DEVANSH SEHGAL DEVANSH SEHGAL

IN THE DISTRICT COURT OF MEMO PUNDITS

1ST MEMO PUNDITS

MEMORIAL FORMATTING COMPETITION, 2020

SUBJECT MATTER OF THE CASE

LIFTING OF CORPORATE VEIL VIS-À-VIS ABSOLUTE LIABILITY

CIVIL PETITION NO. 77 of 2013

filed by GOVT. OF INDIE ISLANDS under SECTIONS 9, 15 & 20 of

THE CODE OF CIVIL PROCEDURE, 1908

DATE OF SUBMISSION: 3 MAY 2020

IN THE MATTER BETWEEN

GOVT. OF INDIE ISLANDS……………………...…………..………………….PLAINTIFF

v

CBO PRIVATE LIMITED……………………………………..……………..DEFENDANT 1

POPAT LAL SHARMA………………………………..……………………...DEFENDANT 2

-MEMORANDUM ON BEHALF OF THE DEFENDANT-

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TABLE OF CONTENTS

LIST OF ABBREVIATIONS ........................................................................................... III

INDEX OF AUTHORITIES ............................................................................................ IV

STATEMENT OF JURISDICTION ............................................................................. VIII

SYNOPSIS OF FACTS..................................................................................................... IX

ISSUES RAISED ............................................................................................................... X

SUMMARY OF ARGUMENTS ...................................................................................... XI

ARGUMENTS ADVANCED ............................................................................................. 1

[1.] THE SUIT FILED BY THE GOVT. OF INDIE ISLANDS IS NOT MAINTAINABLE. .......... 1

[1.1.] Issue of Maintainability is a subject matter in the Final Hearing.................. 1

[1.1.1.] Preliminary objections Can be raised in the Final Hearing of a Suit. ......... 1

[1.1.2.] Emphasis must be supplied on Principals of Natural Justice. ..................... 2

[1.2.] ACL has been wrongfully impleaded in the Present Suit. .............................. 2

[1.3.] Company with registered office located not in Moziland cannot be sued in a

Moziland Court. .......................................................................................................... 2

[2.] THE CORPORATE VEIL SO UNFURLED SHOULD NOT BE PIERCED AND ACL SHOULD

NOT BE ABSOLUTELY LIABLE FOR THE LOSS. .................................................................... 3

[2.1.] The Corporate Veil should not be pierced. ..................................................... 3

[2.1.1.] CPL and APL are not one Single Economic Unit. ....................................... 3

[2.1.2.] CPL is not ACL’s agent. ............................................................................. 5

[2.1.3.] ACL and CPL are two Separate Legal Entities. .......................................... 5

[2.1.4.] The situation does not demand Piercing the Corporate veil. ....................... 6

[2.2.] There is no Absolute Liability arising in the Present case. ............................ 6

[2.2.1.] Inapplicability of the M.C. Mehta case to the present facts and

circumstances. ........................................................................................................... 6

[2.2.2.] In Arguendo, there is Non-fulfilment of essentials of the Principle of Absolute

Liability. 7

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[3.] WHETHER CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES

POST AND CHESTER & WALSINGHAM ARE ATTRIBUTABLE TO RIESLAND, AND

CONSTITUTE AN INTERNATIONALLY WRONGFUL ACT FOR WHICH AMESTONIA IS ENTITLED

TO COMPENSATION? ......................................................................................................... 7

[3.1.] The cyber attacks against the computer systems of The Ames Post and

Chester & Walsingham are attributable to Riesland................................................. 7

[3.1.1.] Riesland should be held directly responsible for having control over the

actors. 8

[3.1.2.] “Effective control” test satisfied ................................................................ 8

[3.2.] Riesland should be held responsible for failing to prevent attacks originating

from its territory. ........................................................................................................ 9

[3.3.] The cyber attacks against the computer systems of The Ames Post and

Chester & Walsingham constitutes an internationally wrongful act. ..................... 10

[3.3.1.] The cyber attack on Amestonia rises to the level of use of force. ............... 10

[3.3.2.] Test of severity satisfied ........................................................................... 10

[3.3.3.] Test of immediacy satisfied....................................................................... 10

[3.3.4.] Test of directness satisfied ........................................................................ 11

[3.3.5.] Test of invasiveness satisfied .................................................................... 11

[3.3.6.] Test of ‘state involvement’ satisfied .......................................................... 11

PRAYER ......................................................................................................................... XII

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LIST OF ABBREVIATIONS

ABBREVIATION EXPANSION

ed Edition

¶ Paragraph

Bom Bombay High Court

vs. Versus

ors Others

SCR Supreme Court Record

AIR All India Records

LLJ Labour Law Journal

HL House of Lords

SCC Supreme Court Cases

S Section

WLR Weekly Law Reports

AC Appeal Cases

UKHL United Kingdom House of Lords

BCLC Butterworths Company Law Cases.

