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Nationalism and the Multinational Enterprise: Legal, Economic ana
Managerial Aspects. Ed. by H.R. Hahlo, J. Graham Smith and Richard W.
Wright, Dobbs Ferry, N.Y.: A.W. Sijhoff Leiden, Oceana Publidations Inc.,
1973. Pp. X, 373 ($21.00).
Edited by the three principal originators of -an international
conference on the multinational enterprise, the- papers in this
volume are those given, and later revised, by one of the most
distinguished collection of scholars assembled in recent years to
study this important institution. The conference, held in August
of 1971 under the joint auspices of the Institute of Comparative
Law, the Faculty of Management and the Department of Economics
of McGill University, was attended by experts in a variety of dis-
ciplines, and the publication of this book is a happy event for
all those interested in the effect of multinationals on international
economic behavior.
The volume consists of 5 parts, each divided into several chap-
ters; a summing up done with a light hand by Dean Howard Ross
of McGill’s Faculty of Management; a series of appendices prepared
by Professor Clive Schmitthoff as part of his article describing,
among other things, the pattern of organization of seven or eight
major multinationals; and finally, what is most rare in a book
based on papers delivered at a conference, an adequate index.
Part I, entitled “The Multinational Enterprise in its National
Setting”, deals with the United States, Great Britain, Canada, Ger-
many, France, Belgium and the EEC, and Africa. Each of the 6
chapters in this part is more than a description of the national
framework within which the world’s major multinationals operate
from their home base or with their “associates” abroad. It is in
almost every case a quite detailed analysis of the dilemmas and
the debates in each country about the problems of controlling this
new institutional giant that crosses frontiers in its daily work,
sometimes against the combined wills of its jural creators, the
nation states themselves. Indeed many of the countries from
which these multinationals originate, such as the United States,
Britain, France and West Germany, are not always happy with
the degree of control they are able to exercise over the offspring
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of -their own company laws and the economic strength of the
progeny.
The simplistic view that the multinationals are necessarily agents
of economic imperialism, acting only for the states that play host
to the head office, is increasingly untenable under close examina-
tion. Part II of the book, with three chapters .on the “Costs and
Benefits of The Multinational Enterprise”, demonstrates the com-
plexity of any balance sheet of the pluses and minuses of this
new transnational reorganization of business behaviour. Their so-
phisticated defence by Professor Harry Johnson does not meet all
of the arguments put forward by Canadian critics such as Eric
Kierans and Abraham -Rotstein –
although both stand on some-
what different grounds in their critique of what Kierans calls the
“cosmocorporation”, and what Rotstein in his essay labels “A
Matter of National Survival” as part of the title of the paper itself.
Parts III, IV and V, are further demonstrations of both the
scope of the conference and the inherent difficulties in the issues.
Part III is entitled “Management of the Multinational Enterprise”,
and considers governmental control by both the home state and
the receiving or host state. From its three chapters it is quite
evident that while substantial regulation is possible, indeed up to
the point of confiscation, rational regulation that. balances the
varied interests involved and leads to an economic and adminis-
tratively constructive result is not easy to achieve.
These conflicts are expressed by the very subject matter of
Part IV, entitled “Litigation, Arbitration, Securities, Industrial Re-
lations and the -Multinational Enterprise”. Its four chapters show
the inevitable results of attempting to reconcile national laws rarely
in harmony and often in conflict with economic policies equally
in opposition to each other. It is quite clear from the chapters on
Litigation and Arbitration that it is impossible to keep the multi-
national- enterprise from being the subject of substantial domestic
litigation and increasing international arbitration or other dispute
settlement procedures. Similarly, the intricate rules of many states
in regulating industrial relations and the sale of securities provide
new sources- of irritation and difficulties for management when
the- multinational must accommodate its behaviour to meet local
legislation. Professors Keith Wedderburn and Louis Loss contribute
characteristically thought-provoking and lucid articles on these two
problems,
In Part V three chapters deal with “Anti-Monopoly Legislation
and the Multinational Enterprise” from the vantage point of the
United States, Europe and Canada. Of particular interest here is
McGILL LAW JOURNAL
[Vol. 20
the extensive and irritating tendency of the United States to apply
its domestic law to foreign subsidiaries owned by U.S. multina-
tionals or closely associated with them. The Canadian view tends
to be part of its general concern with direct or indirect U.S. inter-
vention into the Canadian economy on the one hand and its quite
positive approach toward seeking through OECD and elsewhere
some better international answers to this global vacuum in the
matter of a universal anti-trust policy. Europe, until recently, has
been far less familiar with restrictive trade practice legislation.
It has now to work out its own new competition policy within
the Common Market rules at the same time as it resists the ten-
dency of the United States to give extraterritorial application to
its anti-trust (and other) laws.
