THE SCOPE OF APPLICATION OF THE CONCEPTS OF NATIONALITY AND PERSONAL LAW TO THE LEGAL ENTITY

This article examines the areas of application of the nationality and personal law of a legal entity, which plays an important role in the relations of a legal entity in a foreign state and with foreign legal entities, ie public and private international legal relations. In this case, tax, investment and diplomatic protection are discussed separately as the main areas of focus on the nationality of the legal entity. It has also been proved based on the legislation of foreign countries, judicial practice, bilateral and multilateral international agreements, scientific doctrine on the application of the nationality and personal law of a legal entity in various fields are that nationality and personal law of a legal entity are separate concepts. More precisely, it was concluded that the nationality of a legal entity should be applied in public legal relations, and personal law in private international legal relations.

THE SCOPE OF APPLICATION OF THE CONCEPTS OF NATIONALITY AND PERSONAL LAW TO THE LEGAL ENTITY

ARTICLE INFO Keywords: nationality, personal law, resident, tax, investment, diplomatic protection, scope of nationality, scope of personal law, code, dispute.

Abdurauf Abdukodirov, Lawyer, International Strategic Centre for Agro-food Development (I-SCAD) E-mail: mutread707@gmail.com ORCID: 0000-0002-6189-1287

ABSTRACT This article examines the areas of application of the nationality and personal law of a legal entity, which plays an important role in the relations of a legal entity in a foreign state and with foreign legal entities, ie public and private international legal relations. In this case, tax, investment and diplomatic protection are discussed separately as the main areas of focus on the nationality of the legal entity. It has also been proved based on the legislation of foreign countries, judicial practice, bilateral and multilateral international agreements, scientific doctrine on the application of the nationality and personal law of a legal entity in various fields are that nationality and personal law of a legal entity are separate concepts. More precisely, it was concluded that the nationality of a legal entity should be applied in public legal relations, and personal law in private international legal relations.

the term “nationality” is used conditionally

Of course, due to the lack of a single recognized opinion on the concept of nationality and its field of application, there are a number of reasons to confuse concepts nationality and personal law or to consider them as the same ones. Scholars dealing with this problem point out that in relation to legal entities. Therefore, the terms “legal relationship” and “belonging” are more neutral and realistic. However, M.Issad said that the term “nationality” is often used, it could be abandoned [9, P.355, 356]. Unlike the personal law of a legal entity, the concept of nation has a purely

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doctrinal character (from the point of view of national legislation) [4, P.90]. In particular According to L. P. Anufrieva, the concept of “nationality” applied to legal entities is used only for convenience, in the legal sense it is not appropriate to use in the classification of legal entities. The use of the term personal status would be legally correct [7, P.39-42]. According to V.P.Zvekov, “the personal law of a legal entity indicates that it belongs to the legal system of a particular state and, accordingly, that the individual is related to the state” [12, P.63]. However, both in the matter of personal law and in the matter of nationality, a legal entity is bound to be connected to the legal system of a state, and there is no need to dispute this. In essence, “nationality” is a concept used in public law (administrative law, investment law, tax law) and international law (the right of diplomatic protection). “the personal law of a legal entity is used to resolve private legal issues. First of all, here are talked about the classification of foreign organizations as subjects of law in private legal relations” [14, P.14]. L.P.Anufrieva noted that economic and political sanctions, transport and consular relations as clear examples of the use of

“nationality” [7, P.39-42]. Yu. Monastyrskaya considers that determining the nationality of a legal entity is important in defining the concept of “foreign investor”, and the classification of a legal entity as a foreign investor plays a role in allowing it to engage in investment activities in the host country [3, P.114]. In fact, determining the nationality of a legal entity in the field of investment will be necessary to address the issue of providing it with investment treatments. In this regard, M.A.Manukyan notes: “The concept of “nationality” of a legal entity in relation to the issuance, licensing, taxation and other issues of a particular economic activity can not be applied to the extent of international private law. Such matters are governed by national and international public law” [1, P.149]. However, the author does not give examples of cases in which the concept of “nationality”

