Fictional Entities, Future of Voluntary Law, Introduction To Voluntary Law (Book)

Fictional Entities


Headless Sightings by Krocky Meshkin

Legally recognized fictional entities, as we know them today, are creations of state laws. These entities exist in two basic forms: personal and collective. Personal fictional entities are alter-egos of a natural person. For example, a business owner may provide a fictional identity for one or more businesses she owns and controls. Each business may be given a separate name, bank accounts, and financial records. Depending on the status of registration of the fictional entity with state authorities and its compliance with state regulation, the owner or owners of the fictional entity may be protected from liability for non-criminal acts attributed to the fictional entity. When the fictional entity has more than one owner, it is a collective entity.

In general, fictional entities can be justified for their supposedly socially beneficial purposes, including (for example) encouraging passive investment in collective enterprises, development of business enterprises as transferable assets, providing collective redress for harms committed by agents of the collective, and many other purposes. This post does not concern state-created fictional entities, and therefore will not spend words considering the merits or detriments of such beasts. The topic at hand is recognition and treatment of fictional entities under voluntary law. Debating the merits of generic collective entities under voluntary law is pointless for any political purpose, because nobody will be forced to recognize a form of collective against their will. We might expect, however, that the merits of particular collectives or legal forms for collectives might be hotly debated in voluntary law societies.

Fundamentally, in a stateless legal system based on personal sovereignty, the legal effect of the fictional entity depends on its recognition under the laws of each person encountering it. With its characteristic infinite adaptability, voluntary law can provide for recognition of any form of fictional entity, and any rules for treatment of such entities. Recognition cannot be forced on those who do not hold to those laws under which the recognition is granted. However, social pressure to recognize certain forms of fictional entities may arise. For example, laws enabling socially adept collectives will tend to be favored, creating social pressure for recognition of those laws. Indeed, we might think of states as the result of a sometimes violently aggressive social process for recognition of a fictional collective entity: namely, the state in its various forms. But under voluntary law, social pressure is rooted in personal sovereignty and non-aggression, whereas state-sanctioned pressure is aggressive by nature of being rooted in the concept of state sovereignty over a territory.

Given that social pressure for recognizing collective entities can arise under voluntary law, what forms of voluntary law will provide for the most vigorous forms of collectives, capable of encouraging widespread adoption of those forms? Will it be the corporate form, similar to that recognized by states? Only time will tell, but there are reasons to think that the prevalent form will differ from statist corporate laws in some fundamental respects, most obviously in matters of taxation or tolls, determination of liability for corporate action, and assertion of collective property rights. In other respects, collectives operating solely within voluntary law societies might (or might not) resemble corporations and other collectives based in state law. For example, such entities may have officers, employees, and shareholders, and shares of some types of collectives might be traded in open markets similar to stock exchanges. Or not; these collectives can be organized in any useful way that a group of people is capable of agreeing to.

Before speculating about the future of collective entities, some fundamental matters need to be considered. Personal sovereignty of natural persons is at the root of voluntary law. By definition, a fictional entity is not a natural person, and thus, cannot possess the sovereign power to make its own law. Any system in which a fictional entity is granted lawmaking power as if it were a natural person falls squarely outside of the bounds of voluntary law, by definition. The grant of lawmaking power to fictional entities is well-known in other systems, including all systems that rest primarily on dominion over a territory (empires, republics, democracies, city-states, etc.). States are themselves the premier example of such fictional entities, abrogating for themselves the power to make law in a territory. But no fictional entity can ever possess the legal status of a natural person under voluntary law, by definition. Every natural person can have but one natural identity.

Some natural persons may, nonetheless, prefer to adopt different identities for different purposes, even within voluntary law societies. For example, different identities may be desired for convenience in dealing with disparate groups of people, or because the presence of split personalities in the same person makes the maintenance of a single identity impractical.

Let us presume that different identities can, in some cases, be adopted and used legitimately without fraud. Whatever the motivation for adopting the different identities, each of the multiple identities is necessarily tied to the same natural person. Because we have assumed a lack of fraud, it follows that whenever a dispute involving the natural person arises, the multiple identities and the respective laws adopted by those entities will be known to all parties involved. If the natural person has adopted conflicting laws, under TROTWET the least advantageous one of these laws will be the one used for resolution of the dispute at hand. Any other approach would allow disputants to pick and choose from alternative laws to apply to different disputes, turning voluntary law into a useless game of words. If voluntary law is to have any social utility, the rule of “weakest law” for each natural person (or something like it) must be enforced. This means that although a person may adopt any number of laws and identities, only the weakest one of their adopted laws will be considered in the circumstances of any particular dispute. Each person can be allowed only one controlling law, in any given circumstance — unless, of course, all parties to a dispute consent to the application of some law other than the one determined to be the weakest.

