US Supreme Court decision in
Lobby has received a lot of attention in blawgs (see eg here
and here). Based on
the Religious Freedom Restoration Act (RFRA), it allowed ‘closely
held for-profit corporations to be exempt from a law its owners religiously
object to’, namely ‘a regulation adopted by the US Department of Health
and Human Services (HHS) requiring employers to cover certain
contraceptives for their female employees’ (as summarised here). US
This blog post aims to go through some of its core statements focussing on the corporate aspects of the decision, with some rough comparative reflections from a European (mainly German) perspective. So:
pp. 18, 20: ‘[Congress] included corporations within RFRA’s definition of “persons…. The term “person” sometimes encompasses artificial persons (as the Dictionary Act instructs), and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations’.
In general, most other legal systems would agree that the term ‘person’ would usually refer to both natural and legal persons. However, it may also depend on the specific law in question. In
a common phrase is that of
the ‘Relativität der Rechtsbegriffe’ meaning that legal terms (‘Rechtsbegriffe’)
are ‘relative’, ie they may have completely different meanings in different
areas of law. Thus, it would not be impossible that a particular law excludes
for-profit corporations. Also note that the German constitution specifically
states in Art
19(3) that humans rights also ‘also apply to domestic artificial persons [ie
legal persons] to the extent that the nature of such rights permits’; thus,
here too it depends. Germany
pp. 22-23: ‘Some lower court judges have suggested that RFRA does not protect for-profit corporations because the purpose of such corporations is simply to make money. This argument flies in the face of modern corporate law. “Each American jurisdiction today either expressly or by implication authorizes corporations to be formed under its general corporation act for any lawful purpose or business”… So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires.’
That’s also the case in
Europe: the articles of
association can specify any legal purpose of the company. Even more so, there
is the well known discussion (eg see Ch 5 II of my Convergence
book) to what extent stakeholder and other non-economic interests can, or
even need to be, considered, in particular, as far as public companies are concerned.
This leads to:
pp. 29-31: ‘… HHS has not pointed to any example of a publicly traded corporation asserting RFRA rights, and numerous practical restraints would likely prevent that from occurring. For example, the idea that unrelated shareholders—including institutional investors with their own set of stakeholders—would agree to run a corporation under the same religious beliefs seems improbable. .. The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs…. The owners of closely held corporations may—and sometimes do— disagree about the conduct of business. ... State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure….’
These statements, making a distinction between public and closed companies, are somehow puzzling. Following-up from the previous comment, it may be said that non-economic considerations are even more relevant for public than for closed companies because the greater economic power of the former companies has to go hand in hand with a greater sense of responsibility for non-economic considerations (at least that’s the European perspective). Since the final sentence of the quote refers to means of how corporate law can solve conflicts, it also seems to me that this could, in principle, equally work for public companies.
But some parts of Hobby Lobby also very much focus on the shareholders of the close corporation. The quoted paragraph refers to their interests as the ‘owners’ of the corporation. Thus, what we really have here may be (as
scholars discussed) a ‘reverse
veil piercing’. Veil piercing also exists in other countries (see eg ch 6 in Siems
& Cabrelli), but it is really the rare exception in all countries (as
far as I’m aware); thus why allow ‘reverse veil piercing’ here? In this respect,
it is interesting to quote an earlier statement of the decision: US
p. 18: A corporation is simply a form of organization used by human beings to achieve desired ends. An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people.’
Here, from a comparative perspective, the problem is that no country (as far as I’m aware) just defines a company as ‘human beings achieving desired ends’. Such a definition would be too wide as it would also embrace many other organisations (associations, clubs, partnerships etc). Rather, in Europe, it’s usually debated whether the company is an institution, fiction or real person (cf my Convergence book p. 47) in order to explain why companies are distinct ‘persons’.
A possible way to support the argumentation in Hobby Lobby may be that, in order to protect shareholders, the German Constitutional Court (BVerfG) has referred to the constitutional protection of private property in a number of occasions; eg, as a way of assessing the introduction of co-determination, ie its inherent reduction of shareholder participation rights. Or to put it more generally, this ‘German’ reasoning says that the protection of shareholders is not only a matter of company law but that there are also individual constitutional rights that shareholders may have.