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Published online by Cambridge University Press: 04 April 2017
[Reproduced from United Nations Document ST/ECA/190 of August 1973.
[On July 28, 1972, the U.N. Economic and Social Council requested the Secretary-General to appoint a group of eminent persons to study the role of multinational corporations and their impact on the process of development. This report was prepared by the Department of Economic and Social Affairs of the U.N. Secretariat to facilitate the work of the group of eminent persons.
[The report consists of four chapters and three annexes. Chapter I is entitled “Concepts and Dimensions”, Chapter II, “The Nature of Multi-national Corporations, and Chapter III, “Impact and Tensions”. The annexes provide excerpts from relevant decisions of U.N. bodies, alternative terms and definitions of multinational corporations, and statistical tables. The entire report may be purchased for $10.00 from the U.N. Sales Section (Sales No. E. 73 . H.A. 11).]
1 Bolivia, Chile, Colombia, Ecuador, Peru, Venezuela.
2 Andean Group, Historia Documental del Acuerdo de Cartagena, (Acuerdo de Cartagena, Junta).
3 The most recent instances are the investigations of the Sub-Committee on Multinational Corporations of the Senate Foreign Relations Committee and the Sub-Committee on International Trade of the Senate Committee on Finance.
4 Originally introduced by Senator Hartke as Senate Bill 2592 on 28 September 1971, and by Representative Burke on the same day in the House of Representatives as Bill 10914, and re-introduced as the Foreiga Trade and Investment Act of 1975 - H.R. 62 in the United States House of Representatives and S.151 in the United States Senate.
5 United States Department of State, Bulletin, 30 April, 1973.
6 See, for example, publications by the Emergency Committee for American Trade, The Role of the Multinational Corporation in the United States and World Economies (Washington. D.C., 1972), by the United States Chamber of Commerce, United States Mutinational Enterprise: Report on a Multinational Enterprige Survey (1960-1970), (Washington. D.C., 1972). and by the National Association of Manufacturers of the United States, Comments on International Activities of United States Multinational Corporations (New York,. 1973).
7 See, International Chamber of Commerce, Guidelines for International Investment (Paris, 1972).
8 Andrews, Kenneth R., “Can the best corporations be made moral?”, Harvard Business Review, May-June 1973, p. 57.Google Scholar
9 Bauer, Raymond A. and Fenn, Dan H., “What is a corporate social audit?, Harvard Business Review, loc. cit., p. 37.Google Scholar
10 For example, Linowes, David I., “An approach to Socio-Economic Accounting” in The Conference Board Record, November 1972 Google Scholar. Also, Nader, Ralph and Green, Mark J., eds., Corporata Power in America - Proceedings of Ralph Nader’s Conference on Corporate Accountability (New York, 1973)Google Scholar. According to Rodman C. Rockefeller, president of the International Basic Economy Corporation, “by creating wealth, foreign business…overlooked a major area of social accountability”, New York Times, 14 April, 1972.
11 See, International Labour Organisation, Multinational Enterprises and Social Policy, op. clt.
12 Programmes regarding labour participation in decision-making have been put forward by some authors. See, for example, Angelos Angelopoulos, “Towards a tripartite administration of large-scale enterprises”, Annals of Public and Co-operative Economy, (Liege, January 1973). It is suggested therein that the Board of Directors of large corporations should be tripartite, consisting of representatives of shareholders, employees and personalities nominated by the government and elected by the other two groups.
13 For example, the International Confederation of Free Trade Unions approved such a code in July 1969.
14 For example, the United States Foreign Assistance Act of 1961, as amended, contains a provision (kncrwn as the Rickenlooper Amendment) to the effect that “aid will be cut off for any country that expropriates and has not within six months of such action taken appropriate steps to discharge its obligations under international law”.
15 The Calvo doctrine was named after a distinguished Argentine jurist of the 19th century. Calvo argued that a state could not accept responsibility for losses suffered by foreigners as the result of civil war or insurrection, on the ground that to admit responsibility in such cases would be to threaten the independence of weaker states and would “establish an unjustifiable inequality between nationals and foreigners”.