can be used in private international law. However, there are those who believe that the term “nationality” is used in both private and public law. M. Issad cited that the types of “nationality” that representing a legal relationship for private law and political affiliation for public law [9, P.355, 356]. Dutch scholar Van Hecke accounte that the concept of “nationality” is used in the fields of administrative law, public law, conflict law (as a criterion for determining personal law) [8, P.12]. The term “belonging to the state” is promoted by some representatives of private international law may also be synonymous with the term “private law”. This is because a legal entity also belongs to a state in a conflict of law relationship [5, P.111]. The term “resident” is used in tax and currency legislation. The absence of a single definition of “nationality” is not expressed by its synonyms or by the contradiction between personal law. In practice, it is simply impossible to use the term “nationality” in different areas of public law and to define it based on the specifics of these areas. Indeed, the interests of the state in relation to legal entities vary in each area of public ​​ law. II. Research results and discussion Analyzing the views of scholars on the application of the concept of “nationality” to legal entities, it is appropriate to distinguish between the following public relations, in which the “nationality” of the legal entity is of great importance: tax, investment, diplomatic protection. Tax relations. In this area, the “nationality” influences to providing legal entities with the tax benefits, tax regimes based on legislation by distinguishing the legal entity as a resident or non-resident. In this case, the concept of resident is used as a synonym for “nationality”. According to R.T.Yusufova [15, P.88], the establishment of the status of a foreign organization for tax purposes using the construction “resident” is a special case of the emergence of the “nationality” as a link between the state and the legal entity.

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It is also a concept that “resident” represents a public legal relationship between a state and a legal entity arising from economic interests. At the same time, the state is interested in a broader subjective content of the resident. In particular, in accordance with Article 33 of the Tax Code of the Republic of Uzbekistan, the criteria for determining legal entities as tax residents of the Republic of Uzbekistan have been established, for instance:

1) Legal entities of the Republic of Uzbekistan; 2) Foreign legal entities recognized as tax residents of the Republic of Uzbekistan for the purposes of application of international agreements of the Republic of Uzbekistan on tax issues; 3) Foreign legal entities in which the actual place of management is the Republic of Uzbekistan (unless otherwise provided by the international agreement of the Republic of Uzbekistan on tax issues). Thus, it is clear from the content of the article that in order to consider legal entities as tax residents, in addition to the requirements of national legislation, it is necessary to take into account the requirements of bilateral international agreements on tax issues.

Analyzing the international agreements on the prevention of double taxation with the participation of the Republic of Uzbekistan, the number of such agreements today is more than 60. The term “resident of a Contracting State” used in these treaties establishes various criteria for being considered a resident of that State.

For example, in accordance with Article 4 of the Agreement between the Government of the Republic of Uzbekistan and the Government of the United Arab Emirates “For the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” signed on October 26, 2007 “... the term “Resident of the Contracting State” refers to any person who, under the laws of that State, is taxable on the basis of his or her place of residence, place of permanent residence, place of administration, place of registration or any other similar criteria”. Hence, any person who meets these criteria, including a legal entity, is recognized as a tax resident of the State party to the international agreement.

The problematic situation with related to new established International Consolidated Airlines Group SA airline company which founded based on merger British Airways (Great Britain) и Iberia (Spain) airline companies may be shown as an example for the conditional application and different interpretation of “nationality” as reason of the interests of the state. The problem was that the newly formed airline was registered as a tax resident in Spain, but the financial and management center was in the UK, with 55% of the shares owned by British Airways, 45% by Iberia and British Airways is trying to prove that its “nationality” is the UK in order for its shares to be included in the FTSE 100 list of major corporations. According to FTSE rules, companies registered outside the UK are not included in the list of “blue chips”. However, the FTSE committee decides to change the company’s “nationality” and despite of that the UK is in favor of the corporation criterion, accepts British Airways as its “resident” because of British Airways holds 55% share of the new airline company and its financial and managerial location in the UK [2, P.63].

Investment relations. After the Second World War, the role of investment in the development of economic relations between states increased. This in itself requires the development of a mechanism to protect investors and their investments in the host country. As a result, on March 18, 1965, the Washington Convention Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (hereinafter referred to as the Washington Convention) was adopted. However, a number of authors have noted that the Washington Convention does not define the concept of “investment” [11]. This allowed the International Center for the Settlement

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of Investment Disputes (hereinafter referred to as the International Center), established under the Washington Convention, to expand the composition of the subjects of investment relations in the consideration of disputes. In particular, it was confirmed by the International Center that shareholders who do not have sufficient shares to control the company can also be recognized as foreign investors.

It is confirmed in the case of the Republic of Argentina CMS Gas Transmission Company. According to the dispute, CMS Gas Transmission Company incorporated in the U.S. and owned a certain amount of shares in Argentina’s Transportadora de Gas del Norte through its Argentine subsidiary CMS Gas. However, as a result of the decisions taken by the Argentine government, CMS Gas Transmission suffered losses due to the change in gas tariffs and applied to the International Center on Argentina to claim this damage [21].

Argentine argued in its position on the dispute that, the dispute is not an international investment dispute since CMS is a domestic investor, the acquisition of shares by a U.S. company from an Argentine company is not considered a foreign investment activity, TGN company that its activities in the gas sector do not fall within the scope of the Investment Promotion and Protection Agreement (hereinafter referred to as BIT) between Argentina and the United States. However, the International Center, in its analysis of the concept of “investment”, refers to Article 1 of the BIT between Argentina and the United States, anything that any capital investment is considered and recognizes the right to claim damages from a CMS as a foreign investor [21].