In his summing up Dean Ross states that “[a]ll through this
subject runs the recurring theme of the conflict between economic
and political considerations”. He confesses to being unable either
to understand very clearly, or to be guided wholly, by any of the
three main classes of participants at the conference:
lawyers,
economists and managers. This shrug at the experts cannot satisfy
governments that must deal with multinationals. They are an im-
mensely important force and have led to a new structure in inter-
national economic behaviour that is transforming patterns of trade,
investment, production and money flows. When these activities are
performed by “the private sector”, they may generally be limited
by whatever rules the local nation state may impose; but it is
different where a substantial portion of mankind’s economic ac-
tivity is now dominated for better or worse by organizations lying
outside the main stream of public control and accountability. It
is no accident that various organs of the United Nations, such as
the OECD, the ILO and the GATT, are presently examining the
significance, benefits and dangers of this new threat to accounta-
bility. For neither local law nor loose-knit interstate cooperation
can effectively control multinationals which regulate their own
transfer prices, investment plans, research and development, cross-
ing or ignoring boundaries in the pursuit of growth and profit.
However, multinationals in theory do have sound classical eco-
nomic objectives. Their aims are to make decisions which allocate,
within a global setting, the world’s skills and resources so as to
maximize productivity and profitability. On paper there is nothing
wrong with this, since it presumably achieves global efficiency
in the use of resources with a corresponding net gain to mankind
as a whole. But the real difficulties arise when it is realized that
a multinational’s views may not coincide with those of a state
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within which it is located concerning matters such as priorities
and equity, or even of a group of nation-states which have banded
together to improve their general economic performance.
Some of these questions were forseen at Havana in 1948, but
the failure to adopt the Havana Charter left a gap in the inter-
national regulation of enterprise that has never been filled –
either
by GATT or by any of the other regional or universal agencies.
Moreover, all perspectives are distorted today by the energy and
monetary crises, with their impacts upon normal trading patterns.
In the short run the multinational enterprise seemed a threat to
sovereign states and their search for “decentralized” (and cooper-
ative) patterns of survival and development. Within recent months
these crises have demonstrated that the multinationals may be
as vulnerable to the new disorder as states themselves. Indeed, as
Professor Vagts points out in Chapter I –
a paper written long
before the present upheavals –
the multinational depends “on
the maintenance of a reasonably open economic world”. He warns
that just as U.S. overseas trading shrank drastically in the economic
crisis of the 1930’s, the multinational enterprise today could also
“shrivel up in a hostile world”.
Mankind has greater troubles –
economic, monetary, environ-
mental and nuclear –
than the health or temporary sickness of
the multinational corporation. And while a high priority is still
to be given to rationalizing its international accountability, an even
higher priority may now have to be given to maintaining a rational,
global economic framework. Most states, in due course, may be
happy to have the multinational again function with success be-
cause that “success”, however better controlled, would now indi-
cate the return to a more orderly international economic system.
Maxwell Cohen *
* Macdonald Professor of Law, McGill University.
McGILL LAW JOURNAL
[Vol. 20
The Law of Agency (3d Edition). By G.H.L. Fridman, London: Butter-
worths, 1971. Pp. ivii, 334 (Hardcover $15.40; Paperback $8.75).
Dean Fridman’s 1 latest edition of his book on agency is worthy
of comment from a Canadian perspective. Although it is not a
Canadian edition, its pages contain several references to Canadian
material and thus it is of greater interest to lawyers in this country
than other works on this subject.
This edition is identical in format to the second edition. The book
is divided into six major parts, each following a relatively traditional
approach. The agency relationship is dealt with under the following
classifications: nature, creation, scope, obligations, effects iand
termination. One may ask whether it is desirable to deal with the
creation and scope of agency separately. As a result of this division
similar material is treated in separate parts of the book. One
example of this is found in Chapters Eight and Twelve, where agency
of necessity is discussed under both the heads of creation and scope.
It seems that nothing would have been sacrificed by combining these
two aspects of agency: one necessarily involves a discussion of the
other. Conceptually, little appears to have been gained from a
student’s point of view by divorcing the two.
The major Canadian cases on agency have been cited by Dean
Fridman and are, to some extent, discussed in the work. Most of the
discussion of this material is relegated to the footnotes. This, how-
ever, does not diminish its effectiveness in any way. One must re-
member that it is still primarily an English textbook. McLaughlin v.
Gentles 2 is cited as Canada’s answer to Watteau v. Fenwick;3 the
recent Supreme Court of Canada decision in Crampsey v. Deveney 4
and the Ontario Court of Appeal decision in Campbellville Gravel
Supply, Ltd. v. Cook Paving Company, Ltd.5 are other examples of
important Canadian content.