When a fictional entity is merely an alter ego of a single natural person, TROTWET works well as the prevailing rule and should suffice for regulatory purposes. However, many collective entities exist that are not under the control of a single person, being regulated by some structure of rights distributed among members or shareholders, for example. Collective fictional entities cannot be equated to natural persons, so how could they have legal status under voluntary law? There are infinite possibilities, limited only by the imagination of any two or more natural people who adopt their own laws, and the jurists who may mediate disputes between such persons. That said, even at this early stage, certain general possibilities are clear.

One possibility is recognition by contract. Suppose a natural person “Steve” organizes a collective “Peach” to develop and sell quantum computers and subspace communicators. The rights and responsibilities of “Peach” can be defined by contract between any two or more persons, and may vary depending on context. For example, two people who have adopted a compatible form of contract law can execute an enforceable written agreement in which one person is an officer of the fictional entity “Peach” and the other is a stakeholder of one type or another, for example, an independent contractor, investor, supplier, or customer. Both the officer and the stakeholder agree to treat “Peach” as if it were a person in the event of any dispute arising under the agreement. Naturally, the agreement will also include a choice of law clause to eliminate uncertainty by the law under which the agreement will be interpreted, and other provisions for dispute resolution. The choice of law may also specify a form of governance for the entity. Thus, for purposes of disputes arising under the agreement, and only for such purposes, the entity “Peach” can readily be accorded a status that is equivalent to that of person by those who have voluntarily agreed to do so. If the contract somehow lacks a choice of law provision, its legal effect can be evaluated under TROTWET, based on the laws of the natural persons who have executed it.

Another possibility is recognition of fictional entities by adoption of law. This may be used instead of, or in conjunction with, recognition by contract. Such voluntary laws may take various forms. For example, a law may state that the natural person adopting the law will recognize the legal status of any fictional entity that is currently certified as complying with a specified set of standards for personal and/or collective fictional entities. The law may also specify the certifying agency, or a class of acceptable certifying agencies. There is nothing to prevent a voluntary law from referencing a state law regarding fictional entities. For example, a person is not prohibited from adopting a law that recognizes all legal entities in good standing with the California Secretary of State, for purposes of the person who adopts the law only. It might sometimes be convenient for people to adopt laws that grant recognition to state-created entities. Such recognition enables the entity to resolve disputes with the grantor under voluntary law. Under some circumstances (e.g. in societies gradually transitioning to voluntary law), state-sanctioned entities might be eager to receive such recognition, for example to increase their customer base and avoid unnecessarily expensive legal process, without running afoul of state requirements for collective entities.

To avoid uncertainty regarding choice of law, personal recognition of a class of fictional entities could, and probably would, be accompanied by a choice of law provision. For example, a person’s law might limit recognition to entities that agree to settle disputes under some particular statement of voluntary law. Without such a clause in the voluntary law that provided recognition to the fictional entity, the recognition would be meaningless. Status as a person within voluntary law society requires, by definition, that the person has adopted a law applicable to the dispute at hand. Fictional entities cannot adopt laws, not being natural persons. Therefore, to be accorded legal status under voluntary law, the applicable law of the fictional entity must be defined by each natural person who chooses to recognize that entity. When a dispute between the fictional entity and a voluntary law society member arises, the fictional entity could agree to resolve the dispute according to the society member’s law. If that option was not acceptable, and it could not negotiate some other settlement of the matter, the fictional collective entity could forgo legal recognition under voluntary law in the matter. This would essentially remove any “corporate shield” erected to protect the property of the entity’s members. In general, the legal rights of collective fictional entities under voluntary law are subject to the laws of those they come in dispute with, without any restraint from operation of TROTWET.

Naturally, some voluntary law society members would choose to not recognize collective entities. Others, unrestrained by TROTWET, might recognize collective entities subject to unacceptably onerous liability laws. Therefore, it is inevitable that certain collective entities would not be recognized under voluntary law, even if voluntary law is widely adopted. This would have consequences for members or agents of the collective who possess reputations under voluntary law. To preserve those reputations, such persons might need to subject themselves to legal process under voluntary law even in cases where they are not directly responsible for the underlying harm. It will therefore often be necessary to determine whether or not, and to what extent, particular members of a collective are liable for harms committed by other members of the same collective.

If the collective is not legally recognized, the voluntary law to be applied by the jurist must boil down to determining the law applicable between the claimant and defendant, as two natural persons who have both adopted voluntary law. Whether or not a member of a collective is responsible for actions of another member therefore becomes a function of the member’s law and that of the person bringing the claim, under conflict of law rules such as TROTWET. Each member of the collective is free to choose his own law regarding “agency,” meaning the circumstances when one becomes legally responsible for the actions of another. Each can limit liability for actions by other members of the collective by adopting a suitable law regarding agency. But limitations that are too severe will likewise severely limit ability of those who hold to the limitations to recover from others. To provide reasonable recourse from harm by collectives, conspiracies or other agencies, most people will therefore adopt laws that permit “joint and several” recovery for harms against each and every member of a group of people (including both principals and their agents) that have caused the harm. “Joint and several” means that each person in any way responsible for the harm can be held fully accountable to pay for the entire harm. Without laws providing for joint and several liability, it would be trivial for collectives and conspiracies to exercise coercion without effective recourse.

