understanding that evidence will be treated as confidential until a decision is made to prosecute.

We have sought to find a practical way to assure that the rule of law is applied to enforce the claims of justice across international boundaries while, at the same time, protecting the rights of the individual against the injustice of premature and illconsidered disclosure.

*

Dept. of State Bulletin, Vol. LXXIV, No. 1926, May 24, 1976, pp. 642-647. For the text of the U.S.-Japan agreement on exchange of evidence in connection with the Lockheed Aircraft matter, see ante, pp. 313-314.

On March 31, 1976, President Ford issued a directive creating a Cabinet-level Task Force, chaired by Secretary of Commerce Elliot L. Richardson, to examine the matter of questionable payments by U.S. corporations to foreign officials, political organizations and business agents. The Task Force is required to report to the President through the Economic Policy Board and the National Security Council. The President directed it to conduct a sweeping policy review and explore additional avenues to be undertaken "in the interest of ethical conduct in the national marketplace and the continued vitality of our free enterprise system."

Weekly Compilation of Presidential Documents, Vol. 12, No. 14, pp. 519-520.

The United States proposed the negotiation of a multilateral agreement dealing with corrupt practices by transnational and other corporations to the second session of the U.N. Commission on Transnational Corporations at Lima on March 5, 1976. The paper submitted by the U.S. delegation contained the following proposals:

1. Resolution 3514 (XXX), approved unanimously by the General Assembly, condemns all corrupt practices, including bribery, by transnational and other corporations, their intermediaries and others involved in violation of the laws and regulations of the host countries. The resolution calls upon governments to take necessary and appropriate measures within their respective national jurisdictions and to cooperate to prevent such corrupt practices. Finally, the resolution requests the Economic and Social Council to direct the Commission on Transnational Corporations to include in its program of work the question of corrupt practices of transnational corporations and to make recommendations on ways and means whereby such corrupt practices can be effectively prevented.

2. The problem of corrupt practices is both a trade and investment problem and, in fact, extends beyond the activities of transnational enterprises. It is primarily the responsibility of each state to set forth clear rules relevant to such activities within their territories-to establish and enforce legislation dealing with the

problem, including clear rules as to the use of agents in transactions with the government. However, the dimensions of the problem are such that unilateral action needs to be supplemented by multilateral cooperation. Coordinated action by exporting and importing, host and home countries is the only effective way to prevent improper activities of this kind. The most effective method of achieving such international cooperation is through an international agreement dealing with corrupt practices.

3. An international agreement dealing with corrupt practices should be based on the following principles:

(a) It would apply to international trade and investment transactions with governments, i.e., government procurement and other governmental actions affecting international trade and investment as may be agreed;

(b) It would apply equally to those who offer or make improper payments and to those who request or accept them;

(c) Importing governments would agree to (i) establish clear guidelines concerning the use of agents in connection with government procurement and other covered transactions and (ii) establish appropriate criminal penalties for defined corrupt practices by enterprises and officials in their territory;

(d) All governments would cooperate and exchange information to help eradicate corrupt practices;

(e) Uniform provisions would be agreed for disclosure by enterprises, agents and officials of political contributions, gifts and payments made in connection with covered transactions. 4. The Commission believes that urgent and serious consideration should be given to the preparation of an international agreement which would establish certain standards and procedures relative to international trade and investment transactions with governments with the aim of eliminating corrupt practices in these areas. Accordingly, the Commission requests that the Economic and Social Council at its sixty-first session give priority consideration to this question and establish a group to which states shall appoint a high level expert taking into account his knowledge of the issues involved to study and prepare, based on the principles set forth in paragraph 3 hereof, recommendations for such an agreement. The report of the group would be submitted to the Economic and Social Council at its sixty-third session. The Center on Transnational Corporations, along with such other organs of the United Nations as the Economic and Social Council deems appropriate, would give full support and assistance to the group in its work.

The Commission took note of the proposal and decided to forward it to the Economic and Social Council (ECOSOC) of the United Nations. It recommended further that the Council consider the matter of corrupt practices on a priority basis and take appropriate action in its sixty-first session.

On August 5, 1976, ECOSOC agreed to establish an Intergovernmental Working Group authorized to prepare an accord to prevent bribery and corrupt practices in international commercial transactions. A White House press statement issued that day

welcomed it as "a direct result of a major U.S. initiative" and "a major step toward an international agreement on bribery." The text of the ECOSOC resolution follows:

RESOLUTION ADOPTED BY THE ECONOMIC AND SOCIAL COUNCIL

[on the report of the Economic Committee (E/5883)]

2041 (LXI). Corrupt practices, particularly illicit payments, in international commercial transactions

The Economic and Social Council,

Recalling General Assembly Resolution 3514 (XXX) of December 15, 1975, which inter alia, condemned all corrupt practices, including bribery, by transnational and other corporations, their intermediaries and others involved, in violation of the laws and regulations of the host countries, reaffirmed the right of any state to adopt legislation and to investigate and take appropriate legal action, in accordance with its national laws and regulations, against transnational and other corporations, their intermediaries and others involved, for such corrupt practices, and called upon all Governments to exchange information and upon home Governments to cooperate with Governments of the host countries to prevent corrupt practices, including bribery, Noting the decision of the Commission on Transnational Corporations contained in paragraph 37 of its report on its second session,