Of course, for the International Center, along with the concept of “investment”, the concept of “nationality” is also important. Because by defining the concept of “nationality” it may be possible to establish the jurisdiction of the International Center in respect of disputes between the state and foreign investors. Pursuant to Article 25 of the Washington Convention, the jurisdiction of the International Center shall apply to all investment disputes between individuals and legal entities of a Contracting State and another Contracting State. That is, a legal entity is required to have the “nationality” of another state. However, the Washington Convention focuses not on the concept of “nationality” but on the criteria (inclusion and control criteria) that serve to define it.

In doing so, it referred to the discretion of the parties to resolve issues not regulated by the Washington Convention. The will of the parties is reflected in the Investment Promotion and Protection Agreements concluded between the states. These agreements define such concepts as “company”, “investment”, which serve to determine the “nationality” of the legal entity. In turn, the determination of the “nationality” of a legal entity in such transactions determines the issue of whether to provide it with a regime provided by the BIT. The number of Investment Promotion and Protection Agreements signed between the Republic of Uzbekistan and foreign countries is more than 40. Of course, these agreements also avoid the definition of “nationality”. It only defines other concepts that serve to define “nationality”.

For example, according to article 1 of the agreement between the Government of the People’s Republic of China and the Government of the Republic of Uzbekistan on the Promotion and Protection of Investments, the term “investor” means nationals or enterprises of one Contracting Party who are investing or have invested in the territory of the State of other Contracting Party: … (b) the term “enterprise” means any entities, including companies, firms, associations, partnerships and other organizations incorporated or constituted under the applicable laws and regulations of either Contracting Party and have their seats and substantial business activities in that Contracting Party, irrespective of whether or not for profit and whether it is owned or controlled by private person or government or not.

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Thus, both the Washington Convention and the BITs define the criteria that serve to define the concept of “nationality” rather than the concept itself.

Relationships related to diplomatic protection. This situation may be example in order to show importance of determining the concept of the “nationality” of a legal entity that citizens of one or more states establish a legal entity under the laws of the second state, have a place of management in a third state and substantial business activities in a fourth state. As a result, this legal entity remains associated with the legal systems of several states. This situation makes it difficult to find the “nationality” of the legal entity, ie the connection between the legal entity and the state.

Of course, each state provides its legal entities with diplomatic protection even when they are in the territory of a foreign state, and this obligation is also enshrined in the legislation of the states. For example, under the Hungarian constitution, legal entities are granted fundamental rights that by their very nature do not apply only to individuals [20]. In turn, one of the main conditions for the provision of diplomatic protection is the existence of a real connection between the “nationality” of the injured party and the state, and this condition is reflected in the case of Nottebohm [23].

In addition to cases, the “nationality” of a legal entity has been discussed several times by the UN Commission on International Law (hereinafter referred to as the UN Commission). For example, the First Report of the UN Commission on First report on State succession and its impact on the nationality of natural and legal in 1995. First of all, it should be noted that in this and the second report, the concept of “nationality” was used as a link between the legal entity and the state, but in the Russian text of the reports, the concept of “citizenship” was used instead of “nationality” [22].

The first report states that in order to apply the norms of international law, most importantly, there must be a link between the legal entity and the state in order to provide diplomatic protection to the legal entity [22]. However, some authors criticize the use of nationality by analogy with respect to legal entities applied to individuals. Because, in their opinion, the norms of international law applicable to the nationality of individuals cannot be applied to legal entities without change [10, P.860,861]. For example, the establishment, operation, and liquidation of a legal entity have different legal consequences than those of an individual. The main conclusion of this report is that there is no single view on the “nationality” of the legal entity. However, the criteria for determining “nationality” can be established in national legislation (tax, labor) or in international agreements [22].

The peculiarity of the Conclusion of the Second Report on the Provision of Diplomatic Protection to Legal Entities from the First Report is that the provision of diplomatic protection or the determination of the legal entity “nationality” on the responsibility of states can be regulated by the norms of private international law. Because, according to the special rapporteur V. Mikulka, the problem of “nationality” of a legal entity arises in relations related to conflict law, the status of foreign legal entities, diplomatic protection and the responsibility of states, so the “nationality” of a legal entity is belongs to both international law and private international law [31].

However, without denying the participation of legal entities in these two areas of law, it can be said that the application of the concept of “nationality” to legal entities in both areas of law is unjustified. This is because international law and private international law are interrelated areas that also differ in their subject matter. The application of the concept of nationality to individuals is also accepted in both legislation and doctrine. However, the UN commission could not reach a consensus on the “nationality” of the legal entity and the criteria for determining it.