For example, suppose a collective “Evil, Inc.” wishes to harm another while shielding all of its principals from liability under voluntary law. Each of Evil, Inc.’s principals (e.g., controlling shareholders and officers) could renounce joint and several liability, such as by limiting liability to direct actions only. Then, Evil, Inc. could hire a special agent (who could be an outlaw, or a society member with lax laws) to perform the heinous deeds desired by the principals, for example, dumping hazardous waste to avoid costs of proper disposal. Under TROTWET, principals of Evil, Inc. who did not personally direct the agent could not be held accountable for the actions of the special agent under voluntary law, even if they had tacitly approved the action. Actions for recovery would be limited to proportional recovery from the agents and their direct supervisors, one or all of which might be outlaws, or relatively poor; thus would legal redress be frustrated. A small fraction of the legal damages might be paid, if at all; while the beneficiaries of Evil’s conduct would not suffer any legal consequences. However, these beneficiaries would not enjoy tranquility for long. If the harm was serious enough, another collective such as “Revenge, Inc.”, will step in to exact revenge. Principals with overly lax laws regarding liability for actions of their agents will make tempting victims for the same treatment by others. For example, the executives of Evil, Inc. might find hazardous waste being dumped on their own properties by agents of Revenge. Thus, to avoid being victimized by the agents of their adversaries, principals would adopt reasonable laws regarding agency liability. Such laws could take various different forms, but would generally make principals jointly and severally liable for actions of agents made to further the principal’s interests. The agents would of course also be liable for their actions, and to protect themselves might demand indemnity from the principals, before accepting their offer of employment. Thus, liability for collective or other agency action can naturally be imbued by social pressure and enforcement of principles against hypocrisy, such as TROTWET, just as can liability for any other anti-social or destructive behavior.

Property can be held in the name of a collective entity, with the legal effect depending on the law of the person making a claim on the property. If the claimant recognizes the collective entity, and if this recognition is not contested by any representative of the entity, then the property can be used to satisfy a judgment under voluntary law, or as the basis for a counter claim by the entity. If the claimant does not recognize the entity or its recognition is not accepted, then the property can be reached only indirectly as an asset of a member of the collective, and cannot be used as the basis for a counter claim. For example, if Ted does not recognize PollutCo, and PollutCo’s agents and officers do Ted some harm, Ted can sue the agents and officers if they hold to voluntary law. If Ted wins a judgment, it can be satisfied from the assets of the agents and officers named in the suit. However the jurist may consider the money held in the name of PollutCo to be effectively owned by the defendants, because PollutCo is merely an unrecognized fiction in the case at hand. So if the employees and officers do not pay, the jurist may order that a lien be attached to the PollutCo’s accounts until the judgment is satisfied. This lien would not, of course be recorded in state records or enforced by state sheriffs, if a state exists and has registered PollutCo. It would be recorded by a private recorder of voluntary law liens, and enforced by a contingent-fee peace officer, a.k.a a “bounty hunter.”

Conversely, PolluteCo cannot make voluntary law claims against anyone that does not recognize it as a legal entity, because it has no inherent status under voluntary law except as a fiction. For example, it cannot assert property rights against those who do not recognize it as a legal entity. Accordingly, PolluteCo might protect property by appointing a natural agent (or agents) to hold it in trust for the benefit of PolluteCo. Each of these agents would, by contract and/or adoption of law, recognize PolluteCo as a legal entity and grant it certain rights related to the property, under a license or other agreement. Each of the agents would also adopt a form of property law that that is perceived as mutually beneficial by the pertinent executive of PolluteCo and by the agent. All legal enforcement of PolluteCo’s property rights would be done by the applicable agent, under that agent’s chosen voluntary law. The benefit of any judgements received would flow to PolluteCo by virtue of the trust agreement with the agent.

Just as natural persons can recognize fictional entities, can fictional entities recognize each other under a sort of quasi-voluntary law? Not without being under a legal system other than voluntary law. Law making by fictional entities belongs to another class of legal systems that includes law making by territorial-based fictional entities (namely states), and law making by property-based fictional entities (for example, by private defense/justice collectives under anarcho-capitalism). It may be convenient for fictional entities to deal with one another as if each were a sovereign natural person or subject to some higher authority that governs collective entities only.  Therefore, even in a society otherwise wholly under voluntary law, we may expect disparate classes of legal systems to co-exist for indefinitely long periods of time. In a state of healthy coexistence, each legal system would be restricted to its natural and proper domain: voluntary law to legal issues involving one or more natural persons, and fictional law to issues exclusively involving fictional entities. Laws from one system might influence laws in another, but would not be directly applicable in alien domains.  Laws covering fictional collectives might fall into two general classes: collective-voluntary law, in which each collective is sovereign and adopts its own laws effective against other collectives under a conflict-of-laws regime such as TROTWET, and collective-delegated law, in which associations of collective entities delegate sovereignty over law making for the entire association to a special collective.