To prevent appeals by aliens to their home governments for diplomatic intervention in behalf of their contract rights, a number of Latin American states, during the latter part of the 19th century, adopted a policy of writing into their contracts with aliens a clause, known as the “Calvo Clause”, the general tenor of which was that the alien agreed that any disputes that might arise out of the contract were to be decided by the national courts in accordance with national law and were not to give rise to any international reclamation.
The decisions of international arbitration tribunals and of mixed claims commissions upon the subject have been conflicting, some upholding the Calvo Clause as a bar to the interposition of the alien’s government, others rejecting it on the ground that the act of the alien can not restrict the rights of his government under international law.
As Latin American governments generally interpret the Calvo Clause, they would deny all local rights and remedies to any foreign-owned subsidiary if the subsidiary called on a foreign government in a dispute with its host government.
16 Such conflicts have arisen in the past in the settlement of questions involving national security, anti-trust, export, securities and banking regulations. In the case of the United States, for instance, the basic rule was given in the Alcoa decision in which a Canadian corporation was held to have violated the Sherman Act by entering into agreements outside the United States which were intended to restrict exports to the Uhited States. The Justice in the United States Second Circuit Court of Appeals stated that “it is settled law…that any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders that the State reprehends”. (United States v. Aluminum Co. of America, 148 F.2 and 446, 443, 2nd Circuit Court, 1945). The logical application of this principle to two nation states led to the conflict in the case involving Imperial Chemical Industries (United Kingdom) and Du Pont (United States).
17 See Vernon, R., Sovereignty at Bay, op. cit. p. 279 Google Scholar, P. Kindleberger, American Business Abroad (New Haven, 1969).
18 For example, the code of behaviour to facilitate the inflow of foreign investment proposed by the International Chamber of Commerce contains a number of guidelines for host countries.
19 Several countries require affiliates to float shares on the local stock-exchanges (e.g. Brazil, Chile, Colombia, Jamaica, Mexico). Some foreign corporations have complained, however, that the presence of a narrow local capital market in many host countries inevitably leads to the accumulation of such shares in few powerful local hands, thereby rendering local participation on a broad basis impossible. When such a concentration occurs, conflicts frequently develop between local ownership interests favouring a high dividend-payout policy and foreign interests which opt for reinvestment of profits and growth.
20 See Hirschman, A.O., “How to disinvest in Latin America, and why”, Essays in International Finance, No. 76, (Princeton, International Finance Section, November 1969).Google Scholar Dr. Prebisch proposed that such an agency should be established within the Inter-American Development Bank. The International Chamber of Commerce in op. cit. recommends that the host country should “take appropriate measures, principally by encouraging the creation or development of an effective capital market, to facilitate the purchase of equity in domestic and foreign-owned enterprises by local interests” (Article 11(3)(c)).
21 Originally proposed for Canada, the purpose of the corporation would be to procure sufficient management skills and capital to undertake new ventures; see W. Gordon, Chairman of the Royal Commission on Canada’s Economic Prospects, Final Report, (Ottawa, 1958). See also I.A. Litvak and C.J. Maule, op. cit., p. 41.
22 Report of the Task Force on the Structure of Canadian Industry, op. cit.
23 A discussion of the difficulties resulting from such practices is included in “Transfer of Technology” (UNCTAD, TD/107), 29 December 1971, and Constantine V. Vaitsos, “Considerations on Technological Requirements in Developing Countries, with Observations on Technology Licensing Agreements”, (United Nations Industrial Development Organization, ID/WG 150/2, 21 April, 1972).
24 Kenvete, B.D., “The Africa Experience: Iron and Steel in West Africa”, pp. 201-286 Google Scholar, and “Multinatioaal invertment in Africa”, pp. 287-302, in Multinational Investment in Latin America (Round Table, Inter-American Development Bank, Bogota, Colonoia, April 1968).
25 See Tax Treaties between Developed and Developing Countries, Second Report, 1970 (E/4936, ST/ECA/137), P. 67, where the establishment of an international panel of tax experts to give advice to developed and developing countries 18 recommended.