Nevertheless, in 2006 the UN Commission drafted an international legal instrument on Diplomatic protection. The

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document uses the term “nationality” in relation to legal entities, thus strengthening the use of the term “nationality” in relation to legal entities in relation to the provision of diplomatic protection. At the same time, although the draft does not define the concept of “nationality”, the legal entity provides grounds for applying the criteria used to define the “nationality” (place of incorporation, administrative and financial control, place of control, optionally significant commercial activity) [29]. The scope of personal law (lex societatis). Since it is necessary to separate the “nationality” of a legal entity from its personal law, it is necessary to pay attention not only to the scope of the concept of “nationality”, but also to the scope of the concept of personal law of a legal entity. It should be noted that, unlike the concept of “nationality”, the relationship governed by the concept of individual law is reflected in the legislation of some countries. In particular, article 1272 of the Civil Code of the Republic of Armenia [17], article 2594 of the Civil Code of the Republic of Moldova [18], article 1202 of the Civil Code of the Russian Federation [19], article 15 of the Private International Law Act of Estonia Republic [28], article 25 of the Reform of the Italian System of Private International Law [30], article 22 of the Law of the Republic of Hungary “On Private International Law” [24], article 111 of the Law of the Kingdom of Belgium “On the Code of Private International Law” [26], article 42 of the Law of the Republic of Romania “On the Regulation of the Private International Law Relationship” [27], article 58 of the International Private Code of the Republic of Bulgaria [16]defines the scope of relations regulated by the personal law of a legal entity. The analysis of the legislation of foreign countries governing the personal law of a legal entity shows that a number of relations are regulated by personal law, in particular: legal status of a legal entity; organizational and legal form; name of the legal entity;

making changes to the constituent documents of the legal entity; the order of organization and operation of the bodies of the legal entity, as well as their powers; legal representation of a legal entity (branch and representative office); establishment and reorganization, liquidation of a legal entity, including legal succession; legal capacity of a legal entity and its content; the procedure for obtaining civil rights and assuming civil obligations by a legal entity; relations within a legal entity, including relations between a legal entity and members of its bodies, as well as relations between a legal entity and its members (shareholders) and their mutual relations; the procedure for acquiring and losing a membership (shareholder); rights and obligations arising from the membership of a legal entity (shareholder); responsibility of the legal entity for its obligations and the founders (members) of the legal entity for its obligations; liability of the legal entity and its bodies to third parties; the ability of the legal entity to be liable for its obligations; the procedure for gaining and losing the status of a member or partnership of a legal entity, as well as the rights and obligations associated with the status of membership or partnership of a legal entity; Consequences of non-compliance with the rules established by the legislation or the constituent documents of the legal entity. III. Conclusion Of course, the above-mentioned issues are not a complete list of legal relations governed by the personal law of the legal entity. This is also stipulated in the legislation of foreign countries. It is also possible to agree with the opinion of some western scholars on issues regulated by the personal law of the legal entity. In particular, according to H. Shak, the private law also determines the legal capacity - the right to sue in court or arbitral tribunal

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and the right to participate in the proceedings as a responsible party [13, P.257-259].

However, the fact that issues regulated by personal law are reflected in the Civil Code or laws (codes) of private international law is itself a major step in separating nationality from a personal law. It should also be noted that such a step has emerged in recent years as a result of amendments and additions to the legislation of some countries, including the Civil Code of the Russian Federation in 2014, the Private International Law Act of Estonia Republic in 2017.

Although the 2014 amendment to Article 1202 of the Civil Code of the Russian Federation addresses (albeit incompletely) issues regulated by personal law of the legal entity, they still try to link the concept of “nationality” to a legal entity to some extent in private international legal relations. Such cases can be found in the works of A.O Inshakova., I.A. Turbina, N.N. Voznesenskaya, I.V. It Getman-Pavlova.

An analysis of the areas in which the concepts of “nationality” and personal law applies to a legal entity shows that the concept of “personal law” serves for the purposes of private international law in the legislation of many countries, while the concept of “nationality” applies to areas beyond cross-border civil law relationship.

Regarding the above-mentioned legal relations regulated by the “nationality” and personal law of the legal entity, we can agree with E.A.Abrosimova`s opinion that: “Today, in most countries of the world, there is a trend according to which national legislation, on the one hand, uses different methods of defining personal law for the purpose of conflict law, and various methods of determining nationality are used for the purpose of public law” [6, P.42].

However, neither national law nor international treaties use the term “nationality” in relation to legal entities, only using criteria that serve to define a nationality, and personal law and its criteria can be found in both sources. Thus, the last point on whether a legal entity is a “nationality” and its personal law are separate or interrelated concepts can be put by the criteria that serve to determine after opinions of scholars, the legislation of national and foreign countries, judicial practice. Therefore, it is necessary to analyze the scope of the criteria that serve both concepts.