-the protection of the interests of the partners in industrial cooperation projects, including the legal protection of the various kinds of property involved;

-the consideration, in ways that are compatible with their economic systems, of the needs and possibilities of industrial cooperation within the framework of economic policy and particularly in national economic plans and

programs;

consider it desirable that the partners, when concluding industrial cooperation contracts, should devote due attention to provisions concerning the extension of the necessary mutual assistance and the provision of the necessary information during the implementation of these contracts, in particular with a view to attaining the required technical level and quality of the products resulting from such cooperation;

recognize the usefulness of an increased participation of small and medium sized firms in industrial cooperation projects.

The participating states,

Projects of common interest

Considering that their economic potential and their natural resources permit, through common efforts, long term cooperation in the implementation, including at the regional or subregional level, of major projects of common interest, and that these may contribute to the speeding-up of the economic development of the countries participating therein,

Considering it desirable that the competent organizations, enterprises and firms of all countries should be given the possibility of indicating their interest in participating in such projects, and, in case of agreement, of taking part in their implementation,

Noting that the provisions adopted by the Conference relating to industrial cooperation are also applicable to projects of common interest,

regard it as necessary to encourage, where appropriate, the investigation by competent and interested organizations, enterprises and firms of the possibilities for the carrying out of projects of common interest in the fields of energy resources and of the exploitation of raw materials, as well as of transport and communications;

regard it as desirable that organizations, enterprises and firms exploring the possibilities of taking part in projects of common interest exchange with their potential partners, through the appropriate channels, the requisite economic, legal, financial and technical information pertaining to these projects;

consider that the fields of energy resources, in particular, petroleum, natural gas and coal, and the extraction and processing of mineral raw materials, in particular, iron ore and bauxite, are suitable ones for strengthening long term economic cooperation and for the development of trade which could result;

consider that possibilities for projects of common interest with a view to long term economic cooperation also exist in the following fields:

-exchanges of electrical energy within Europe with a view to utilizing the capacity of the electrical power stations as rationally as possible;

-cooperation in research for new sources of energy and, in particular, in the field of nuclear energy;

-development of road networks and cooperation aimed at establishing a coherent navigable network in Europe;

-cooperation in research and the perfecting of equipment for multimodal transport operations and for the handling of containers;

recommend that the states interested in projects of common interest should consider under what conditions it would be possible to establish them, and if they so desire, create the necessary conditions for their actual implementation.

Principles concerning training of personnel for economic development are stated as follows:

Training of personnel

The participating states, Conscious of the importance of the training and advanced training of professional staff and technicians for the economic development of every country, declare themselves willing to encourage cooperation in this field notably by promoting exchange of information on the subject of institutions, programs and methods of training and advanced training open to professional staff and technicians in the various sectors of economic activity and especially in those of management, public planning, agriculture and commercial and banking techniques;

consider that it is desirable to develop, under mutually acceptable conditions, exchanges of professional staff and technicians, particularly through training activities, of which it would be left to the competent and interested bodies in the participating states to discuss the modalities-duration, financing, education and qualification levels of potential participants;

declare themselves in favor of examining, through appropriate channels, the possibilities of cooperating on the organization and carrying out of vocational training on the job, more particularly in professions involving modern techniques.

For the full text of the Final Act of the CSCE, see Dept. of State Bulletin, Vol. LXXIII, No. 1888, Sept. 1, 1975, pp. 323–350. For reference to other provisions of the Final Act, see index entries, this Digest, under Conference on Security and Cooperation in Europe (CSCE) (1975).

84

Transnational Corporations, Foreign
Investment, and Tax Law

Transnational Corporations

On March 1, 1975, Secretary of State Henry A. Kissinger made an address in Houston, Texas, in which he discussed transnational corporations and investment disputes. The Secretary said in part:

Most Latin American nations take the position that the laws of the host country are conclusive, and that a foreign investor cannot appeal to his own government for protection. The United States, on the other hand, has insisted on espousing the cause of U.S. investors when they are treated in a way which violates international legal standards. And the Congress has reflected this view in such acts as the Hickenlooper and Gonzalez amendments which cut off aid in the event of nationalization without adequate and timely compensation.

The two legal positions are not easily reconciled. But the United States is prepared to make a serious effort to find a mutually acceptable solution which does not prejudice the principles of either side. .

The United States is prepared in the context of this endeavor: -to work out a new declaration of principles to govern the treatment of transnational enterprises and for the transfer of technology;

-to develop intergovernmental mechanisms to prevent and resolve investment disputes and the problems between governments that arise from them;

-to fashion new modes of cooperation to deal with conflicts of laws and jurisdiction relating to transnational corporations; and

-to encourage private enterprise to make its vital contributions to Latin America in forms congenial to the economic and political needs of the host countries.

*

Dept. of State Bulletin, Vol. LXXII, No. 1865, Mar. 24, 1975, pp. 361-369.

