound.
Let us begin with the good news. Ever since its seminal ruling in Hale v Henkel decided in 1906 26 , it has been repeatedly held that corporations cannot plead the Fifth Amendment (the privilege against self-incrimination in criminal and quasi-criminal proceedings) 27 . This case arose out of an antitrust investigation into two tobacco companies pursuant to the Sherman Act. The Court declared that, if it were otherwise, “the privilege claimed would practically nullify the whole act of Congress” (the Sherman Act) 28 . In other words, it would then become excessively difficult to enforce the Act. This ruling is most welcome, since the purpose of this ancient right is also to avoid “physical torture and other less violent but equally reprehensible modes of compelling the production of incriminating evidence”, as the Supreme Court subsequently acknowledged in White 29 .
Now we come to the bad news – at least it is bad for anyone who is not a hard-line economic libertarian.
This is not the place to explore the case law of the 19th and early 20th centuries which massively favoured businesses especially against the most vulnerable members of the population. Nor can we dwell on the “infamous” judgment in Lochner 30 , the Supreme Court struck down a labour law of the State of New York prohibiting bakers from employing staff for more than sixty hours per week, on the grounds that it constituted an unreasonable interference with the liberty of the person and the freedom of contract contrary to the Due Process Clause of the Fourteenth Amendment (1868) 31 . Suffice it to say that this ruling sparked a wave of extreme ‘cowboy capitalist’ judgments which ended abruptly in 1937 32 . That is all confined to history – except that, according to Cass Sunstein, Lochner never fully went away 33 .
Let us concentrate on four highly controversial judgments dating from 2010 and 2011. But, for a proper understanding of the first of these cases, Citizens United 34 , we have to cast our minds back over the previous few decades. The background to this case is the overriding importance attached to free speech under the First Amendment, including speech by corporations 35 . A judgment which deserves a particular mention in this regard is Miami Herald 36 , where the Supreme Court unanimously struck down a Florida statute which granted a mandatory right to reply free of charge to a political candidate for nomination to refute accusations made against him in a newspaper. Any compulsion on a newspaper to publish anything which ‘reason tells them should not be published’ was held to be unconstitutional 37 . This ruling appears to confirm the sardonic quip that: ‘Freedom of the press is guaranteed only to those who own one’ 38 .
Moreover, this provision has been interpreted very broadly to cover the right to make political donations 39 , even for corporations 40 – despite the fact that they have no right to vote or run for office. Thus in Bellotti a bare majority of the Supreme Court struck down a Massachusetts law which prohibited corporate expenditure for the purpose of influencing the vote on any referendum submitted to the voters other than one materially affecting the property, business or assets of the corporation.
In Citizens United, the US Supreme Court took this line of cases a dangerous step further. By a 5-4 majority, the Supreme Court held that corporations have a right under this provision to incur expenditure to influence elections. In 2008, the plaintiff, a non-proﬁt political action committee, produced and released a documentary criticising Hillary Clinton, who was seeking the Democratic nomination for President of the United States. To promote this ﬁlm, it produced various advertisements which fell foul of a federal prohibition on ‘electioneering communications’ by corporations and unions within 30 days of a primary election 41 . This prohibition was held to be incompatible with the First Amendment. Because this case concerned an election – and a presidential election at that – its repercussions are considerably more far-reaching than those of Bellotti.
This judgment resulted in a massive increase in political donations by corporations, which were already extremely high. Not only has this increased corporate interference with American democracy, but it has also required politicians to devote even more of their working days to raising funds for their re-election, and consequently devoting insufficient time to their work as lawmakers.
Shortly afterwards, the Supreme Court delivered its judgment in Hobby Lobby 42 , a challenge to the Affordable Care Act 2010 (“Obamacare”). Hobby Lobby Stores Inc. was a national chain of 500 arts and crafts stores with more than 13,000 employees. The five individuals who owned the company (“the Green family”) were devout Christians and maintained a sincere conviction that human life begins at conception. Although they do not oppose contraception as such, they had a profound objection to four out of the twenty methods of contraception approved by the Food and Drugs Administration, since they considered those four methods to be a form of abortion. Accordingly, they objected to the requirement under “Obamacare” to contribute towards the healthcare coverage of their staff so far as those four methods of contraception were concerned.
The Supreme Court ruled that the company could rely on the freedom of the religion since it was simply a vehicle for the Green family to do their business and was in effect a mouthpiece for the family’s religious views. On this basis, the contested provisions of the Act were held to be repugnant to the freedom of religion in so far as the four types of contraceptive were concerned. This approach to the nature of companies is deeply flawed 43 . Moreover, this judgment had the pernicious effect of introducing gender discrimination within the workplace: by definition, only female employees were affected; and of course it is by no means easy for staff to move to another employer.
