Iron Bank of Braavos v. The Crown

Piercing the Corporate Veil (or Vale), Game of Thrones Style

Piercing all kinds of things – corporate veils, hearts, ears (maybe with a smaller sword)

So, Season 8 of Game of Thrones is well underway and I realized this may be the last chance I have to write about alter ego liability. While most people who think of GOT don’t think, “Yes, of course! Corporate law!”, I’d like to think it’s because those people are all short-sighted and don’t understand what’s important in life.

Alter ego liability (AEL) can be a boring topic and is sometimes difficult to conceptualize. The more familiar phrase associated with alter ego liability is “piercing the corporate veil.” When a court decides to pierce the corporate veil, it’s saying it will hold the owners of a corporation accountable for the corporation’s actions, ignoring the independent nature of the corporate entity. A similar theory applies to LLCs, so don’t get too comfortable just because you’re an LLC member and not a shareholder.

Whether AEL applies depends on the existence of two factors: (1) a unity of interest, and (2) an inequitable result. U

The Crown or Lannister? One thing is for sure: incest

To determine if there is a unity of interest, the courts look at things like co-mingling or diversion of company’s assets (like personal and corporate money in the same account), whether the company was used as a mere shell for the owners’ benefit, the company’s failure to maintain formalities or an arm’s length relationship with others (like its owners), and its use of labor, services, or assets for the use of its owners.

Finale predictions…

Now, let’s imagine the Royal House—the ruler sitting on the Iron Throne—is a corporation (the “Crown”). The shareholders of the Crown are the Lannisters (at least for the time being). As we know, the Lannisters are constantly using their own money (from their personal bank accounts) pay form the Crown’s expenses, but they’re doing it for their own personal gain and not through arm’s length arrangements that are fair to the Crown. This is all problematic, even thougha Lannister always repays his debts…allegedly.

Just as troublesome, the Lannisters also use the Crown and its resources to fund House Lannister and its personal endeavors – be it marching on other houses using the assistance of the Kingsguard, killing their enemies using the poisons kept in the Red Keep (the Royal House’s residence), or Grand Maester Pycelle’s expertise as an employee of the Crown.

The entire operation makes it look to outside observers like the Crown and House Lannister are one and the same. In other words, it appears that there is such a unity of interest and ownership that the separate entities no longer exist. Factor one for piercing the corporate veil would be met.

Banking on the Law

Why is this a problem? Well, if you recall, the Iron Bank of Braavos (the “Bank”) had lent a considerable sum of money to the Crown and it didn’t look like the Crown would repay it on its own. If the Crown ever defaulted on its obligations and the Bank sued them to recover, then the Bank would likely argue that House Lannister should be personally responsible for repaying the Crown’s debts. Why? Because the Crown’s independent existence is an illusion, maintained, if at all, for the private gain of its owners. If the Lannisters treated the Crown  like it was a distinct and independent entity, then the first factor would not be satisfied and the Lannisters would be protected from the Crown’s debts.

Inequities of Westeros

If the Bank successfully proves the first factor above, then it would move on to the second factor – that an inequitable result would follow by continuing to treat the Crown as a separate entity. After all, why should the Lannisters be able to hide their misdeeds behind the Crown when they’ve treated the Iron Throne, the Royal treasury, and all the resources in Westeros as their own personal assets?

What would prevent other noble houses from taking over the Crown and doing the same, making representations of profit and good standing to third parties only to leave those parties with nothing to recover when the resources are abused?

Game of Thrones Spin Off?

It feels odd to talk about corporate law in a medieval society where such ideas haven’t been developed yet, but I’m guessing that Daenerys Targaryen’s first point of business upon seizing the Iron Throne for herself will be to establish the Kingdom’s first corporate statutes. Now that’s a bingeworthy episode that would upset no one!


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