AELR All England Law Reports

ICJ International Court of Justice

Pvt Ltd Private Limited

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INDEX OF AUTHORITIES

CASES PG. NO.

Adams vs. Cape Industries, (1990) Ch 433 4

Am. Fuel Corp. vs. Utah Energy Dev. Co., (1997) 122 F.3d 130, 134 (2d Cir.) 6

Assistant Commissioner of Income Tax vs. Zee News Ltd., (2013) 27 ITR 240

(Mum) 9

Avinder Singh vs. State of Punjab, (1979) 7 AIR 321 (SC) 11

Brigham vs. Moon Lake Elec. Assn., (1970) 470 P.2d 393, 395 (Utah) 7

Creasey vs. Breachwood Motors Ltd, (1993) BCLC 480 4

DHN Food Distributors Ltd. vs. Tower Hamlets London Borough Council,

(1976) 1 WLR 852 3

Esmark, Inc. vs. N.L.R.B., (1989) 887 F.2d 739, 759 (7th Cir.) 6

General Council of Medical Education & Registration of U.K. vs. Sanckman,

(1943) AC 627 2

Gunther vs. Capital One, N.A., (2010) 703 F. Supp. 2d 264, 277 (E.D.N.Y.) 6

Hedges vs. Public Service Co. of Indiana, (1979) 396 N.E.2d 933, 937 (Ind.

App.) 7

Indian Oil Corporation Ltd vs. State Of Bihar & Ors, (1986) AIR 1780, (1986)

3 SCR 553 1

J.S. Ocean Liner vs. M.V. Golden Progress, (2007) 2 ARBLR 104 (Bom) 1

LIC vs. Escorts, (1986) AIR 1370 5

M.C. Mehta vs. Union of India, (1987) A.I.R. 1086 (SC) 7

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MAG Portfolio, GMBH vs. Merlin Biomed Grp. LLC, (2001) 268 F.3d 58, 64

(2d Cir.) 6

Maneka Gandhi vs. Union of India, (1978) 1 SCC 248 2

Modi Spg & Wvg Mills vs. ITO, (1975) 101 ITR 637 8

Morris vs. Dorris, 623 N.E.2d 1161 6

Mukhtiar Singh Sandhu vs. ITO, (1986) 160 ITR 526 (P&H) 8

Nagrath Chemicals Works (Pvt) Ltd vs. CIT, (2004) 265 ITR 401 (All) 8

New Zealand vs. France, (1990) 20 R.I.A.A. 217, 251, para 75 8

Nicargua vs. United States of America, (1986) I.C.J Reports 14 9

Nicargua vs. United States of America, (1986) I.C.J Reports 14, para 195 11

Nicargua vs. United States, (1986) I.C.J. 14, para 202 10

R. Maria Thangam vs. U. Murugan & Ors, (1979) 2 LLJ 29 1

Ranganatha vs. MohanLal, (1989) AIR 22 2

Ridge vs. Baldwin, (1963) 2 AER 66 (HL) 2

Salomon vs. A Salomon & Co Ltd, (1897) AC 22 3

Smith, Stone & Knight vs. Birmingham Corp., (1939) 4 All. E.R. 116 (KB) 5

Smt. Shanti Devi (Dead) vs. Gian Chand, (2008) 2 PLR 393 1

Trustor AB vs. Smallbone, (2001) 2 BCLC 436 4

Udit Narain Singh vs. Board of Revenue, (1963) Supp. (1) SCR 676 2

Woolfson vs. Strathclyde Regional Council, (1978) UKHL 5 4

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OTHER AUTHORITIES PG. NO.

Advisory Opinion on Legality of the Threat or Use of Nuclear Weapons, (1996)

I.C.J. 10

ARTICLES PG. NO.

Berglind Halldorsdottir Birkland, Reining in Non-State Actors: State

Responsibility and Attribution in Cases of Genocibide 84 N.Y.U. L. Rev., 1626

(2009)

10

Michael N. Schmitt, Computer Network and the Use of Force in International

Law: Thought on a Normative Framework 37 Columbia Journal of

Transnational Law 885, 914 (1999)

11

Rene Vark, State Responsibility for Private Armed Groups in the Context of

Terrorism, XI Juridica Int'l, 189 (2006) 9

Rüdiger Wolfrum, International Courts and Tribunals, Evidence The Max

Planck Encyclopedia of Public International Law, 556 (2012) 10

Susan W. Brenner, At Light Speed: Attribution and Response to

Cybercrime/Terrorism/Warfare, 97 J. Crim. L. & Criminology, 435 (2007) 9

Vincent-Joel Proulx, Babysitting Terrorists: Should States Be Strictly Liable for

Failing to Prevent Transborder Attacks? 23 Berkeley J. Int'l L., 621 (2005) 9

Vincent-Joel Proulx, Babysitting Terrorists: Should States Be Strictly Liable for

Failing to Prevent Transborder Attacks? 23 Berkeley J. Int'l L., 624 (2005) 10

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STATUTES PG. NO.

