U.S. corporate subsidiaries of Japanese parent companies enjoy the same advantages of incorporation (e.g., liability limited to the amount of investment) and the same legal protections extended to domestically-held U.S. corporations (e.g., access to courts and various legal remedies). Thus, it would be a natural and logical assumption that U.S. subsidiaries of Japanese parent companies are required to comply with U.S. law in the same manner as domestically-held corporations. However, some U.S. subsidiaries, by asserting that they are, in reality, inseparable from their Japanese parent companies, have been allowed to avail themselves of exceptions to U.S. law under the U.S.-Japan Friendship, Commerce and Navigation Treaty ("FCN Treaty"). Thus, the paradox arises where Japanese subsidiaries are not required to comply with provisions of the U.S. legal system, but enjoy the same advantages of incorporation and legal protection as domestically-held U.S. corporations. A notable example of such use (or misuse) of the FCN Treaty is the avoidance of liability for discriminatory practices in employment, in particular, wrongful discharge. However, as this Article explains, such use of the FCN Treaty is not without consequence, as the invocation of Treaty rights by a U.S. subsidiary poses the potential danger of disregard of the corporate entity and thus unlimited liability to the Japanese parent company.
Eric K. Kawabata,
Potential Disregard of the Corporate Entity & U.S. Subsidiary Invocation of Japanese Parent's Treaty Rights,
8 Pac. Rim L & Pol'y J.
Available at: https://digitalcommons.law.uw.edu/wilj/vol8/iss2/10