1. Decides,

(a) To establish an Ad Hoc Intergovernmental Working Group to conduct an examination of the problem of corrupt practices, in particular bribery, in international commercial transactions by transnational and other corporations, their intermediaries and others involved, to elaborate in detail the scope and contents of an international agreement to prevent and eliminate illicit payments, in whatever form, in connection with international commercial transactions as defined by the Working Group, and to report to the Economic and Social Council at its sixty-third session, including in its report such other relevant proposals and options as it may decide to submit:

(b) That the Ad Hoc Intergovernmental Working Group shall be composed of 18 members selected by the Council on the basis of equitable geographical distribution; (c) That the Ad Hoc Intergovernmental Working Group shall meet in 1976 and as necessary in 1977, the sessions to be of sufficient duration to permit the completion of its task;

2. Requests United Nations agencies and bodies, especially the United Nations Commission on International Trade Law and the Information and Research Center on Transnational Corporations, to render such assistance to the Ad Hoc Intergovernmental Working Group as it may request;

3. Reaffirms that the formulation of a code of conduct by the Commission on Transnational Corporations should be given the highest priority and that the consideration and action of the Council in the matter of corrupt practices, particularly illicit payments, shall in no way interfere with or delay that priority;

4. Decides further that the report to be submitted by the Ad Hoc Intergovernmental Working Group to the Council at its sixty-third session containing the results of its work, pursuant to paragraph 1 (a) above should be in a form that will enable the Council, if it so decides, to transmit its concrete recommendation or recommendations to the General Assembly for final action.

U.N. Doc. E/RES/2041(LXI), Aug. 11, 1976.

Deputy Secretary of State Robert S. Ingersoll on March 5, 1976, informed the Subcommittee on Priorities and Economy in Government of the Joint Economic Committee of the U.S. proposal made at

Lima, ante, p. 505. In his statement he noted the adverse effects of recent reports of corrupt practices involving U.S. multinationals abroad and said that some recent disclosures of unsubstantiated allegations against foreign officials had created serious foreign relations problems for the United States. Excerpts from his statement follow:

The U.S. Government has taken the position that any investor who makes illegal payments cannot look to the United States to protect him from legitimate law enforcement actions by the responsible authorities of either the host country or of the United States. We support cooperation by the U.S. agencies investigating these cases with responsible foreign authorities seeking information consistent with the requirements of the laws and procedural fairness.

However, the U.S. Government will provide appropriate diplomatic protection to American nationals abroad who are not treated fairly in accordance with international law. We are concerned at threats of extrajudicial sanctions which may be disproportionate to the offense and based on unproved allegations. We do not believe that economic retaliation is an appropriate response to payments which, although controversial, are either lawful under the foreign law concerned, or if unlawful, are subject to specific civil or criminal penalties prescribed by that law. Of course, we also oppose such retaliation for failure to make such payments, as alleged in some recent cases. The Department of State has a responsibility to assist American businessmen who are treated unfairly.

In international discussions of enterprise behavior, the United States has supported two basic principles:

-First, all sovereign states have the right to supervise and regulate the activity of foreign investors in their territory, consistent with the minimum standards of justice called for by international law; and

-Second, investors must respect the laws of the nations in which they operate and conduct themselves as good corporate citizens of these nations, refraining from improper interference in their internal affairs.

[T]he principal responsibility for dealing with criminal acts in foreign countries is that of the governments directly concerned. But we too have a responsibility to make sure that U.S. laws regulating corporate behavior are vigorously enforced, and that official U.S. programs in foreign countries are effectively managed to guard against these practices. The responsible U.S. agencies are already taking significant steps. The Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) are giving the problem vigorous attention, and their efforts can be expected to have a substantial deterrent effect.

The Departments of State and Defense have taken steps to insure that foreign governments who purchase defense articles and

services under the Foreign Military Sales (FMS) program are fully informed of any agents' fees that are included in the price of the goods sold. Under the applicable regulations, the foreign government is notified of any such fee at the time of the Defense offer to sell. If the foreign government responds that the fee is unacceptable, the American supplier is advised that Defense will not consider the fee an allowable cost under the contract.

In several cases foreign governments have established a general policy that contingent fees are not to be allowed on FMS cases. The U.S. Government has responded to that policy by adopting a regulation with respect to such countries that no contingent fee will be allowed as an item for reimbursement unless it is specifically approved in advance by the purchasing government. We believe that our procedures on FMS transactions can be further improved and support the concept of systematic reporting along the general lines of the pending amendments to the security assistance bill. Of course, it is important that any such legislation respect the legitimate need for confidentiality of business information, the public disclosure of which could harm the competitive position of American companies.

We think there are many advantages to a multilateral approach which is based on international agreement both as to the basic standards to be applied in international trade and investment and the procedures to curtail corrupt practices. A coordinated action by exporting and importing countries would be the only effective way to inhibit improper activities of this kind internationally. An international agreement would also help insure that action would be taken against those who solicit or accept payments, as well as those who offer or make them.

As a first step we have negotiated strong language condemning bribery, as part of the voluntary guidelines for multinational enterprises which are being drawn up in the Organization for Economic Cooperation and Development.

However, in the area of criminal law, such as in the matter of bribery, more is needed. Effective action, consistent with individual rights, must be in accordance with established legal procedures. Thus, in this area we favor action pursuant to national law and international agreement.

Deputy Secretary Ingersoll also described U.S. action in providing a framework for bilateral cooperation with foreign law enforcement agencies with which the United States was able to make satisfactory arrangements for the exchange of evidence. See ante, Ch. 6, § 6, pp. 313-315, regarding judicial assistance agreements concerning the matter of alleged corrupt practices of Lockheed Aircraft Corporation. Concerning the Lockheed case, Mr. Ingersoll said: