MSFT already operates in Europe via subsidiaries for a whole host of reasons. But hiving certain assets off in a subsidiary is very rarely effective to avoid laws and regulations that apply to the parent. The parent controls the subsidiary so a court or regulator having jurisdiction over the parent could order it to get what it needs from the subsidiary. This is particularly so in the US, which is kind of known for enacting overreaching extraterritorial laws.
> The parent controls the subsidiary so a court or regulator having jurisdiction over the parent could order it to get what it needs from the subsidiary.
But what if the parent’s jurisdiction orders the parent to order the subsidiary to do something illegal in the subsidiary’s jurisdiction? If local management obey the order, they risk being prosecuted by their jurisdiction’s authorities-so they’ll likely refuse. What is the parent going to do then? Fire them? But will any replacement act any differently? “Is this job worth going to prison over?” Most people answer “no”, and people who answer “yes” won’t last, because you can’t run a subsidiary from a prison cell.
I think the real issue here is that the US gets away with it because the EU is still so dependent on the US (see NATO) they can’t push back fully, at some point a political calculation takes over. So it could be that the US parent orders the subsidiary to do something illegal under EU law, and then the EU authorities choose to ignore it.
The laws I have read used the term “effective control”; if a shareholder is able to control the org (eg can replace the CEO or board), they are obliged to comply with government orders regarding that org.