Another highly controversial judgment was delivered in Sorrell v IMS Health Inc. 44 The case concerned a statute of the State of Vermont restricting the use of pharmacy records to describe the prescription practices of doctors. This effectively prevented pharmaceutical companies from sending their agents to persuade individual doctors to prescribe their products, which were not in the best interests of patients or the public purse. In effect, the law was intended to encourage the use of generic drugs which are generally cheaper. The Supreme Court ruled by a majority that the contested statute was an unjustified interference with free speech. In so doing, the judges favoured “big pharma” at the expense not only of patients, but also of smaller competitors and the public purse. An eminent legal journalist described Sorrell as a ‘particularly egregious’ example of the Court using free speech to ‘serve a deregulatory agenda’ 45 .
Finally, J. McIntyre Machinery Ltd. v Nicastro 46 concerned a three-ton metal shearing machine manufactured by the appellant company, which was based in England and which had severed four fingers off the respondent worker’s right hand. The company’s products were marketed in the US by its distributor, based in Ohio. Since the accident occurred in a scrap-metal factory in New Jersey, Mr Nicastro brought his action in the courts of that State. Incredibly, because J. McIntyre had no links with New Jersey, the Supreme Court held by a majority that to allow the case to be heard in the courts of New Jersey would violate the company’s right under the Due Process Clause of the Fourteenth Amendment to be ‘subject only of lawful authority’ 47 . The majority seemed oblivious to the fact that the injured workman almost certainly lacked the resources to bring the action in Ohio, and would probably be unable to take the necessary time off work to do so.
In Europe, Germany long has been in the vanguard in this field ever since Article 159 of the abortive national Constitution of 1849 48 provided for a right of petition which expressly covered corporations 49 . This development culminated in 1949 with the adoption of the Basic Law or Grundgesetz (GG), Article 19(3) of which reads: ‘Fundamental rights also apply to … legal persons to the extent that their nature permits’. This may well be the very first provision of any Constitution, Bill of Rights or treaty anywhere in the world to recognise expressly the fundamental rights of legal persons. 50
Unsurprisingly, legal persons cannot rely on Article 1(1) GG, which provides: ‘Human dignity shall be inviolable. All public authorities are under a duty to respect and protect it’ 51 . In a ruling reminiscent of Hale v Henkel 52 and its progeny, it was held that the privilege against self-incrimination is rooted in human dignity under Article 1(1) and therefore applies only to natural persons 53 .
Nevertheless, corporations enjoy a very wide range of other rights, including the freedom of expression (Article 5(1) GG) 54 , privacy of correspondence and telecommunications (Article 10) 55 , and the rights to occupational freedom (Article 12(1)) 56 and to property (Article 14) 57 . The latter two provisions should be viewed in the light of the clause in Article 20(1) GG specifying that the Federal Republic is a ‘social State’ 58 as well as the concept of the ‘social market economy’ (‘Soziale Marktwirtschaft’). That concept, according to which social and economic rights must be balanced against one another, has played a crucial role in post-war Germany even though it is not enshrined in the Basic Law 59 .
- The ECHR
The ECHR, which was opened for signature in 1950, contains various indications that some of its provisions apply for the beneﬁt of companies 60 . First, Article 10 on the freedom of speech contains a sentence stating: ‘This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises’. 61 Second, Article 34 of the Convention provides: ‘The Court may receive applications from any person, non-governmental organisation or group of individuals …’. This has been interpreted widely to cover companies. What is more, Article 1 of Protocol 1 to the Convention, which was opened for signature in 1951, contains a sentence which reads: ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions’. 62
Together with its protocols, this treaty focuses primarily on first generation rights (e.g. the right to life, equality before the law, freedom of speech, freedom of religion and the right to a fair trial). Nevertheless, in Airey v Ireland, the ECtHR held that, while the rights enshrined in the Convention are ‘essentially civil and political’, ‘many of them have implications of a social or economic nature’. 63 At the same time, as one would expect, the Court has repeatedly asserted that economic rights are less deserving of protection than political and civil rights.
The very ﬁrst case in which a company succeeded in an action before the ECtHR was Sunday Times v United Kingdom 64 , in which the Court found a breach of that company’s right to freedom of non-commercial expression under Article 10 ECHR. Since then the ECtHR has applied several other provisions of the Convention in favour of companies. 65 However, it has almost always been at pains to limit the fundamental rights of companies to what is strictly necessary 66 . For instance, in Spacek v Czech Republic the ECtHR found that a company, unlike an individual taxpayer, can be expected to take expert advice 67 . That Court has also has also held that companies have no right to legal aid under Article 6 ECHR. 68
An extremely rare judgment in which that court was insufficiently cautious is Grande Stevens v Italy 69 . In that case, the Court took the unprecedented step of applying the rule against double jeopardy (ne bis in idem) to a company; and at the same time it simply applied its earlier case law in which it had construed the relevant provision in a manner which is particularly favourable to accused individuals. As explained in section 1 above, the case for applying this fundamental right in favour of companies is overwhelming, but it does not necessarily follow that their rights should be as extensive as those enjoyed by natural persons. However, that is not the point. The problem was that the ECtHR did not even allude to the fact that two of the applicants in the case before it were companies and not individuals – let alone set out any reasoning in support of its approach.