Art 2(4), The Charter on United Nations, 1945 10

S. 10(1)(a), The Companies Act, 1956 3

BOOKS PG. NO.

Amid Dhandha, NS Bindra's Interpretation of Statutes (11th ed., 2010), p. 250 8

Banerjee, Writ Remedies (4th ed., 2007), p. 702 2

Crawford, The International Law Commission’s Articles on State Responsibility

(2002), p. 81 8

Ian Brownlie, International Law and the Use of Force by States (1963), p. 362,

431 10

Marcus Lutte, Legal Capital In Europe, p. 200 5

Michael N. Schmitt, Talinn Manual on the International Law applicable to

Cyber Warfare (2013), p. 15-16, para 10 9

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STATEMENT OF JURISDICTION

The Defendants have been brought before this Hon’ble District Court under Ss. 9, 15 and 20

of the Code of Civil Procedure, 1908.

The present memorandum sets forth the facts, contentions and arguments in the present case.

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SYNOPSIS OF FACTS

BACKGROUND OF AML COMPANY LIMITED (ACL)

ACL is a company registered under the Companies Act, 2006 of the Zaniland, having its

registered office is at Swenska Islands. It had incorporated about 20 companies in various

countries of the world with presence in power generation, chemicals, dies, pesticides and

pharmaceuticals sectors.

BACKGROUND OF CBO POWER LIMITED (CPL)

CPL is registered under the Companies Act, 1956, for generating electricity using new

technology developed by ACL. The registered office of CPL is at SOZA Plaza, Kodagu, the

Indie Islands.

RELATIONSHIP BETWEEN ACL AND CBO

CPL is a wholly owned subsidiary (750 Crores of investment) of ACL. CPL and ACL had a

technology transfer agreement, which contained a profit sharing agreement between them.

ENSUING EVENTS

The Meterology Department of Moziland cautions all the coastal states about the possibility of

heavy wind and huge rainfall. Many states including the Indie Islands evacuated people to safe

places.

However, due to leak of materials from the facility of CPL at the time of heavy wind, private

and public property worth tens and thousands of crores was damaged.

SUIT FOR DAMAGES

Since, the laws of Moziland impose absolute liability on corporations for such losses, the

Government of Indie Islands files a suit for damages from CPL. ACL, parent company of CPL,

is also included as one of the Defendants. The Government of Indie Islands pleaded for piercing

the veil of incorporation. The matter is listed for final hearing.

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ISSUES RAISED

The following questions are presented before this hon’ble court in the instant matter:

[1.] WHETHER OR NOT SUIT FOR DAMAGES FILED BY GOVT. OF INDIE ISLANDS IS

MAINTAINABLE?

[2.] WHETHER OR NOT THE CORPORATE VEIL SO UNFURLED SHOULD BE PIERCED IN

ORDER TO MAKE ACL ABSOLUTELY LIABLE FOR THE LOSS?

[3.] WHETHER CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES POST

AND CHESTER & WALSINGHAM ARE ATTRIBUTABLE TO RIESLAND, AND CONSTITUTE

AN INTERNATIONALLY WRONGFUL ACT FOR WHICH AMESTONIA IS ENTITLED TO

COMPENSATION?

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SUMMARY OF ARGUMENTS

[1.] THE APPEAL FILED BY GOVT. OF INDIE ISLAND IS NOT MAINTAINABLE.

The present suit for damages is maintainable for two reasons.

(i.) First, ACL has been wrongfully impleaded as a Defendant as it is not a

necessary party.

(ii.) Lastly, ACL is a company with its registered office outside Moziland and thus

Courts of Moziland lack jurisdiction.

[2.] THE CORPORATE VEIL SO UNFURLED SHOULD NOT BE PIERCED AND ACL AND CPL

ARE NOT ABSOLUTELY LIABLE FOR THE LOSS.

The Corporate Veil should not be pierced for three reasons.

(i.) First, ACL and CPL are not one single economic unit and CPL is not ACL’s

agent.

(ii.) Secondly, ACL and CPL are two separate legal entities and the situation does

not demand piercing of corporate veil.

(iii.) Lastly, ACL and CPL are not absolutely liable as there is non-fulfillment of the

essentials of absolute liability principle.

[3.] WHETHER CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES POST

AND CHESTER & WALSINGHAM ARE ATTRIBUTABLE TO RIESLAND, AND CONSTITUTE

AN INTERNATIONALLY WRONGFUL ACT FOR WHICH AMESTONIA IS ENTITLED TO

COMPENSATION?

