An Legal Study On Regulating Multinational Corporations' Control Power

In order to achieve the integration of their strategic interests , multinational corporations are upgrading their struggle on corporation control in China . So it becomes important for China to regulate, in the form of legislation and its implementation, the application of the controUingpower by these multinational corporations to their subsidiaries in China the aim of which is to protect the interests of Chinese investors, creditors, and other correlating entities. Furthermore, the successful regulation of the corporation control could help reach the goal of China's foreign investment policies, which aims at utilizing foreign investment,not being utilized. By applying the method of comparative studies, this author examines the legal basis of regulating the controlling power of multinational corporations both in international and national planes and concludes that such powers can be feasibly regulated by the laws of host countries under the current framework of international law. The main point is that responsibilities related to the exercise of such an power should be set out in the laws of the host country. In practice, activities of share-holders a n d d i r e c t o r s a n d t h e i r r e s p o n s i b i l i t i e s n e e d t o b e stipulated in corporation' s Articles of Association. The author suggests that, procedurally, partners of a joint venture had better settle their disputes related to such an controlling power through arbitration because of the difficulties of acceptance and execution of international verdict. This paper will expound the above viewpoints in three chapters. Chapter One introduces the general ways in which multinational corporations apply the controlling powers to their subsidiaries. Section One is to define the controlling power of a multinational corporation and to confine the scope of the paper. Section Two introduces three methods of control: control by shares, control by organization, and control by knowledge, and thus shows the possibility of regulating foreign investors' controlling powers and makes a basise for the following discussion onregulating the control powers by delimiting investors and director's activities in domestic laws. Chapter Two discusses a host country's regulation of thecontrolling power of multinational corporations. Firstly, the paper analyses the effects of the application by a multinationalcorporation of the IVcontrolling powers on its subsidiaries and the host country, thus proves the necessity of regulating such an power by the host country; secondly, the paper demonstrates, as the result of examining the legal status of a multinational corporation and current international legal documents, the difficulty in regulating multinational corporations by international laws thirdly it explains why it would be impossible to regulate multinational corporations' controlling powers based only on the percentage of shares from laws for the host country to regulate multinational corporations according to the legal basis of host country' s regulation , liberalization of international investment and competition relating to investment environment, which paves the way for regulation of nominated director's activities. The chapter also analyses how western countries and developing countries regulate control power of multinational corporations, which leads to the key point of controlling power regulation and also a preparation for the following question of how to regulate . According to the analysis of multinational corporations' controlling power in the above two chapter, Chapter Three focuses on the current situations where multinational corporations exercises their controlling power in our country, the defects of current regulating regime and the anticipation of a reasonable one. The paper suggests stipulating activities and responsibilities of investors and directors in an Articles ofAssociation and resolving disputes relating the controlling power by arbitration.