26 United Nations, Department of Economic and Social Affairs, Tax Treaties Between Developed and Developing Countries, First Report, 1969 (E/4614 ST/ECA/110); Sacond Report, 1970 (E/4936, ST/ECA/137); Third Report, 1972 (ST/ECA/166). The Fourth Report is available in mimeograph.
27 The United States Secretary of the Treasury suggested in an address to the International Fiscal Association, on 4 October, 1971, that “international codes of conduct should be developed and enforced with respect to international fiscal matters… We should promptly explore the feasibility of creating a continuing secretariat with a staff of experienced fiscal experts and more frequent and thorough discussions among the representatives of participating nations. This might be accomplished under the aegis of an existing international organization or through the creation of a new organization, perhaps affiliated with an existing body.”
28 The United Nations Conference on Trade and Employment, held at Havana, 1947, drew up a charter for an International Trade Organisation, known aa the Havana Charter, to be submitted to the governments represented at the Conference. See Final Act and Related Documenta (New York, 1948).
29 Economic and Social Council resolution 375 (XIII) was adopted in 1951. Pursuant to that resolution, the Draft Articles of Agreement prepared by the Ad Hoc Committee were submitted to the Council in 1953. When no agreement was reached in 1955, the Council decided to suspend examination of the question.
30 UNCTAD, Restrictive Business Practice in Relation to the Trade and Development of Developing Countries: Report of Ad Hoc Group of Experts on Restrictive Business Practices (Geneva, 1975); Organisation for Economic Co-operation aad Development, Market Power and the Law: Report of the OECD Committee of Experts on Restrictive Business Practices (Paris, 1910); sec also Fine, Richard I., “The control of restrictive business practices in inter-national trade: a viable proposal for an international trade organization”, The International lawyer (April, 1973).Google Scholar
31 UNCTAD op. cit.
32 Paul Goldberg and Charles Kindleberger, “Taward a GATT for investment: a proposal for supervision of the international corporation”, Law and Policy in International Business, (Summer 1970).
33 See, for example, a number of papers presented at the Conference on the International Control of Investment held in Düsseldorf, sponsored by the Institute for International and Foreign Trade Law of the Georgetown University Law Centre, Washington, D.C., to be published by Praeger, New York.
34 See Georga W. Ball, “Cosmocorp: The Importance cf Being Stateless”, Columbia Journal of World Business (November/December 1967), and testimony in Hearings before tha Sub-Committee on International Trade, Committee on Finance, Uhited States Congress, World Trade and Investment Issues, Part I, (Washington, D.C., May 1971).
35 The Commission of the European Communities’ proposal is contained in a special supplement to European Community Bulletin, No. 8, 1970.
36 See, Karl Gleichmann, “The Proposed European Company Law: Implications for Industrial “Relations” in Management Counsellors International. European Labor Relations in the 70’s : An Overview, Part I (Brussels, 1973). Labour participation in corporate policy making has also been an objective of certain international labour unions in their dealings with multinational corporations. For example, The International Metal Workers’ Federation has had a series of meetings with the Board of Directors of VFW-FOKKER since 1970. Among the topics proposed by the Federation for discussion was the creation of a central committee of the Union at the Company’s head office.
37 See, Reports of the Committee on the Peaceful Uses of the Sea-Bed and the Ocean Floor Beyond the Limits of National Jurisdiction, Official Records of the General Assembly, XXVIth Session, Supplement No. 21 (A/8421) and XXVIIth Session, Supplement No. 21 (A/8721).
38 See, International Centre for Settlement of Investment Disputes, Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 4 October 1966 (ICSID/2, 1965),
39 International Centre for Settlement of Investment Disputes, Proceedings: Sixth Annual Meeting, 26 September 1972 (Document AC/72/4, 1 November 1972).
40 International Chamber of Commerce, Rules of Conciliation and Arbitration (Paris, undated). It should be noted that under the conciliation procedure of the International Chamber of Commerce, the parties are at liberty to accevt or reject the proposed terms of settlement. Under the arbitration procedure, the arbitrators are appointed by the Court which does not itself hear cases. The award of the arbitrator is final. See also “International Commercial. Arbitration” In United Nations Commission on International Trade Law Yearbook, Volume III, 1972. (United Nations publication, Sales No. E.73.V.6), pp. 193-250.