(i.) First, the cyber attacks against the computer systems of The Ames Post and

Chester & Walsingham are attributable to Riesland

(ii.) Secondly, Riesland should be held responsible for failing to prevent attacks

originating from its territory

(iii.) Thirdly, the cyber attacks against the computer systems of The Ames Post and

Chester & Walsingham constitutes an internationally wrongful act.

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ARGUMENTS ADVANCED

[1.] THE SUIT FILED BY THE GOVT. OF INDIE ISLANDS IS NOT MAINTAINABLE.

[¶1.] The Govt. of Indie Islands has filed a suit for damages against CPL in which ACL is

impleaded along as one of the Defendants.1 It is contended that this suit is not maintainable on

the grounds that ACL is firstly, wrongfully impleaded as a Defendant and secondly, a company

with its registered office outside Moziland2 and thus, conferring no jurisdiction upon Courts of

Moziland to file a suit against ACL.

[1.1.] ISSUE OF MAINTAINABILITY IS A SUBJECT MATTER IN THE FINAL HEARING.

[¶2.] The present suit is in its final stage of hearing.3 It is submitted that even though the

present hearing is final, the issue of maintainability can be raised. Furthermore, in absence of

any express statutory provision prohibiting or limiting the court’s power to entertain such

preliminary objection, it would be a gross miscarriage of justice if the same were not

entertained.

[1.1.1.] Preliminary objections Can be raised in the Final Hearing of a Suit.

[¶3.] For final hearing, if the question regarding maintainability of the suit is raised,4 it has

been held that it becomes the duty of the Court to consider the same.5 In addition, it is the

obligation of this Court to apply the law notwithstanding whether any such objection is raised

by any of the parties or not.6 The High Courts of the country in umpteen cases have entertained

preliminary objections7 even when the hearing was in its final stage.8

1 Moot Proposition, para 6.

2 Ibid, para 1.

3 Ibid, para 7.

4 J.S. Ocean Liner vs. M.V. Golden Progress, (2007) 2 ARBLR 104 (Bom).

5 Smt. Shanti Devi (Dead) vs. Gian Chand, (2008) 2 PLR 393.

6 Ibid.

7 R. Maria Thangam vs. U. Murugan & Ors, (1979) 2 LLJ 29.

8 Indian Oil Corporation Ltd vs. State Of Bihar & Ors, (1986) AIR 1780, (1986) 3 SCR 553.

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[1.1.2.] Emphasis must be supplied on Principals of Natural Justice.

[¶4.] It has long been held that it is sine qua non for procedures of law to sub serve Principles

of Natural Justice.9 If in the present case, the Defendants are not given a fair opportunity to

raise preliminary objection on the suit, which might have been wrongly instituted against them,

then it will be a prima facie abrogation of Audi Alteram Partem, or the first principle of Natural

Justice which says that the person concerned must be heard before a decision is taken10 by

giving a ‘full and fair opportunity’11.

[1.2.] ACL HAS BEEN WRONGFULLY IMPLEADED IN THE PRESENT SUIT.

[¶5.] ACL in the present suit has been impleaded as a Defendant.12 In the instant case, ACL

has been impleaded as a necessary party.13 A necessary party is one in the absence of which,

no order can be made effectively,14 and thus the party is vitally affected by the case.15

[¶6.] In arguendo, assuming that if ACL were to be a necessary party, then the decision of

the present suit should have direct ramifications on the ACL. However, it is submitted that the

ACL and CPL are two different and separate legal entities sharing profit,16 a contention which

has been elaborated in the later stages of this submission. Whatever be the order of the case,

ACL will not be vitally affected and thereby ceases to be necessary party as it had no role to

play in creation of the law whose constitutional validity stands questioned.

[1.3.] COMPANY WITH REGISTERED OFFICE LOCATED NOT IN MOZILAND CANNOT BE SUED IN A MOZILAND COURT.

[¶7.] The Companies Act, 1956 provides for institution of a suit in the High Court at the

place where the registered office of the company concerned is situated.17 In the present case,

9 Ridge vs. Baldwin, (1963) 2 AER 66 (HL).

10 Maneka Gandhi vs. Union of India, (1978) 1 SCC 248.

11 General Council of Medical Education & Registration of U.K. vs. Sanckman, (1943) AC 627.

12 Supra note 1, para 6.

13 Ranganatha vs. MohanLal, (1989) AIR 22.

14 Udit Narain Singh vs. Board of Revenue, (1963) Supp. (1) SCR 676; Banerjee, Writ Remedies (4th ed., 2007), p. 702. 15 Ibid.

16 Supra note 1, para 3.

17 S. 10(1)(a), The Companies Act, 1956.

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ACL, which is the Defendant, has its registered office at Swenska Islands, which is itself a part

of Zaniland. Since S. 10 of the Companies Act, 1956 lays down imperatives for institution of

a suit, such imperatives must be necessarily adhered. Since the requirement regarding

registered office is not satisfied, the suit is not maintainable.

