PAPER DRAFT CODE OF PRINCIPLES FOR MULTINATIONAL ENTERPRISES AND GOVERNMENTS (Paper by Mr. Lange) Following is the report made in February 1977 by the EP Committee on Economic and Monetary Affairs and approved by the Parliament on April 19, 1977: On 12 December 1974 the European Parliament adopted a resolution on the basis of an interim report which the Committee on Economic and Monetary Affairs, as the committee responsible had been requested on 10 December 1973, to draw up on the communication from the Commission to the Council (Dọc. 261/73) on multinational undertakings and Community regulations. As the rapporteur, Mr. Leenhardt, has ceased to be a member of the European Parliament, Mr. Lange was appointed to replace him on 30 April 1976. At its meetings of 30 April, 21 May, 13 July, and 19 October 1976 the Committee on Economic and Monetary Affairs considered the various matters relating to multinational undertakings, and on 23 November 1976 it adopted the motion for a resolution by 10 votes to 3. On the basis of an agreement reached by the political groups, the report (Doc. 441/76) was referred back to the committee without debate on 12 January 1977 with the proviso that it should be resubmitted at the February 1977 part-session. In 17 January 1977, the Committee for Economic and Monetary Affairs considered the report referred back to it and on 26 January 1977 adopted the amended motion for a resolution by 9 votes to 1 with 3 abstentions. It instructed the rapporteur to make an oral explanatory statement in the House. The Committee on Economic and Monetary Affairs hereby submits to the European Parliament the following motion for a resolution: Motion for a resolution on principles to be observed by enterprises and governments in international economic activity. The European Parliament -confirming its resolutions on Community industrial policy (Doc. 277/73), the control of concentrations between undertakings (Doc. 362/73), the sec ond (Doc 264/73), third (Doc. 290/74),* and fifth (Doc. 243/76) reports on competition policy, and on the communication from the Commission of the European Communities to the Council on multinational undertakings and Community regulations (Doc. 292/74) ;* -having regard to the report of the Committee on Economic and Monetary Affairs (Doc. 547/76), and referring to the declarations by the governments of the OECD Member States on international investments and multinational undertakings and the Working Document, "Draft Code of Principles on multinational enterprises and governments," drawn up by the European Parliament delegation for relations with the United States Congress, as annexed to this report: -having regard to the need to promote the viability and competitiveness of undertakings of all sizes within the community; -having regard to the fact that international undertakings have a beneficial effect on productivity, technology and management methods while, on the other hand, there are no international legal regulations to solve the problems caused by their size, massive liquid resources and centralization of economic power; 1 OJ No. C 23, 8.3.1974, p. 10. 2 OJ No. C 23, 8.3.1974, p. 19. 8 OJ No. C 11, 7.2.1974, p. 8. 4 OJ No. C 140, 13.11.1974, p. 65. 5 OJ No. C 238, 11.10.1976, p. 35. OJ No. C 5, 8.1.1975, p. 37. 1. Applauds the establishment by the OECD of international guidelines for the conduct of governments and international undertakings based on voluntary implementation of the rules adopted but stresses that binding and legally enforcable norms must be laid down for international undertakings and a framework for their activities defined in one or more international agreements; 2. Calls on the Council and Commission to establish one or more international legally binding agreements through negotiations with the parties concernedgovernments and international organizations and undertakings; 3. Feels that these negotiations should take account of the Declarations by the governments of the OECD Member States on international investments and multinational undertakings and the Working Document "Draft Code of Principles on multinational enterprises and governments" annexed to this report; 4. Notes, however, that such international negotiations are only likely to succeed if, at the same time, appropriate measures are taken at Community level and calls on the Council, therefore, to adopt without delay the proposals submitted by the Commission and supported by Parliament and expects the Commission to submit as soon as possible all the proposals called for by the European Parliament in its resolution of 12 December 1974 but not yet presented; 5. Instructs its Committee on Economic and Monetary Affairs to follow the development of these matters with a view to drawing up, where appropriate, a further report; 6. Instructs its president to forward this motion for a resolution and its annex to the Council and Commission of the European Communities. The annex consists of the September 1976 version of the Lange-Gibbons draft code on multi-national enterprises and governments which is printed in the Tenth Report of Meetings of Members of Congress and of the European Parliament. COMPARISON BETWEEN THE GUIDELINES ADOPTED BY THE OECD AND THE LANGE/GIBBONS DRAFT CODE OF CONDUCT ON MEASURES RELATING TO INTERNATIONAL INVESTMENT 1. General considerations The two documents (the OECD Code and the Lange/Gibbons draft)1 differ in their basic approach to the problem. While recognizing the essentially positive role of international production, the Lange/Gibbons document (L/G) insists on the need to ensure that political requirements take precedence over economic considerations (para. 5). The aim of the OECD text, on the other hand, is defined as follows: "the guidelines (set out hereafter) are designed... to contribute to improving the foreign investment climate" (p. 2). Another important difference is that, whereas the L/G document proposes the introduction of compulsory measures, observance of the OECD's recommendations is envisaged as being purely voluntary (p. 3). The documents agree on one essential point in that they both advocate that international enterprises should be accorded "national treatment" i.e. non-discriminatory (OECD, p. 1 and L/G, para 12). In short, there are no appreciable differences between the two documents as far as the sections covering competition, technology and unlawful payments are concerned. The L/G document goes a little further than the OECD as regards the requirement to publish figures (ref. section entitled "Information"). A comparison of the two texts reveals considerable differences, however, between the measures recommended or envisaged in the areas of investment policy, fiscal policy, financing and credit policy and social policy. II. Information The relevant paragraphs in the two documents cover more or less the same ground (OECD, pp. 1 and 2; L/G, paras. 16 to 18). The main differences are as follows: On competition, the OECD Code is more explicit than the L/G document, the reason being that an international agreement initially applying only to the United States and the Community would have scarcely anything to add to the relatively comprehensive anti-trust laws governing competition in these two economic areas. The same does not hold true, however, for the OECD as a whole. 1 See footnote p. 66. What most needs to be improved in Community/USA relations in the area is the exchange of information between the anti-trust authorities (L/G, para. 19). IV. Investment policy L/G: -investments planned by MNES must be reported to the responsible authorities in the host country (para. 23) -where necessary, restrictions must be imposed on the takeover of existing firms -open takeover bids must be made subject to regulations (para. 24). L/G: -broadly similar (para. 26) -broadly similar (para. 26) -taxes ought to be paid in the country where the income is earned -if a firm avoids taxation, the authorities may tax income as if received by shareholders (para. 27) -the exchange of information between tax authorities must be promoted (para. 26) -efforts must be made to harmonize the withholding tax on portfolio investment (para. 28) -efforts must be made to establish a common position regarding tax havens (para. 29) -steps must be taken to minimize -supervision of transfer prices L/G: -broadly similar (para. 40) -banks and any large enterprise should be required to keep the central bank of the host country informed of their forward exchange position and of capital movements within the enterprise (para, 41) -possibly, enterprises having recourse to the capital market in the host country should do so, at least in part, by increasing the proportion of their equity capital available to its nationals (para. 43) |