Discrimination against foreign companies

Prejudicial treatment of non-domestic firms
Active prejudice towards foreign business interests

Nature

Since the juridical personality of a company determines the degree of legal personality the company will enjoy within a territory, including the right to engage in various types of commercial activity and the ability to appear before the local courts as plaintiffs or defendants, the non-recognition of foreign companies severely restricts their ability to engage in commercial activity and compete with the local companies.

Background

Discrimination against foreign companies emerged as a significant global concern in the late 20th century, as international trade and investment expanded rapidly. High-profile disputes in sectors such as telecommunications and energy highlighted how regulatory barriers, biased procurement, and unequal treatment impeded market access. The problem gained further prominence through World Trade Organization cases and multinational business advocacy, revealing persistent patterns of protectionism and prompting calls for more transparent, equitable frameworks in cross-border commercial relations.

Incidence

Discrimination against foreign companies is a persistent issue affecting international trade and investment across both developed and developing economies. Such practices include biased regulatory frameworks, exclusion from public procurement, and targeted investigations, which collectively hinder market access and fair competition. The problem is significant, with numerous multinational corporations reporting barriers in sectors ranging from technology to manufacturing, impacting global supply chains and economic growth.
In 2023, the European Union launched an investigation into China’s electric vehicle sector, citing discriminatory subsidies and market access restrictions against European manufacturers. This case highlighted ongoing concerns about unequal treatment of foreign firms in China’s rapidly expanding automotive market.

Claim

Discrimination against foreign companies is a grave and urgent problem that undermines fair competition, stifles innovation, and damages global economic growth. Such practices breed mistrust, discourage investment, and fuel protectionism, ultimately harming consumers and workers worldwide. Ignoring this issue threatens the integrity of international markets and erodes the principles of equality and openness that drive progress. Immediate action is essential to ensure a level playing field for all businesses, regardless of origin.

Counter-claim

There are undoubted economic effects of foreign ownership of companies for which discrimination may be necessary. Export markets are frequently allocated by the parent company. The subsidiaries are prevented from competing against the parent in other countries. Development of new product lines cannot always be undertaken freely. Within the foreign controlled corporation, the price charged to its subsidiaries for goods or services and the profits trasnferred many no be a true relection of the market. This gives the multinational company the opoortunity to declare its profits in the country it chooses and in this way opt for more favourable tax rates.