Is lifting the veil a procedural passive standing problem? Activation of action in tort – which ultimately means this doctrine – in occurrence of certain cases of fraud or abuse of rights law, share spaces with the legitimatio ad causam of the defendant or of the co-defendants.
Active and passive procedural legitimization of the litigants is an issue that affects the merits of the case, and should consequently be resolved in the judgment. While the lack of neccesary passive joinder, and lack of capacity or representation are questions that have the character of procedural exceptions, the suitability of the part to be center of interests allocations in frame of the dispute – properly the legitimatio ad causam – is closely linked to the ruling on the merits, and therefore should be treated in the judgment.
“Piercing the veil” is not an independent doctrine but a generic term to refer – almost visually – to all legal means that can overcome the contours of legal personality and relativity of contracts. If the the legal personality is aimend to defraud or deceit third party rights, it is given to them ability to penetrate into the financial sphere of the person beneficiary from such acts. For instance, the production of a capital increase that can not economically be justified (simulated sales, simulated loans, dividends with the intention of asset-stripping…).
Therefore, from a procedural perspective, the third party beneficiary directly enters into the subjective realm of the procedure, coinciding the basis of its passive standing on the grounds of his responsibility. This is, the third is passively stands because he must respond. If not liable, neither passively stands. Responsibility and passive standing are therefore inseparable in the frame of lifting the veil.
However, our attention is called to the third legal basis of the Judgment of the Spanish Supreme Court of 4 April 2016, under which a third party is passively legitimized in case that the internal organization of a group of companies is complex enough so that the plaintiff cannot find out which company has caused the damage. Can we define this judicial discretion as a “piercing the corporate veil” in their common sense? Obviously not, since the typical animus fraudandi, unjustified asset allocation, or simply abuse of legal personalit,y to prevent the extension of liability to the beneficiary of a failed transaction, are not fulfilled. However there are some plot parallels between one another criterion, since both are built to the aid of the creditor who has a right against a legal person.
In what interests us, a particular engages an actionagainst Google Spain S.L. based on a contravention of his rights to personal and family privacy, image and honor, and he requested the withdrawal of the search engine results of all BOE (Official Gazette) links publishing the pardon of the person concerned. Google Spain S.L. contended that the controller of the data was its parent company Google Inc., based in California, and that Google Spain S.L. only sells advertising in Spain, and – therefore – Google Spain S.L. lacked standing to be sued.
Despite these arguments, the Provincial Court of Madrid appreciated the passive standing of Google Spain S.L. using a criterion later endorsed the Supreme Court: the judgment of the Court of Justice of the European Union (ECJ) of 13 May 2014 (Google Spain S.L. against the Spanish Data Protection Agency), had determined that although Google Spain S.L. does not perform the indexing activities of web pages that may violate EU rules on data protection, it can be considered as controller of data treatment for performing a closely related activity such is hiring the necessary publicity for the economic support of search engines, and in turn search engines are providing advertisers who contract with Google Spain SL
Specifically, the ECJ holds that European legislation does not require that the actual data processing is performed by the establishment that sells the advertising (Google Spain S.L.) but simply demands that such activity is performed in the framework of its activities. And the ECJ considered that by virtue of the above reasoning, – mutual links between indexing and advertising – Google Spain S.L. could be considered responsible for processing the data.
In such a manner, and through these somewhat contrived arguments previously used by the ECJ, the Supreme Court recognizes Google Spain S.L. passive standing to respond to the applicant by the processing of hispersonal data, despite not actually performing such activity.
Paragraphs 9 and 10 of the Basis Law Third, consider that legitimating only to Google Inc., in practice would defeat the purpose of ensuring effective protection of personal data. Forcing the owner of the data to (i) determine which company within the telecommunications group Google is the one that performs the processing of data; and (ii) file a lawsuit against the company, possibly to a foreign jurisdiction that does not give personal data a protection comparable to that granted within the European Union; make unworkable in practice the protection provided by the standard.
This decision is based on the same reasoning than the lifting the veil of the legal person, who considers unright denying a remedy by reason of the formal legality prepared unilaterally by the defendant. However, while usually passive legitimacy and accountability are born simultaneously and coexist inseparably and mutually justifying each other, in the case commented, passive standing does not automatically coincide with the responsibility of Google Spain S.L. , which has to be deducted under the substantive rules.