MERITS

[2.] THE CORPORATE VEIL SO UNFURLED SHOULD NOT BE PIERCED AND ACL SHOULD NOT BE ABSOLUTELY LIABLE FOR THE LOSS.

[¶8.] CPL, the company responsible for the present loss, is a subsidiary of ACL.18 To make

ACL liable for the loss, the corporate veil must be lifted, without which ACL will not be liable

for the loss absolutely. The Soloman principle stands locus classicus on matters relating to

separate legal entities.19 It is contended that by applying the same, ACL and CPL should be

rendered to be two separate legal entities and thus, ACL should not be liable for any loss in

any way.

[2.1.] THE CORPORATE VEIL SHOULD NOT BE PIERCED.

[2.1.1.] CPL and APL are not one Single Economic Unit.

[2.1.1.1.] Inapplicability of the DHN principle to the Present case.

[¶9.] The concept of Single Economic Unit was found in the DHN case20 and it seems that it

is only this authority, which supports the contention on behalf of the Plaintiff that two

corporations may be taken as one single economic unit. However, it is submitted that in

Woolfson vs. Strathclyde Regional Council Lord Keith, said in relation to DHN: “I have some

doubts whether in this respect the Court of Appeal properly applied the principle that it is

appropriate to pierce the corporate veil only where special circumstances exist indicating that

it is a mere façade concealing the true facts.”21

[¶10.] Thus, the articulated characterization of the applicable principle, namely that “it is

appropriate to pierce the corporate veil only where special circumstances exist indicating that

18 Supra note 1, para 3.

19 Salomon vs. A Salomon & Co Ltd, (1897) AC 22.

20 DHN Food Distributors Ltd. vs. Tower Hamlets London Borough Council, (1976) 1 WLR 852.

21 Woolfson vs. Strathclyde Regional Council, (1978) UKHL 5.

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it is a mere façade concealing the true facts” was narrowed.22 The courts will not lift the veil

merely because it would be in the interests of justice.23

[2.1.1.2.] Other Judicial Pronouncements against the Single Economic Unit principle.

[¶11.] In Adams vs. Cape Industries, where Cape was the English parent company of an

international group, which mined asbestos in South Africa that it sold to various countries and

its workers sued Cape for damages for disease alleged to have been caused by the asbestos.24

It was found that the DHN and other cases all involved the interpretation of a statute or a

document and so did not apply here25 and rejecting the argument that Cape Group should be

treated as one, and said: “…save in cases which turn on the wording of particular statutes or

contracts, the court is not free to disregard the principle of Salomon vs A Salomon & Co

Limited26 merely because it considers that justice so requires. Our law, will nevertheless under

the general law fall to be treated as separate legal entities with all the rights and liabilities

which would normally attach to separate legal entities. …”27

[¶12.] The court said that the motives of those behind the alleged façade could be very

important.28 In the present case, there is firstly, no particular statute or contract in existence to

hold them as single economic unit and secondly, the motive behind the alleged façade was

nothing but to expand its business to become one of the largest corporates of the world.29

Furthermore, lifting the corporate veil merely on the basis of the existence of a single economic

entity could not be reconciled with the principle of independent legal capacity.30

22 Ibid.

23 Trustor AB vs. Smallbone, (2001) 2 BCLC 436.

24 Adams vs. Cape Industries, (1990) Ch 433.

25 Creasey vs. Breachwood Motors Ltd, (1993) BCLC 480.

26 Supra note 19.

27 Supra note 24.

28 Ibid.

29 Supra note 1, para 1.

30 Marcus Lutte, Legal Capital In Europe, p. 200.

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[2.1.2.] CPL is not ACL’s agent.

[¶13.] It is well-settled that the mere fact that a man holds all the shares in a company does

not make the business carried on by that company his business, nor does it make the company

his agent for the carrying on the business, this proposition is just as true if the shareholder is

itself a limited company.31

[¶14.] Merely because ACL held all the shares in CPL, it cannot be inferred that CPL was

acting as an agent of APL. It is therefore submitted that there are no facts available at hand, for

instance, the board of directors were same or the management of CPL was dominated by ACL,

to manifest that CPL was truly an agent of APL.

[2.1.3.] ACL and CPL are two Separate Legal Entities.

[¶15.] It is contended that ACL and CPL are two separate legal entities. While CPL is a

company formed and incorporated under the Companies Act, 1956 in Moziland, ACL is a

foreign corporation incorporated under the Companies Act, 2006 in Zaniland.32 It is submitted

that ACL was only a shareholder in the CPL, holding its equity ownership during the relevant

period. It is also denied that ACL could exercise control over any action or conduct of the CPL

or that the CPL could be treated as the agent or alter ego of the ACL.