In this author’s submission, it is vitally important for courts to proceed with great caution when called upon to decide whether to extend to companies existing case law on the fundamental rights of individuals. In each case, the judges should ask themselves whether it is appropriate to take this step, and their reasoning should be set out clearly in the judgment. Otherwise, there is a real danger that the courts will inadvertently be unduly generous to companies; and once such a step is taken, it is hard to reverse.
- The EU
The fathers of the Treaty of Rome of 1957 (there were no mothers), which established what is now the EU, and related treaties concluded in the 1950s saw no need to include any provisions relating to human rights. At that time, those treaties focused almost exclusively on creating the common market (now known as the single market), and this economic goal was thought to be quite unconnected with such rights. Thus, while the ECHR is primarily concerned with first generation rights, the primary focus of the EU is economic rights.
However, starting with its seminal judgment in Internationale Handelsgesellschaft, the CJEU began to develop its own body of fundamental rights “inspired by the constitutional traditions common to the Member States”. Moreover, ever since its ruling in Nold, the Court has given considerable weight to the ECHR and the case law of the ECtHR. This case law is now reflected in Article 6(3) of the Treaty on European Union (TEU).
A major turning-point was the promulgation of the Charter of Fundamental Rights of the European Union in the year 2000. When the Treaty of Lisbon came into force in December 2009, the Charter became binding in an amended form with “the same legal value as the Treaties”, by virtue of Article 6(1) TEU. A very high proportion of the provisions in the Charter mirror those enshrined in the ECHR, and most of them reflect the earlier case law of the CJEU. According to Article 52(3) of the Charter, the provisions in the Charter which ‘correspond’ to those in the ECHR have the same meaning and scope as their counterparts in that Convention; but that does not ‘prevent Union law providing more extensive protection’. Despite this provision and Article 6(3) TEU, the CJEU has been known to depart from the case law of its counterpart in Strasbourg without providing “more extensive protection”.
For present purposes, one of the most important provisions of the Charter is Article 16, which provides: ‘The right to conduct a business in accordance with Union law and national laws and practices is recognised.’ This right, which was first recognised by the CJEU in Nold, is not based on any provision in the ECHR but on Article 12 of the German Basic Law and Article 41 of the Italian Constitution, which recognise this right, albeit in different terms from Article 16.
Articles 6(1) TEU and 52(7) of the Charter require all courts to pay due regard to the official Explanations of the Charter. According to these Explanations, the right enshrined in Article 16 falls into three parts: (i) the freedom to exercise an economic or commercial activity; (ii) freedom of contract; and (iii) the right to free competition in accordance with Article 119(1) and (3) TFEU. Finally, the Explanations state that, as one would expect, these rights may be subject to the exception clause contained in Article 52(1) of the Charter.
The striking feature of Article 16 is the almost diffident terms in which it is formulated, in two respects. First, the phrase ‘the freedom to conduct a business … is recognised’ contrasts with the much stronger language to be found in several other provisions of the Charter. Numerous articles begin with the words ‘Everyone has the right …’, which are much stronger. Second, the phrase ‘in accordance with Union law and national laws and practices’ further lessens the intensity of Article 16. Not only is it entirely fitting that this freedom should be a weak right, but it is also in keeping with the pre-Charter case law.
Accordingly, the Court has repeatedly held that, like its close relative the right to property (Article 17 of the Charter), this right is “not absolute but must be viewed in relation to [its] social function”. On this basis and “in the light of the wording of Article 16 of the Charter, … the freedom to conduct a business may be subject to a broad range of interventions on the part of public authorities which may limit the exercise of economic activity in the public interest”. Consequently, in numerous cases competing interests including public health, animal health, the protection of privacy, freedom of speech and consumer protection have been held to prevail over Article 16. Of course, this can only be decided on a case by case basis.
A case which has been the subject of considerable controversy is Alemo-Herron v Parkwood Leisure Ltd. It related to Council Directive 2001/23 on safeguarding employees’ rights in the event of transfers of undertakings. In 2002, the London Borough of Lewisham’s leisure activities had been contracted out to a private sector undertaking, CCL Ltd, and the employees working in that department became part of the staff of that company. In May 2004, CCL sold the business to Parkwood in a contract including a ‘dynamic clause’ referring to collective bargaining agreements. By this clause, which was designed to soften the blow of privatisation for the employees, Parkwood undertook to abide by the conditions set out in future collective agreements decided by a third party, namely the local government collective bargaining body. However, as a private sector company Parkwood could not be represented in any way within that body.