One might have wished to see a more critical discussion of this
latter case, which followed the rule in Greer v. Downs Supply Co.:’
where an agent makes a contract with a third person in which the
identity of the agent is a material element in its formation, a
”personal contract” is formed on which the agent’s undisclosed
principal may not be allowed to sue. In the Greer case, the English
‘Dean of the Faculty of Law, University of Alberta.
2 [1919] O.R. 477; 51 D.L.R. 383; 17 O.W.N. 245 (App. Div.).
3 [1893] 1 Q.B. 346; 67 L.T. 831; 9 T.L.R. 133.
4 (1969), 2 D.L.R. (3d) 161 (S.C.C.).
r (1968), 70 D.L.R. (2d) 354 (Ont. CA.).
0 [1927] 2 K.B. 28; 96 LJ.K.B. 534; 137 L.T. 174 (C.A.).
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Court of Appeal found that the third party had dealt with an agent
only because a debt was owed to him by the latter. The Court held
that not only was the principal subject to any defenses the third
party had against the agent (e.g., a set-off), but also was in the
unfortunate position of having no contract whatever with the third
party. He could not recover from the third party amounts owed
under the contract, over and above the amount of the set-off.
On its facts, the Campbellville case would have led to a similar
result had the Court found the principal subject only to the set-off,
since it exceeded the value of the main contract. But in addition,
Laskin,J.A. (as he then was), citing Greer as authority, found a
personal contract to exist between the agent and the third party. As
a result, even if the amount of the set-off would have been less than
the main contract pice, the principal could not have sued the third
party for the balance, notwithstanding the fact that the latter would
have benefited under the contract. Although one cannot expect a
detailed analysis of a Canadian case in a non-Canadian text-book,
in view of the importance of this decision, a greater emphasis
might have been placed on problems created by it.
In examining the ratification of pre-incorporation contracts, it
is suggested that Dean Fridman has misinterpreted an important
Canadian case. The basic determination to be made in these cases
is who, if anyone, is to be liable to a third party on a contract made
prior to the incorporation of the company. After discussing the basic
rule of Kelner v. Baxter,7 in which a company was not held liable
on a contract made on its behalf before its incorporation, and the
variations of the rule as made by different courts,8 Dean Fridman
oites the Saskatchewan Court of Appeal case of Dairy Supplies, Ltd.
v. Fuchs9 for the proposition “that the company could be liable for
the price [of the goods supplied] when it was incorporated”.”
Although this statement is somewhat ambiguous in itself, a footnote
in another part of the book seems to indicate that Dean Fridman is
interpreting this case as departing from the established rule in
Kelner v. Baxter. He states that “[o]n incorporation of the company,
it was the company, and not the agent, which was liable”.”i
It is certainly true that the Saskatchewan Court of Appeal did
not hold the agent liable, but, without more, the company certainly
7 (1866), L.R. 2 C.P. 174; 36 LJ.C.P. 94.
8 Black v. Smallwood, [1966] A.L.R. 744 (Aust. H.C.); Newborne v. Sensolid
(Great Britain) Ltd., [1953] 1 All E.R. 708; [1954] 1 Q.B. 45.
9 (1959), 18 D.L.R. (2d) 408; 28 W.W.R. 1.
10 Fridman, The Law of Agency (1971), 46.
3″ Ibid., 173, f.n.25.
McGILL LAW JOURNAL
[Vol 20
could not be liable either. To be so, the company would have had to
have entered into a new contract with the third party. As Martin,
C.J.S. stated:
If the defendant is not liable by reason of the promise of the plaintiff’s
manager, the plaintiff is left in the unfortunate position of having to
resort to the company after incorporation, but cannot resort to it without
entering into a new agreement with it.12
If the result were otherwise, as Dean Fridman seems to suggest,
would not the problem of ratification of a company not yet in
existence be substantially solved or at least substantially altered?
Would not Kelner v. Baxter be of much less importance in Canada
than it is? 3
In a review of the second edition of this book, Professor Treitel
made valuable comments regarding the use of certain terms to
describe types of authority.1 4 This is a very difficult matter since
the courts have been noticeably inconsistent in their use of “implied
authority”. Text-book writers also ascribe different meanings to
different agency terms. The problems raised by Professor Treitel
of the confusing use of implied and usual authority can, it seems, be
echoed with regard to the third edition as well. Usual authority is
said to be a variety of implied authority which is in turn a variety
of real or actual authority.15 If the principal places a limitation on
the agent’s authority one can no longer speak of the actual authority
of an agent with respect to an act done in contravention of the
express reservation. If a principal is held liable in such a situation
it would necessarily have to be on the ground of some other type of
authority. It might be either apparent or “usual” authority, but the
latter is unrelated to actual authority. However, after recognizing
this, Dean Fridman goes on to state that “the usual authority of the
agent continues to operate, despite the secret limitation”.?, It seems
that a secret reservation of the authority relevant to the act in
question should deprive the agent of authority, at least of actual
authority as this term is used by Dean Fridman, of which implied
and usual authority is a variety. This is merely one example of some
of the problems the reader has with the terminology used. Professor
12 (1959), 18 D.L.R. (2d.) 408, 414.