Modern corporate governments, such as the United States, may be precursors of collective-delegated systems compatible with voluntary law society.  If the United States were to recognize personal sovereignty as supreme, and rewrite its laws to govern participating collective entities only, it could persist indefinitely with voluntary law and collective-voluntary law systems, without any tension or clash between competing areas of sovereignty.  Naturally, that is a big “if.”  Yet, if the mass of its citizenry were willing to govern themselves as individual sovereigns, there can be little doubt that institutions of the old empire such as remained useful for organizing collective entities would seek to play the role of sovereign over the collective fictions that remained outside the sphere of voluntary law.  If these vestigial agencies hold to the non-aggression principle (as would likely be the case if they recognized the supremacy of personal sovereignty and most individuals practiced voluntary law) they will compete for this sovereign role against more loosely-organized communities of fictional entities organized under a collective-voluntary law system.     It may be that some social functions requiring collective laws are better served by one  class of collective law or the other, so perhaps both classes could co-exist.      This coexistence of voluntary law,  collective-voluntary law, and collective-delegated law will be able to accommodate highly complex legal and social situations no doubt worthy of an entire branch of study, while always preserving the sovereignty of the individual against that of the collective.  Individuals would be safely beyond the reach of coercive collective power, but collective social power would not be extinguished.  Legal process would come in two fundamental flavors: individual versus individual, and collective versus collective.  This blog focuses mainly on voluntary law, which is concerned principally with processes exclusively involving individual sovereigns.

Nonetheless, legal process between an individual and a collective could also occur under voluntary law, by mutual consent.  Whenever a voluntary law society member decides to recognize a fictional entity by adoption of law, whether or not the fictional entity is also recognized by a state or by some other legal system by and for fictional legal entities, there is a possibility of an individual versus collective process. For the recognition of the collective to have practical effect, it must be agreed to by a managing principal of the fictional entity, either by preexisting agreement or by agreement at the time a dispute arises. Such an agreement may be made whenever the voluntary law member and the managing principal of the fictional entity both believe the agreement confers some advantage. For example, the managing principal might believe that participation in voluntary law provides improved public relations and more efficient legal process. A voluntary law member might also benefit from the more efficient legal process, and might believe that the voluntary law provides more just and socially beneficial outcomes than possible under state law. To a state regulator of fictional entities, voluntary law appears as merely another tool for dispute resolution, akin to private mediation and arbitration. The use of voluntary law by collective entities might find political opposition from state-licensed lawyers or other government-assisted legal cartels threatened by private dispute resolution beyond the reach of their monopolies. Such resistance would merely reflect political opposition to changes in the status quo, and not any fundamental shortcoming in dispute resolution under voluntary law. If voluntary law is to become widespread, it will certainly be accommodated by collective entities of all types, both state-recognized and not.

Accommodation of voluntary law by collective entities will depend on recognition of the collective entity by each individual of the multitudes who will practice voluntary law. Just as in other areas, social pressure can be brought to bear on collectives by the individual choices of society members in their adoption of law. It is impossible to predict exactly how collective entities might evolve, or what they might become, under this social pressure. For now, we can foresee some exciting possibilities, such as corporations and cooperatives competing for recognition from individual society members by developing and promoting more sensible and popular laws. The most successful collectives would attract the most members and supporters, and would thrive, displacing older forms based on political coercion. We can foresee systems for social cooperation in which equal rights, individual liberty, efficient division of labor, and complex massive collective projects can all thrive together, without any coercive taxation or regulation. We can foresee many diverse types of collective organizations coexisting and enabling very different lifestyles to be lived, side by side. We can foresee the end of wasteful paperwork and legal machinations to avoid paying taxes or to comply with regulations motivated by powerful special interests. We can foresee the end of cartels, corporate welfare, and other special privileges that enable the few to claim ownership or control over the many, by gradual abolition of the monopoly at the root of those evils.

Insisting on the sole sovereignty of the natural person will not disable collective entities, or banish them from voluntary societies. Quite the contrary. It is this true democracy, this rule by every person over herself under law published to all, which will free the collective to take on amazing new forms and accomplish unimaginably great and more perfectly moral things.

* * *

Photo “Headless Sightings Exhibit V” Credit To Krocky Meshkin

Some Rights Reserved (Photo) under Creative Commons

Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

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