[¶16.] On the legal question relating to lifting of veil, it is submitted that the concept of

piercing a corporate veil cannot and does not arise between two-established and duly registered

corporate bodies save when the corporation has been set up to evade or defraud government

revenue or shareholders.33

[¶17.] The role of the ACL in the Indie Island project of CPL was to the extent manifest by

the ‘technology transfer’ Agreement.34 It is contended that these agreements were agreements

between the two separate corporate entities and that the role of the ACL in the design of the

project was only that of a provider of new technology by ACL to CPL.

[¶18.] In arguendo, even if ACL authorized, ratified, or directed the actions of the CPL, it

would still be the basic rule of the corporate form that shareholders are not liable for the acts

31 Smith, Stone & Knight vs. Birmingham Corp., (1939) 4 All. E.R. 116 (KB).

32 Supra note 1, para 1 and 2.

33 LIC vs. Escorts, (1986) AIR 1370.

34 Supra note 1, para 2.

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of a corporation.35 Even the “direct participation” theory of liability is limited to situations in

which the parent corporation’s control over particular transactions is exercised in disregard of

the separate corporate identity of the subsidiary.36

[2.1.4.] The situation does not demand Piercing the Corporate veil.

[¶19.] Plaintiff may pierce the corporate veil where there is evidence showing “(i) that the

owner exercised complete domination over the corporation with respect to the transaction at

issue; and (ii) that such domination was used to commit a fraud or wrong that injured the party

seeking to pierce the veil.”37 There seems to be no single fact to support any of the above-

mentioned criteria and thus it is submitted that piercing the corporate veil in this case is not

required.

[¶20.] In arguendo, while complete domination of the corporation is the key to piercing the

corporate veil, such domination, standing alone, is not enough; existence of a wrongful or an

unjust act towards Plaintiff is required.38 In other words, Plaintiff must establish that the

owners, through their domination, abused the privilege of doing business in the corporate form

to perpetrate a wrong or injustice against that party such that a court in equity will intervene,39

which the Plaintiff in the present case has failed to establish as there is no fact to aid the

contention that the domination was mala fide.

[2.2.] THERE IS NO ABSOLUTE LIABILITY ARISING IN THE PRESENT CASE.

[2.2.1.] Inapplicability of the M.C. Mehta case to the present facts and circumstances.

[¶21.] In M.C. Mehta vs. Union of India, the court set out a rule of absolute liability for an

“enterprise” engaged in hazardous or inherently dangerous industry.40 The M.C. Mehta case

involved an oleum gas leak at a plant operated by Shriram Food and Fertilisers Industries, and

35 Gunther vs. Capital One, N.A., (2010) 703 F. Supp. 2d 264, 277 (E.D.N.Y.).

36 Esmark, Inc. vs. N.L.R.B., (1989) 887 F.2d 739, 759 (7th Cir.).

37 Am. Fuel Corp. vs. Utah Energy Dev. Co., (1997) 122 F.3d 130, 134 (2d Cir.).

38 Morris vs. Dorris, 623 N.E.2d 1161.

39 MAG Portfolio, GMBH vs. Merlin Biomed Grp. LLC, (2001) 268 F.3d 58, 64 (2d Cir.).

40 M.C. Mehta vs. Union of India, (1987) A.I.R. 1086 (SC).

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nothing therein suggests that Shriram was a subsidiary or owned a subsidiary or was in any

way a member of a corporate group.41

[2.2.2.] In Arguendo, there is Non-fulfilment of essentials of the Principle of Absolute Liability.

[¶22.] The principle of absolute liability has under its ambit, the ‘enterprises engaged in

hazardous activities’.42 In the present case CPL is involved in generating electricity. It is

contended that generating electricity is not a ‘hazardous activity’. Our civilization could not

exist without electricity, and those who supply it are benefactors to mankind.43 Therefore, the

high degree of care required may be said to be reasonable care in view of the great potential

danger involved, but the same cannot be regarded as a ‘hazardous activity’.44 Moreover, the

U.S. Court in Hedges vs. Public Service Co. of Indiana accepted that ‘it seems quite clear that

we have not in the past, nor will we now, impose absolute liability upon the power

companies.’45 Thus, it is submitted that CPL is not absolutely liable for the loss so caused, as

generating electricity is not a hazardous activity.

[3.] WHETHER CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES POST AND CHESTER & WALSINGHAM ARE ATTRIBUTABLE TO RIESLAND, AND CONSTITUTE AN INTERNATIONALLY WRONGFUL

ACT FOR WHICH AMESTONIA IS ENTITLED TO COMPENSATION?

[¶23.] The cyber attacks against the computer systems of The Ames Post and Chester &

Walsingham are (I) attributable to Riesland, and (II) constitute an internationally wrongful act

for which Amestonia is entitled to compensation.