On April 3, 1975, William D. Rogers, Assistant Secretary of State for Inter-American Affairs, rejected a request from a law firm representing United Brands Company that the Department of State testify in a proposed proceeding before the Securities and Exchange Commission (SEC) to prevent disclosure by the SEC of certain activities by United Brands officials in Honduras. The alleged activities included a bribe to Honduran Government officials in return for tax reductions on the company's banana exports from Honduras. Mr. Rogers' letter stated, in relevant part:

There is, as you are aware, considerable present interest in Latin America in the behavior of transnational enterprises. In recent years the United States has participated in discussions of multinational corporate activity in a variety of fora. Although there are issues with respect to multinational corporate activity on which the United States and the developing countries disagree, there has been no significant disagreement on the proposition that multinational corporations engaging in business opportunities in foreign countries must respect the laws of the nations in which they operate, consistent with international law, and conduct themselves as good corporate citizens of those nations, refraining from improper interference in their internal affairs. We have consistently indicated that we cannot and do not countenance illegal activities by U.S. enterprises abroad.

The alleged action of United Brands in Honduras, if it occurred, clearly would fall within the category of impermissible activity. The United States condemns such actions by U.S. corporations in the strongest terms. They complicate our relations with friendly foreign governments and make it more difficult for the United States to assist other U.S. firms in the lawful pursuit of their legitimate business interests abroad.

United Brands' Honduran activities were not conducted with the approval of this Government, and were not in the national interest. Under these circumstances, I believe it would be inappropriate for the Department of State to offer testimony in the proposed proceeding before the SEC under Section 24(b) [of

the Securities Exchange Act] seeking confidential treatment of the information.

Dept. of State File No. P75 0134-1953. Sec. 24(b) of the Securities and Exchange Act of 1934 (15 U.S.C. 78x(b)) authorizes the SEC to hear objections, from a person filing a report, to the public disclosure of information contained therein.

The Department of State, on May 15, 1975, released at its noon press briefing a policy statement regarding reports of illegal activities by U.S. enterprises abroad. The statement was issued following press reports of investigations by the Securities and Exchange Commission concerning contributions by U.S. companies to officials of foreign governments, foreign political parties, and other agents in foreign countries. The following is an excerpt from the Department's statement:

the United States Government does not condone illegal activities by American business and industrial firms abroad. The United States condemns such actions by U.S. corporations in the strongest terms. Moreover, any American firm or individual making unlawful payments to officials of foreign governments cannot look to the Department of State for protection from legitimate law enforcement actions by the responsible authorities of either the foreign country in question or the United States.

At the same time, the U.S. Government believes it would be helpful if host governments would clarify the rules for foreign firms in their countries regarding political contributions and other payments. We assume that the investigation and prosecution of offenses by foreign authorities will be nondiscriminatory; that the penalties will be proportionate to the offense; and that persons or firms found guilty of improper conduct will be treated fairly and in accordance with international law.

On May 27, 1975, the Department of State delivered a note to the Bolivian Ambassador in Washington replying to the request of the Bolivian Government for the cooperation of the U.S. Government in seeking clarification of statements made before the Securities and Exchange Commission by an official of Gulf Oil Corporation with regard to contributions by that corporation to officials in Latin American countries. The U.S. note of May 27, signed on behalf of the Secretary of State, stated, in part:

In addition to responding to the request of your Government, I feel it would be helpful to set out the policy of the United States Government with respect to these matters and to explain the steps being taken by United States Government agencies.

As the United States Government has indicated publicly on several occasions, we do not condone illegal activities of American business and industrial firms abroad. Any American firm making unlawful payments to officials of foreign governments cannot look to the Department of State for protection from legitimate law enforcement actions by the responsible officers of either the foreign country in question or the United States. At the same time, we assume that the investigation and prosecution of United States nationals will be nondiscriminatory, that the penalties will be proportionate to the offense, and that persons or firms charged with improper conduct will be treated fairly and in accordance with the minimum requirements of international law.

The Securities and Exchange Commission of the United States is an independent government entity with specific responsibilities and investigative authority relating to the protection of United States shareholders. Political contributions abroad and payments to foreign officials are not violations of United States law, but failure to disclose such payments may violate Securities and Exchange Commission regulations in certain circumstances. The Securities and Exchange Commission initially began an investigation of Gulf Oil Company because of allegations that undisclosed payments might have been made. In an agreement approved by the Federal District Court, the Securities and Exchange Commission, and the Gulf Oil Corporation, Mr. John McCloy was designated to undertake an internal investigation of the Gulf Oil Corporation, directed at uncovering possible illegal actions that would adversely affect the rights of that corporation's stockholders under United States law. On completion of the investigation, a report will be submitted to the Federal District, the Securities and Exchange Commission, and the Board of Directors of the Gulf Oil Corporation. The Department of State has been advised by the Securities and Exchange Commission that the Commission has no information on the nature and extent of the payments or the identity of the persons to whom they were allegedly made in Bolivia, going beyond that which has already been communicated to the Government of Bolivia by the Gulf Oil Company.

The Government of the United States remains fully cognizant of the deep and serious concern your Government attaches to this issue and wishes to express the desire to be as helpful as possible to it, consistent with the requirements of United States law and regulations and the responsibilities of the affected United States Government agencies. The Department of State has been in touch with officials of the Gulf Oil Company, and they have assured us that an intensive investigation is under way and that Gulf will provide complete information to the Government of Bolivia at the earliest possible moment.

Dept. of State File No. P75 0089-272. The note was in reply to a note of May 8, 1975, from the Bolivian Ambassador in Washington which stated that the