The UK Supreme Court posed a series of questions asking whether the Directive and the relevant fundamental rights provisions permitted Member States to allow such dynamic clauses. AG Cruz Villalón found that, although the clause encroached on the freedom of contract, Article 16 was only breached if Parkwood was bound ‘unconditionally and irreversibly’ to the collective bargaining agreement in which it could not participate. Unfortunately, the Court of Justice took a more radical position based on the unusual circumstance that Parkwood was unable to participate in the collective bargaining process in any way. It concluded that ‘the transferee’s contractual freedom is seriously reduced to the point that such a limitation is liable to adversely affect the very essence of its freedom to conduct a business’. This hard-line position left no room to take account of the employees’ rights.
Not surprisingly, this judgment provoked a storm of criticism. The AG had found a fair balance between the rights of the employees and the rights of the company, while the Court did not. In any case, fears that this ruling opened the door to wholesale deregulation have turned out to be misplaced. In this author’s submission, that is not surprising because a dynamic clause linked to a collective bargaining procedure in which the employer has no say is of a quite different nature from legislation laying down standards relating to public health, the environment, consumer protection or the like.
Another extremely controversial judgment in which Article 16 was pitted against employees’ rights (in casu the right to be protected against unjustified dismissal in Article 30 of the Charter) is AGET Iraklis. The plaintiff company in the main proceedings, a subsidiary of the French multinational Lafarge, produced cement at three locations in Greece. When the company decided to close one of its plants there, the Minister prohibited this move on the basis of a Greek statute which required his approval for collective redundancies on the basis of (a) the conditions of the labour market, (b) the situation of the undertaking and (c) the interests of the national economy.
The Court held that the freedom of establishment under Article 49 TFEU includes the right to scale down or close a business in another Member State. The Court recalled its settled case law according to which purely economic grounds such as safeguarding the interests of the national economy cannot justify restrictions on free movement. At the same time, it also recalled that the protection of workers is a recognised ground of justification of restrictions on free movement, as is the promotion of employment and the maintenance of employment. After rejecting criterion (c) on the grounds that it was purely economic, the Court stated that the other two criteria could not be ruled out a priori. However, it then proceeded to rule that these criteria failed because of their very general and imprecise terms, which gave no indication as to the specific circumstances in which authorisation for a collective dismissal would be refused.
Beyond any doubt, this judgment had very harsh consequences for the staff concerned, especially as Greece was undergoing an acute economic crisis at the time. But, while this judgment also caused an outcry, one author has welcomed it as a sound compromise: the Court gave its blessing to schemes requiring collective redundancies to be authorised by the State, but drew the line at such arbitrary and vague criteria as those in question. For this author at least, it is impossible to see how the Court could have given its blessing to such questionable national legislation without jeopardizing the internal market, which remains central to the EU. Moreover, although the Court made great play of Article 16 of the Charter, it would have reached precisely the same conclusion without relying on that provision at all.
In any case, one most welcome development is that the CJEU has now made it clear that some of the social rights enshrined in the Charter are enforceable and not merely aspirational (in casu, the right to an annual period of paid leave under Article 31(2)). Previously, the Court had been reluctant to accept this, which created a serious imbalance in favour of economic rights. Manifestly, this imbalance ran counter to the clause in Article 3(3) TEU, which requires the EU to strive towards the creation of ‘a highly competitive social market economy, aiming at full employment and social progress’.
Even so, numerous commentators have argued that the EU is currently far removed from achieving the balance between social and economic rights which this concept envisages. That is in part because according to the case law of the CJEU the Treaty provisions on the single European market frequently prevail over social rights enshrined in the Charter. That is beyond dispute, and there are undeniably judgments in which the Court has gone too far in protecting the internal market at the expense of social and labour rights. Nevertheless, one should never lose sight of the fact that without the internal market, the EU could not survive.
Like the US Supreme Court, the CJEU has never developed a general test for determining the extent to which companies should benefit from fundamental rights. Nevertheless, it did address this issue squarely in DEB, which concerned the third paragraph of Article 47 of the Charter. That provision reads: “Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.” The question was whether companies could rely on this provision, and in a very thorough and meticulously drafted judgment the Court held that they could do so if need be. The reason was that Article 47 is to be found in Title VI of the Charter (‘justice’), which contains various provisions applying both to natural and to legal persons. The fact that the right to receive legal aid is not to be found in Title IV (‘citizens’ rights’) was an indication that under the Charter, in contrast to the position in German law, that right is not primarily regarded as a form of social assistance. Unsurprisingly, the Court added that, in determining whether DEB had a right to legal aid in the instant case, the national court could take into account the fact that it was a commercial company. From the full reasoning of the Court it is plain that companies are by no means entitled to legal aid as a matter of course.