13 The problem with pre-incorporation contracts has been substantially
solved by statute in some jurisdictions. See The Business Corporations Act,
R.S.O. 1970, c.53, s.20, and Bill C-213 (Can.), An Act Respecting Canadian Busi-
ness Corporations, s.14.
14 (1968) 26 Camb. LJ. 156.
15 Fridman, The Law of Agency (1971), 91.
10 Ibid., 101.
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Treitel has previously pointed out other problems, most of which,
it is suggested, still exist in this edition.
As a student text for use in Canadian law schools, Fridman’s
Law of Agency is a good book. As anticipated by Dean Fridman in
his preface to the book, the inclusion of Canadian material has made
it “more relevant and useful for Canadian students and lawyers”. 7
On the whole, the book presents well this complicated subject and
contains many refreshing and perceptive views. Perhaps one can
soon look forward to a truly Canadian edition of this valuable work.
Daniel Ish *
The Sovereignty of the Law: Selections from Blackstone’s Commentaries
on the Laws of England. Edited with an Introduction by Gareth Jones, Toronto:
University of Toronto Press, 1973. Pp. IV, 254 ($15.00).
The reputation of Blackstone and his Commentaries did not
sensibly decline until the mid-nineteenth century, despite Bentham’s
radical strictures in the Fragment on Government (1776). His
analysis of the English constitution, with its presumed system
of checks and balances, was no doubt relevant even during his
lifetime, and recent historical opinior has dismissed him rather
severely as a member of “a prolific school of constitutional mytho-
logists”. His survey of the structure and functioning of English
legal institutions withstood the test of time more effectively, and
was still drawing warm eulogies from such good judges as Bryce
and Maitland in the early years of the twentieth century. The
present extracts, taken chiefly from the famous introduction and
first book of the Commentaries in the eighth edition of 1778 (the
last published in Blackstone’s lifetime), are not merely a work
of piety. In conjunction with the valuable Introduction by the
editor, the selections provide a solid base for some fascinating
excursions into the legal and constitutional thought of the eight-
eenth century.
The Commentaries have been variously judged as a polished
resum6 of English law designed to attract “gentlemen of rank
and station” into the profession or, less charitably, as a conscious
and skilful defence of the existing legal-political order. The two
17 Ibid., vii.
* Of the Bar of the Province of Alberta, and of the Faculty of Law, McGill
University.
McGILL LAW JOURNAL
[Vol. 20
verdicts are not mutually exclusive. Blackstone was indeed trou-
bled by the decline of the Inns of Court, from which “obscure and
illiterate persons” emerged as mere legal technicians with no in-
terest in the historical evolution of the common law. Thus one
of the strongest sanctions of law and of institutions in general,
their immense antiquity, was in danger of submergence. Black-
stone, who stood close politically to the squirearchy or “country
interest”, placed his Commentaries in a historical dimension and
attempted to combat, by a studied elegance and warmth of pres-
entation, the belief of the gentry that the study of law was an
arid and irrelevant pursuit. The immediate political circumstances
which prompted Blackstone to publish the first volume of his
work are more obscure. Possibly the rising popular enthusiasm for
John Wilkes, whom he opposed in the Commons, convinced him
of the need for a sober and conservative survey of legal and
political institutions.
The Commentaries were an instantaneous success. In vain Bent-
ham, and subsequently Austin, exposed the cumbrous and archaic
legal procedures which Blackstone had justified in the light of
history. When the forces of radicalism and reform gained impetus
from the American and French revolutions, Blackstone’s dogma of
the unmatched excellence of English institutions provided an intel-
lectual base for the defenders of the status quo. But he was not an
equally entrenched opponent of law reform. The humanitarian
influence of Beccaria, the increasing number of crimes regarded
as capital felonies, and the consequent reluctance of juries to convict
combined to persuade him that the criminal law was in pressing
need of amendment. To this end he proposed the appointment of a
commission charged with the task of revising the entire criminal
code. His suggestion was implemented half a century after his death,
when the Criminal Law Commission began its labours (1833).
The editorial Introduction is scholarly and judicious, and consist-
ently seeks the via media between Blackstone’s admirers and de-
tractors. The adoption of the text of the 1778 edition of the Com-
mentaries is wholly justified, since it was the last to be revised by
the author’s own hand. But a comparison with the parallel text of
the first edition of 1765 would have afforded valuable insights into
the development of Blackstone’s constitutional and legal views during
the critical period extending from 1765 to 1778.
C. C. Bayley*
*B.A., M.A. (Mancester), Ph.D. (Chicago), Professor of History, McGill
University.
