Saturday November 3, 2012, 6:59 am
Forbes

Michael Bobelian

I write about the intersection between the law and the business world
Business
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10/02/2012 @ 11:45AM |1,240 views
What Exactly Is A U.S. Corporation?
A Shell station displays 3.31 USD per gallon i...

A Shell station in the Florida Keys (Image credit: AFP/Getty Images via @daylife)

Shell’s history in America dates back to the Taft administration, when it began to sell gasoline on the West Coast and purchased oil properties in Oklahoma.

A century later, its American operations remain vast and critical to Shell’s success. Twenty percent of its revenues – about $92 billion – were earned in this country last year. This should not come as a surprise. Americans have an unquenchable thirst for gasoline and Shell is among our largest suppliers.

The United States also serves as a major source of the company’s oil and gas supplies. Shell’s facilities stretching from California to the Gulf of Mexico produce hundreds of millions of barrels of oil and a bountiful of natural gas. Over the past three years, it spent more money on capital projects in the United States than any other region in the world. Through more than a thousand subsidiaries and gas stations, it operates in all 50 states and employs more than 22,000 people, making up nearly a quarter of its global workforce.

Shell is also registered with the New York Stock Exchange.

The oil giant also prides itself as a global company. From its headquarters in the Netherlands, it oversees operations in more than 80 nations. Currently, about 90,000 people work for Shell through a system of thousands of interlinked business units and subsidiaries.

Oil or gas harvested in one part of the world is refined and sold elsewhere through Shell’s integrated network of 30 refineries, 1,500 storage tanks, 150 distribution facilities, and 43,000 service stations.

In fact, in its 2011 annual report, the energy conglomerate acknowledged that any reference to “Shell” in the financial report was “sometimes used for convenience where references are made to the Company and its subsidiaries…” It defined “Subsidiaries” as any companies over which Shell controlled “directly or indirectly.” Finally, it noted that its “Financial Statements” consolidated financial results for Shell and all of its subsidiaries.

In other words, Shell operates (and presents) its subsidiaries and various business segments as part of a complex global operation. That’s the way it should be. It would be inefficient, illogical, and inaccurate to do so otherwise.

Yet when it comes to the law, Shell hides behind the legal fiction that an entity in another part of the world is somehow not related to its ventures in the United States when both are firmly integrated into a global network of operations.

It is this very notion of corporate liability that lies at the center of the lawsuit filed against Shell for alleged human rights violations.

Yesterday, the Supreme Court heard oral arguments for the second time in Kiobel v. Royal Dutch Petroleum.

In the first round of arguments back in February, the justices considered whether corporations are liable for human rights violations under the Alien Tort Statute (ATS).

Passed in 1789, the ATS allows non-citizens to bring civil actions in federal courts for violations of international law. When the dormant statute was resurrected in the 1980s, it became an important tool for human rights victims to target officials of foreign governments as well as companies operating abroad.

This second time around, the justices reviewed whether the law should apply extraterritorially – that is, should it cover actions committed abroad?

The plaintiffs in the case accuse two Shell holding companies incorporated in the Netherlands and the United Kingdom of aiding and abetting the Nigerian government in a series of alleged human rights violations in the Ogoni region of Nigeria.

Shell responded that the case has, as its lawyer Kathleen M. Sullivan told the justices yesterday, “nothing to do with the United States. It’s Nigerian plaintiffs suing an English and Dutch company…”

Represented by Solicitor General Donald Verrilli Jr., the American government offered a narrower interpretation of the law, yet largely seconded Sullivan’s sentiments by telling the Court that “there just isn’t any meaningful connection to the United States.”

Justice Samuel Alito latched on to this argument as well, asking why the case belongs in an American courtroom “when it has nothing to do with the United States other than the fact that a subsidiary of the defendant has a big operation here.”

Jurisdiction and the reach of an unusual statute like the ATS are among the most complicated areas of the law. Yet, at a basic level, this argument doesn’t pass a simple fairness test. Shell is a fully integrated global entity that funnels oil, gas, and capital among its many subsidiaries and business divisions as it sees fit to maximize its profits. It is both rational and beneficial for its customers, suppliers, employees, regulators, and shareholders to allow Shell to operate as a cohesive global entity.

Yet, when it comes to its legal obligations, Shell wants to splinter into small pieces, shielding one unit from the actions of another – even in regions like Nigeria and the United States where it holds significant business interests.

Shell has been operating in the Ogoni region since 1958. Its Nigerian oil and gas holdings are among its largest, and it exports an immense portion of that oil to the United States.

Just as importantly, its American operations are among its largest and most significant.

Shell is a global company with many small parts. But if 22,000 American workers and $92 billion in domestic revenues don’t make Shell – and all of its various parts – an American company subject to the reach of American courts, than what exactly is a U.S. corporation?

Saturday November 3, 2012, 8:50 am
BOYCOTT!!!

Saturday November 3, 2012, 8:57 am
That is one option Sue,You cannot currently send a star to Sue because you have done so within the last week.

Sunday November 4, 2012, 9:15 am
ty

Sunday November 4, 2012, 9:59 am
Never a dull moment.

Sunday November 4, 2012, 10:41 am
Alito is one of the corrupt Supreme Court Justices in a LONG line, who have promoted corporate and financial interests over any Constitutional justice at all.

A further problem related to this one of corporate safety from justice is US safety from international justice.
Whether Amnesty International or the World Court or the United Nations (remember that Pres Wilson founded the idea of such an entity - the League of Nations, and the US was integral to the UN's founding),
The United States itself has consistently sought to escape international justice for its crimes against North American Indigenous Nations, and others across the world.
Many of these crimes are specific enough to have clear individual defendants, such as George W. Bush and Dick Cheney.

Consider that the very Supreme Court Justices who were responsible for the Citizens United decision clearly aided and abetted National corruption which is attempting to control this very election two days hence.

Sunday November 4, 2012, 12:39 pm
You are welcome ay.
You cannot currently send a star to Theodore because you have done so within the last week.

Sunday November 4, 2012, 3:07 pm
the US is simply moribund

Sunday November 4, 2012, 3:21 pm
You cannot currently send a star to David because you have done so within the last week.

Sunday November 4, 2012, 5:26 pm
Thanks for the share!

Sunday November 4, 2012, 5:31 pm
You are welcome Talya!

Sunday November 4, 2012, 7:40 pm
Noted, thanks.

Sunday November 4, 2012, 7:41 pm
You are welcome Kerrie.

Monday November 5, 2012, 2:10 pm
Noted. Thanks, J.L. And if Corps. don't like a specific law, they spend millions lobbying our members of Congress to change or eliminate it. Often, something that will benefit them is secretly tucked away as an amendment to another bill that's popular with the ability to pass Congress. Sneaky!

Monday November 5, 2012, 5:07 pm
All too true Lois. You cannot currently send a star to Lois because you have done so within the last week.