Occasionally, the CJEU has taken the fundamental rights of companies too far. A case in point is Orkem v Commission, which concerned the rights of a company being investigated for breaches of EU competition law. The Court acknowledged that in most Member States the privilege against self-incrimination was confined to natural persons, and that the ECtHR had not considered the point. Despite these factors and the extremely sound reasons for rejecting Orkem’s argument, the Court went half-way towards accepting that argument: it held that undertakings could be compelled to disclose documents and to answer factual questions so long as this did not require them to admit infringing EU competition law. Fortunately, the Court has subsequently rejected calls by other undertakings to find that they enjoy a fully-fledged right not to incriminate themselves like natural persons; but the Court has not reversed its judgment in Orkem.
Another example is Digital Rights Ireland, where the Court struck down the Data Retention Directive in its entirety as being contrary to Articles 7 and 8 of the Charter. This Directive imposed far-reaching obligations on providers of publicly available electronic communications services to retain large quantities of electronically generated or processed data. Although the Directive stated in the clearest possible terms that it applied to data emanating from legal entities as well as from natural persons, neither the Advocate General nor the Court even alluded to this fact – even though it is highly questionable legal persons should be entitled to data protection at all. Given the importance of the case, the Court’s failure to explain why the Directive should be annulled even as regards data generated or processed by legal persons constitutes a serious omission.
V Should Different Categories of Company be Treated Differently?
To complicate matters further, there is a very strong case for treating certain categories of company more favourably or less favourably than others.
An obvious example is small or medium-sized companies, and especially very small companies. This is illustrated by the ruling in Ketelä, which concerned an EU aid to young farmers setting up in business. It was held that it might be contrary to the principle of equality to exclude from that aid to young farmers who chose to use the vehicle of a company for doing so – provided that they had the decision-making power of that company. It seems hard to imagine circumstances in which a measure granting an advantage to natural persons only could be held to constitute unlawful discrimination against large companies.
As to incorporated enterprises owned by the State, such entities cannot usually enjoy fundamental rights under the Basic Law, although exceptions are made for broadcasters, universities and churches. The basis for this is the premise that the State cannot be both guarantor and beneficiary of fundamental rights For the same reason, applications to the ECtHR by State-owned companies are inadmissible in view of the wording of Article 34 ECHR, which provides that applicants may only to lodged by a ‘person, non-governmental organisation or group of individuals’. In contrast, State-owned companies are not subject to such restrictions in EU law. In Council v Bank Mellat, the CJEU held that ‘any natural person or any entity bringing an action before the Courts of the European Union’ may invoke its rights of defence and its right to effective judicial protection under Article 47 of the Charter. The context in which that statement was made is particularly striking: Bank Mellat, which was wholly owned by the Iranian State, was contesting a series of EU acts imposing economic sanctions against bodies suspected of involvement in terrorism. It remains to be seen whether other Charter rights can be invoked by companies owned by States which are not members of the EU.
Even companies in liquidation can enjoy certain fundamental rights. Both the ECtHR and the Court of Justice have recognised that companies in liquidation enjoy the right to an effective judicial remedy; and indeed they may well enjoy other fundamental rights as well. It is not clear in which circumstances liquidators are required to maintain ‘zombie’ companies in existence to enable them to exercise their fundamental rights.
VI Where Companies and Their Stakeholders Act Together
Quite apart from captivating the interest of the British public for some time, the ‘gay cake case’ is of considerable importance. Mr and Mrs McArthur, the directors of Ashers Backing Company Ltd., were devout Christians who believed that same-sex marriage was contrary to God’s law. At the material time, the company had six shops and some sixty-five employees and offered its products on-line throughout the UK and Ireland. Mr Lee, a gay activist, visited one of the company’s bakeries in Belfast and placed an order for a cake with Mrs McArthur. Mr Lee subsequently returned to the shop and informed her that he wished the cake to bear the inscription ‘Support Gay Marriage’. Accordingly, the McArthurs declined to proceed with the order. Mr Lee then sued both the McArthurs and their company. To the surprise of many lawyers, the UK Supreme Court found unanimously against Mr Lee.
First, they dismissed his claim that he had suffered discrimination: the McArthurs and the company had not declined to sell him a cake because he was homosexual or because he supported same-sex marriage. In either event, such a refusal would have constituted unlawful discrimination.
Second, the judges held that it was repugnant to Article 9 ECHR (freedom of religion) and to Article 10 ECHR (freedom of speech) to compel the couple to express an opinion which they did not hold. The Court added that this would have been the same whatever the message to be conveyed (e.g. support for a particular political party or for a particular religious denomination). As to the company, the Supreme Court recalled the two cases in which the European Commission of Human Rights had held that companies cannot rely on Article 9, but pointed out that ‘to hold the company liable when the McArthurs are not would effectively negate their convention rights’.