[3.1.] THE CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES POST AND CHESTER & WALSINGHAM ARE ATTRIBUTABLE TO RIESLAND.

[¶24.] Under International law, a State can be held responsible for the acts of even non-state

actors (A) directly if the State exercises effective or overall control over the actors and (B)

indirectly if the State failed to prevent attacks originating from its territory.

41 Ibid.

42 Ibid.

43 Brigham vs. Moon Lake Elec. Assn., (1970) 470 P.2d 393, 395 (Utah).

44 Supra note 43.

45 Hedges vs. Public Service Co. of Indiana, (1979) 396 N.E.2d 933, 937 (Ind. App.).

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[3.1.1.] Riesland should be held directly responsible for having control over the actors.

[¶25.] As per Article 2 on State Responsibility there are two conditions which need to be

fulfilled for any act to qualify as an internationally wrongful act; i.e. that the given act should

be adequately associated to conduct, attributable to a State and there must be a breach of an

international obligation which the State owes to the other state.46 This responsibility under

deliberation can be extrapolated from the applicable international customs47 that foresee that

the non-fulfillment of a responsibility to avoid damage, even in the lack of such intent, breaches

a state responsibility.48

[3.1.2.] “Effective control” test satisfied

[¶26.] An effective control over the non-state actors would mean that the State was responsible

for financing and supporting of the non-state actors in course of which alleged violations were

committed.49 Thus, as the test evolved by the ICJ, State participation to the extent of planning,

direction, support and execution of the operations are required for a successful attribution.50 In

a cyber context, use of State cyber expertise during planning of specific cyber attack would

establish State responsibility for an internationally wrongful crime.51 Moreover motive is one

of the guiding factors for attributing a cyber attack.52

[¶27.] In this case the malware which was used in the hacking of the computers has been

traced to IP addresses within Riesland’s territory that are associated with Riesland’s computer

infrastructures.53 Moreover it is evident that Riesland supported the attack from the fact that

46 Crawford, The International Law Commission’s Articles on State Responsibility (2002), p. 81; New Zealand vs. France, (1990) 20 R.I.A.A. 217, 251, para 75. 47 Modi Spg & Wvg Mills vs. ITO, (1975) 101 ITR 637; See also Mukhtiar Singh Sandhu vs. ITO, (1986) 160 ITR 526 (P&H); Nagrath Chemicals Works (Pvt) Ltd vs. CIT, (2004) 265 ITR 401 (All); Amid Dhandha, NS Bindra's Interpretation of Statutes (11th ed., 2010), p. 250. 48 Supra note 118 at 84.

49 Nicargua vs. United States of America, (1986) I.C.J Reports 14.

50 Rene Vark, State Responsibility for Private Armed Groups in the Context of Terrorism, XI Juridica Int'l, 189 (2006); See also Vincent-Joel Proulx, Babysitting Terrorists: Should States Be Strictly Liable for Failing to Prevent Transborder Attacks? 23 Berkeley J. Int'l L., 621 (2005). 51 Michael N. Schmitt, Talinn Manual on the International Law applicable to Cyber Warfare (2013), p. 15-16, para 10. 52 Susan W. Brenner, At Light Speed: Attribution and Response to Cybercrime/Terrorism/Warfare, 97 J. Crim. L. & Criminology, 435 (2007). 53 Moot Proposition, para 38.

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significant segments of code in the malware are exact replicas of those used in the Bureau’s

‘Blaster’ program which are otherwise not known use or available to the general public.54

Moreover motive of harm can be ascertained from the fact that Riesland had requested

Amestonia to recover the information Frost had downloaded, believed to be held by either

Chester & Walsingham or The Ames Post, and return it to Riesland.55 In light of Nicargua case,

providing of malware and necessary training can be likened to arming and training.56 It is thus

submitted that as per ICJ’s preponderance of evidentiary standard,57 Riesland can be held liable

for cyber attacks as it had ‘effective control’ over the attackers.

[3.2.] RIESLAND SHOULD BE HELD RESPONSIBLE FOR FAILING TO PREVENT ATTACKS ORIGINATING FROM ITS TERRITORY.

[¶28.] The principle of indirect responsibility has evolved from the principle that host state

has a duty to prevent terrorist attacks emanating from its territory.58 A state’s apathy or

disregard for terrorist activity within its territory triggers its responsibility as though it had

directly participated in the attack.59 Expansion of the State responsibility is based upon the

omission of a State to prevent acts which were traditionally not attributable to them.60 In this

case, malware used in the hacking of the computers has been traced to IP addresses within

Riesland’s territory that are associated with Riesland’s computer infrastructures. It is thus

submitted that Riesland should be held for failing to prevent attacks originating from its

territory.

