Piercing the (Sovereign) Veil

37 Pages Posted: 1 Apr 2021

See all articles by Mark C. Weidemaier

Mark C. Weidemaier

University of North Carolina School of Law

Date Written: March 9, 2021


Sovereign nations own more than ten percent of the world’s largest firms and often use these ownership stakes to pursue economic, social, and political objectives unrelated to profit maximization. Sovereign nations also have attributes that other owners lack. Sovereigns do not need an owner's control rights to direct entity behavior; they have the power to regulate. Sovereigns do not need an owner’s economic rights to extract value; they have the power to tax. And sovereigns do not need to hide behind the principle of limited liability; they have sovereign immunity in both domestic and foreign courts.

Despite these differences, when deciding whether to respect the separate legal status of state-owned entities, the law generally treats foreign sovereigns just like other owners. This Article highlights flaws in that approach. These flaws derive from the fact that the principle of limited liability does different work for sovereign states than for ordinary shareholders. Because of sovereign immunity, states do not need organizational law (as much) to partition sovereign assets from those belonging to the entity. State owned entities, by contrast, do rely on organizational law for asset protection. Put differently, in the sovereign context, organizational law mostly protects entities, not owners. Indeed, an argument can be made that courts should be more receptive to traditional veil piercing claims when raised against foreign states.

Keywords: sovereign immunity, veil piercing, alter ego, FSIA, foreign sovereign immunities act

Suggested Citation

Weidemaier, Mark C., Piercing the (Sovereign) Veil (March 9, 2021). Brigham Young University Law Review, Forthcoming, UNC Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=3801204

Mark C. Weidemaier (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919.843.4373 (Phone)

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