This reasoning, it is submitted, is unassailable. This case is at the other end of the spectrum from Hobby Lobby, which concerned a very large corporation – but the crucial point was that there was no interaction between the shareholders or management and the employees. In contrast, Mr Lee had communicated directly with the McArthurs. Accordingly, the fact that their business was incorporated was irrelevant.
Conversely, we have seen that in other circumstances it is appropriate to treat a company as the predominant rights holder, in which case the rights of the shareholders and management are therefore no greater than those of their company.
VII The Fundamental Rights Obligations of Corporations
Companies can be bound by fundamental rights obligations in two separate ways. First, some provisions have horizontal effect (“State Action” in the US and Drittwirkung in Germany), meaning that they do not merely bind the State but also private natural and legal persons. Second, in the last few decades various non-binding measures have been adopted by international organisations to prevent abuses by multinational corporations and similar entities. Of course, these measures are most welcome, and it is to be hoped that they will soon be replaced by binding provisions.
Even natural persons can bear the burden of certain fundamental rights provisions as a result of horizontal effect, while the international law measures only target multinational corporations. Furthermore, no direct correlation exists between either of these phenomena and the fundamental rights of companies; and it would be misguided to claim that companies must enjoy a particular fundamental right because they are required to respect the same right in their relations with third parties.
The recent judgments of the US Supreme Court discussed above undoubtedly reflect the hard-line laissez-faire ideology of its conservative members, whereas that is clearly not the case with their European counterparts. The rare instances of the ECtHR or (more frequently) the CJEU overstepping the mark appear to be due simply to a failure to address the particularities of companies’ fundamental rights.
The quest for a general test to determine to what extent particular fundamental rights apply in favour of companies has proved somewhat elusive except (at least to some extent) for the German Constitutional Court. Having said that, a number of lessons can be drawn from this brief survey.
First, save in exceptional situations such as the ‘gay cake case’ (where the corporate nature of the business concerned was not even relevant), it is a fallacy to treat companies as nothing more than a group of individuals, as the US Supreme Court did in Hobby Lobby. Companies are entities in their own right with different rights and obligations from their shareholders and management.
Second, certain rights must by their very nature benefit companies, albeit not necessarily to the same extent as natural persons. Obvious examples are the rights to property and (where such a right exists) the freedom to conduct a business as well as the right to a fair trial, whether the proceedings are civil or criminal in nature.
Third, the very sound principle set out in Spacek and its progeny should be applied to all fundamental rights, where appropriate.
Fourth, it is crucial for courts to proceed with great caution when called upon to decide to what extent the fundamental rights of individuals should apply to companies. In each case, the courts should ask themselves: in view of the ‘nature, history and purpose’ of the provision or right in question, is it appropriate to extend it to companies and, if so, under what conditions? In so doing, the courts should have regard inter alia to the criteria set out by the CJEU in DEB.
Fifth, the courts’ reasoning on this question should be clearly set out in each judgment in which they have take such a decision. Only by following this course can judges convince themselves that they are following the correct path. Otherwise, there is a real danger that the courts will inadvertently be unduly generous to companies; and once such a step is taken, it is hard to reverse.
- “Company” is used here to denote commercial entities, and is used interchangeably with “corporation”. The adjective “corporate” is used in the same sense.
- See e.g. P. Blumberg ‘The Corporate Entity in an Era of Multinational Corporations’ 15 Delaware Journal of Corporate Law (1990) 283, C. J. Mayer ‘Personalizing the Impersonal: Corporations and the Bill of Rights’ 41 Hastings LJ (1990) 577, B. Garrett ‘The Constitutional Standing of Corporations’ 163 University of Pennsylvania Law Rev 95 (2014) and A. Winkler We the Corporations – How American Businesses Won their Civil Rights (Liveright Publishers, 2018).
- e.g. T. Bombois La Protection des Droits Fondamentaux des Entreprises en Droit Européen Répressif de la Concurrence (Larcier, 2012), M. Le Soudeer Droit antitrust de l’Union européenne et droits fondamentaux des entreprises – Approche contentieuse (Larcier, 2019) and A. Scordamaglia-Tousis EU Cartel Enforcement – Reconciling Effective Public Enforcement with Fundamental Rights (Wolters Kluwer, 2013). See also F. Castillo de la Torre and E. Gippini Fournier Evidence, Proof and Judicial Review in EU Competition Law (Edward Elgar, 2017) and N. Khan in Kerse and Khan EU Antitrust Procedure (Sweet & Maxwell, 6th ed, 2012).
- The Fundamental Rights of Companies – EU, US and International Law Compared (Hart Publishing, forthcoming).
- See in particular Decisions 79-112 DC of 9 January 1980 http://www.conseil-constitutionnel.fr/conseil-con..decision-n-79-112-dc-du-09-janvier-1980.7767.htm and 81-132 DC of 16 January 1982, http://www.conseil-constitutionnel.fr/conseil-con..decision-n-81-132-dc-du-16-janvier-1982.7986.html of the Conseil Constitutionnel (Constitutional Court).