54 Ibid.

55 Moot Proposition, para 24.

56 Assistant Commissioner of Income Tax vs. Zee News Ltd., (2013) 27 ITR 240 (Mum).

57 Rüdiger Wolfrum, International Courts and Tribunals, Evidence The Max Planck Encyclopedia of Public International Law, 556 (2012). 58 Vincent-Joel Proulx, Babysitting Terrorists: Should States Be Strictly Liable for Failing to Prevent Transborder Attacks? 23 Berkeley J. Int'l L., 624 (2005). 59 Ibid.

60 Berglind Halldorsdottir Birkland, Reining in Non-State Actors: State Responsibility and Attribution in Cases of Genocibide 84 N.Y.U. L. Rev., 1626 (2009).

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[3.3.] THE CYBER ATTACKS AGAINST THE COMPUTER SYSTEMS OF THE AMES POST AND CHESTER & WALSINGHAM CONSTITUTES AN INTERNATIONALLY WRONGFUL ACT.

[3.3.1.] The cyber attack on Amestonia rises to the level of use of force.

[¶29.] The ICJ in the Nicargua case,61 held that the ambit of Article 2(4) is wide enough to

include any use of ‘force’,62 regardless of the weapons employed.63 In the absence of any

watertight definition to determine what amounts to use of force, ICJ in the Nicargua case,

further observed that ‘scale and effects’ are to be taken into account to ascertain whether a

particular act amounts to force.64 In other words the quantitative and the qualitative factors are

to be taken into consideration for ascertaining whether an act amounts to force.65 The

application of the following tests further establishes quantitative and the qualitative factors

required to prove that the cyber attack amounts to force.66

[3.3.2.] Test of severity satisfied

[¶30.] If it is established that an act has cause physical harm to individuals or property, then

such act would amount to force under Art. 2(4) subject to the de minimis rule. Now in this case

the cyber attack has caused a damage related to infrastructure and unrecoverable data

amounting to €45-50 million.67

[3.3.3.] Test of immediacy satisfied

[¶31.] A cyber attack is considered as force because of their immediate consequences as it

gives the states a limited time and opportunity to react. In this case the malware corrupted the

master boot records, to the extent that nearly 90% of the information was “non-recoverable”.68

61 Nicargua vs. United States, (1986) I.C.J. 14, para 202.

62 Art 2(4), The Charter on United Nations, 1945.

63 See Advisory Opinion on Legality of the Threat or Use of Nuclear Weapons, (1996) I.C.J. and Ian Brownlie, International Law and the Use of Force by States (1963), p. 362, 431. 64 Nicargua vs. United States of America, (1986) I.C.J Reports 14, para 195.

65 Avinder Singh vs. State of Punjab, (1979) 7 AIR 321 (SC).

66 See Michael N. Schmitt, Computer Network and the Use of Force in International Law: Thought on a Normative Framework 37 Columbia Journal of Transnational Law 885, 914 (1999). 67 Moot Proposition, para 38.

68 Moot Proposition, para 37.

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[3.3.4.] Test of directness satisfied

[¶32.] If the nexus between the initial act and its outcome is directly linked, then the attack

would amount to force. In this case the malware’s was directed to only destroy the boot drive

and the information.69

[3.3.5.] Test of invasiveness satisfied

[¶33.] Invasiveness refers to the extent to which an attack invades into the cyber systems

contrary to the interests of the State. In this case the malware was directed intentionally to two

specific locations in order to destroy the information as against the host state.70

[3.3.6.] Test of ‘state involvement’ satisfied

[¶34.] If a nexus between the state and the attack is established then the cyber attack is

characterized as force. In this case the malware which was used in the hacking of the computers

has been traced to IP addresses within Riesland’s territory that are associated with Riesland’s

computer infrastructures.71 Moreover it is evident that Riesland supported the attack from the

fact that significant segments of code in the malware are exact replicas of those used in the

Bureau’s ‘Blaster’ program which are otherwise not known use or available to the general

public.

[¶35.] Thus, the cyber attacks against the computer systems of The Ames Post and Chester &

Walsingham are attributable to Riesland , and constitute an internationally wrongful act for

which Amestonia is entitled to compensation.

69 Ibid.

70 Ibid.

71 Moot Proposition, para 38.

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PRAYER

In light of the facts stated, arguments advanced and authorities cited, the Defendants humbly

prays before this Hon’ble to adjudge and declare that:

[1.] The appeal filed by Govt. of Indie Island is not maintainable.

[2.] The corporate veil in the present case should not be lifted.

[3.] CPL and ACL should not be made absolutely liable for the loss cause.

The Hon’ble Court may also be pleased to pass any other order, which the Court may deem

fit in the light of justice, equity and good conscience.

All of which is most humbly prayed.

SD./-

COUNSEL for DEFENDANTS