- The leading judgment of the Irish Supreme Court was delivered in Iarnród Éireann v Ireland  3 I.R. 321,  2 I.L.R.M. 161
- e.g. Bank Mellat v HM Treasury  UKSC 39 (right to be heard) and Jameel v Wall Street Journal  1 AC 359 (right to reputation). But, applying the definition set out in n 1 above, it is questionable whether fundamental rights exist in UK law at all, since in the absence of a written Constitution they cannot be fully entrenched. Some fundamental rights are recognized under the common law (see e.g. Kennedy v Charity Commission  UKSC 20); but they can be overridden by clear statutes to the contrary. The Human Rights Act 1998 introduces a significant number of provisions of the ECHR into UK law, but it does not empower the courts to set aside Acts of Parliament – and the present Government is seeking to water it down or to replace it https://rozenberg.substack.com/p/what-is-raab-thinking-of?s=w
- That is the case across the board, including both global and regional international human rights instruments. See e.g. the decision of the Inter-American Commission on Human Rights in Mevropal v Argentina (Report nº 39/99 Inter-Am. CHR OEA/Ser. L/V/II.95 doc. 7 rev 297 (1999) http://www.cidh.org/annualrep/98eng/inadmissible/argentina%20mevopal.htm).
- ‘Outside the scope of the ECHR, international human rights protection for companies is dim’ (J. Wouters and A.-L. Chané Multinational Corporations in International Law Working Paper 129 (December 2013, updated February 2015), 10 https://ghum.kuleuven.be/ggs/publications/working_papers/2013/129wouterschane). See also the virulent criticism of the Mevropal decision (n 9 above) by R. D. Bishop, J. Crawford and W. M. Reisman: “The Inter-American Human Rights Commission, in deciding not to entertain petitions from juridical persons, but only from natural persons, excluded a significant part of the economic claims that arise under the American Convention [on Human Rights]” (Foreign investment disputes: cases, materials and commentary (Wolters Kluwer, 2005), 485).
- e.g. D. Ciepley ‘Neither Persons nor Associations: against Constitutional Rights for Corporations’ Journal of Law and Courts 1(2) (2013) 221 and Mayer (n 3 above). The more radical view is that companies should not be treated as persons at all: F. Capra and U. Mattei The Ecology of Law – Toward a Legal System in Tune with Nature and Community (Berrett-Koehler, 2015), 185.
- In Yukos v Russia (application 14902/04, judgment of 20 September 2011), the ECtHR found Russia to be in breach of the right to property under Article 1 of Protocol 1 to the ECHR and the right to a fair trial under Article 6 ECHR. In its judgment of 31 July 2014, the ECtHRawarded the shareholders €1.9 billion damages.
- ‘When a State creates a corporation with the power to acquire and utilise property, it necessarily and implicitly guarantees that the corporation will not be deprived of that property absent due process of law.’ (Justice Rehnquist in First National Bank of Boston v Bellotti 435 US 765, 824 (1977)).
- Of course, the atrocities perpetrated by the Putin Government in the Ukraine at the time of writing show that foreign investors paid insufficient attention to these blatant breaches of human rights – and to countless more barbarous acts committed by it across the world. Nevertheless, there can be no doubt that other more prudent and scrupulous businesses were deterred by the Yukos scandal from investing in Russia.
- New York Times v Sullivan 376 US 254 (1964) and Sunday Times v United Kingdom (application 6538/74, judgment of the plenary ECtHR of 26 April 1979). Similarly, see Lee v McArthur and Ashers Baking Company Ltd  UKSC 49, discussed in the text accompanying n 142 below.
- Crist v Bretz 437 US 28, 33 (1978). See M. Luchtman ‘The ECJ’s Recent Case Law on Ne Bis in Idem: Implications for Law Enforcement in a Shared Legal Order’ 55 CMLRev. 1717, 1721 (2018). C. Karakosta describes the rule as being akin to res judicata: « Ne bis in idem : une jurisprudence peu visible pour un droit intangible » 2008 Rev. Trim. Dr. H. 25.
- Numerous variants of these theories exist, and other terminology is frequently used.
- On these theories, see e.g. R. Avi-Yonah ‘The Cyclical Transformations of the Corporate Form: A Historical Perspective on Corporate Social Responsibility’ 30 Delaware Journal of Corporate Law 767 (2005), K. Beran The Concept of Juristic Person ((Prague, Wolters Kluwer, 2020), Blumberg (n 3 above) and M. Dan-Cohen Rights, Persons and Organizations – a Legal Theory for a Bureaucratic Society (Berkley, University of California Press, 1986).
- In addition to the sources mentioned in n 18 above, see P. Ireland ‘Capitalism without the Capitalist: The Joint Stock Company Share and the Emergence of the Modern Doctrine of Separate Corporate Personality’ 17 Journal of Legal History 41 (1996) and Winkler (n 3 above) 44 – 45.
- See n 2 above.
- e.g. O. von Gierke Die Genossenschaftstheorie und die deutsche Rechtsprechung (1887) and Das Wesen der Menschlichen Verbände (1902), and the seminal judgment of the House of Lords in Salomon v Salomon and Co Ltd  AC 22.
- See Dan-Cohen (n 18 above), E. Decaux ‘L’application des normes relatives aux droits de l’homme et aux personnes morales de droit privé’ 54 RIDC 549, 559 (2002) and L. Favoreu et al Droits des libertés fondamentales (Dalloz, 2000) 177.
- 573 US 682 (2014).
- Only federal American law will be considered here.
- See the literature set out in n 3 above.
- Bellotti (n 13 above), 779.
- 201 US 43 (1906).
- This judgment was confirmed in United States v White 322 US 694 and Curcio v US 354 US 118, 122 (1957).
- Hale (n 27 above), 70.
- n 28 above, 698. This understanding of the origin of this right is shared by legal historians R. H. Helmholz et al. The Privilege Against Self-Incrimination: Its Origins and Development (University of Chicago Press, 1997) and J. Langbein ‘The Historical Origins of the Privilege against Self-incrimination at Common Law’ 92 Michigan Law Rev. 1047 (1994).
- 198 US 45 (1905). The ‘infamous’ description, reflecting a stance which is very widely shared today, is to be found in J Nowak and R Rotunda, Constitutional Law 8th ed (St Paul, West Law, 2010), 472.
- This clause reads “… nor shall any State deprive any person of life, liberty, or property, without due process of law …”. According to Winkler (n 3 above), pp xv and 157-8, this clause, which was intended to give equal rights to African Americans in the wake of the Civil War, was the basis on which the Supreme Court conferred very broad rights on undertakings during this period – but very few on African Americans. But let us not forgot that the European powers frequently acted in equally reprehensible ways at the time.
- Nowak and Rotunda (n 31above), 476.
- “Lochner‘s Legacy” 87 Columbia Law Rev 873 (1987).
- Citizens United v Federal Election Commission 558 US 310 (2010)
- New York Times (n 15 above).
- 418 US 241 (1974).
- At 256.
- Attributed by M Tushnet in An Advanced Introduction to Freedom of Speech (Edward Elgar, Cheltenham, 2018), 116-117) to A.J. Liebling. In the same spirit, in 1987 the Federal Communication abolished the Fairness Doctrine, which required radio and television channels to present controversial issues of public importance and to do so in a manner that fairly reflected differing viewpoints. This step, which opened the door to widespread “fake news”, has had catastrophic effects in the US and (thanks to the Internet), around the world.
- Buckley v Valeo 424 US 1 (1976)
- Bellotti (n 13 above).
- Section 203 of the Bipartisan Campaign Reform Act 2002.
- n 23 above.
- See section II above.
- 564 U.S. 552, 579 (2011)
- L Greenhouse ‘Over the Cliff’ New York Times 24 August 2011.https://opinionator.blogs.nytimes.com/2011/08/24/over-the-cliff/?ref=opinion&nl=opinion&emc=tya1.
- 564 US 873 (2011).
- At 887
- See B. Remmert, commentary on Article 19(3) in Dürig et al Grundgesetz Kommentar (Beck Online, 2021), paras 2 – 14.
- Article 19(3) has served as a model for more recent constitutional provisions, including Article 12(2) of the Portuguese Constitution (1976) and Article 8(4) of the South African Constitution (1996).
- See the judgments of the German Constitutional Court (Bundersverfassungsgericht) in BVerfG 95, 220 (1997), 242, BVerfG 118, 168 (2007), 203. (Many of the judgments of this Court are available in English, as are its press releases.) See Remmert’s commentary (n 50 above).
- n 27 above.
- BVerfGE 95, 220, paras 83-84 (1997).
- BVerfGE 20, 162 (1966), 171 (the written press) and BVerfGE 95, 220 (1997) at 234 (radio)
- BVerfGE 100, 313 (1999) at 356 and BVerfGE 106, 28 (2002) at 43
- BVerfGE 21, 261 (1967) at 266 and BVerfGE 118, 168 (2007) at 202 and 205.
- BVerfGE 4, 7 (1954) at 17
- ‘Die Bundesrepublik Deutschland ist ein … sozialer Bundesstaat.’
- M. Ruffert ‘Public law and the economy: A comparative view from the German perspective’11 I-CON 925 (2013); and see generally Christian Joerges and Florian Rödl, “The ‘Social Market Economy’ as Europe’s Social Model?”,EUI Working Paper LAW No.2004/8 (2004) https://cadmus.eui.eu/bitstream/handle/1814/2823/law04-8.pdf
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