APPENDIX DECLARATION OF OECD MEMBER GOVERMENTS ON INTERNATIONAL INVESTMENT AND MULTINATIONAL ENTERPRISES (As approved by the member governments on June 21, 1976 in Paris) THE GOVERNMENTS OF OECD MEMBER COUNTRIES CONSIDERING That international investment has assumed increased importance in the world economy and has considerably contributed to the development of their countries; That multinational enterprises play an important role in this investment process; That co-operation by Member countries can improve the foreign investment climate, encourage the positive contribution which multinational enterprises can make to economic and social progress, and minimize and resolve difficulties which may arise from their various operations; That, while continuing endeavours within the OECD may lead to further international arrangements and agreements in this field, it seems appropriate at this stage to intensify their co-operation and consultation on issues relating to international investment and multinational enterprises through inter-related instruments each of which deals with a different aspect of the matter and together constitute a framework within which the OECD will consider these issues: I. DECLARE That they jointly recommend to multinational enterprises operating in their territories the observance of the Guidelines as set forth in the Annex hereto having regard to the considerations and understandings which introduce the Guidelines and are an integral part of them. II. (1) That Member countries should, consistent with their needs to maintain public order, to protect their essential security interests and to fulfill commitments relating to international peace and security, accorded to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another Member country (hereinafter referred to as "ForeignControlled Enterprises") treatment under their laws, regulations and administrative practices, consistent with international law and no less favorable than that accorded in like situations to domestic enterprises (hereinafter referred to as "National Treatment"). (2) That Member countries will consider applying "National Treatment" in respect of countries other than Member countries. (3) That Member countries will endeavor to ensure that their territorial subdivisions apply "National Treatment". (4) That the Declaration does not deal with the right of Member countries to regulate the entry of foreign investment or the conditions of establishment of foreign enterprises. III. (1) That they recognize the need to strengthen their co-operation in the field of international direct investment. 73-026-76- -7 (2) That they thus recognize the need to give due weight to the interests of Member countries affected by specific laws, regulations and administrative practices in this field (hereinafter called "measures") providing official incentives and disincentives to international direct investment. (3) That Member countries will endeavor to make such measures as transparent as possible, so that their importance and purpose can be ascertained and that information on them can be readily available. IV. That they are prepared to consult one another on the above matters in conformity with the Decisions of the Council relating to Inter-Governmental Consultation Procedures on the Guidelines for Multinational Enterprises, on National Treatment and on International Investment Incentives and Disincentives. V. That they will review the above matters within three years with a view to improving the effectiveness of international economic cooperation among Member countries on issues relating to international investment and multinational enterprises. ANNEX GUIDELINES FOR MULTINATIONAL ENTERPRISES 1. Multinational enterprises now play an important part in the economies of Member countries and in international economic relations, which is of increasing interest to governments. Through international direct investment, such enterprises can bring substantial benefits to home and host countries by contributing to the efficient utilization of capital, technology and human resources between countries and can thus fulfill an important role in the promotion of economic and social welfare. But the advances made by multinational enterprises in organizing their operations beyond the national framework may lead to abuse of concentrations of economic power and to conflicts with national policy objectives. In addition, the complexity of these multinational enterprises and the difficulty of clearly perceiving their diverse structures, operations and policies sometimes give rise to concern. 2. The common aim of the Member countries is to encourage the positive contributions which multinational enterprises can make to economic and social progress and to minimize and resolve the difficulties to which their various operations may give rise. In view of the transnational structure of such enterprises, this aim will be furthered by cooperation among the OECD countries where the headquarters of most of the multinational enterprises are established and which are the location of a substantial part of their operations. The guidelines set out hereafter are designed to assist in the achievement of this common aim and to contribute to improving the foreign investment climate. 3. Since the operations of multinational enterprises extend throughout the world, including countries that are not Members of the Organization, international cooperation in this field should extend to all States. Member countries will give their full support to efforts undertaken in cooperation with non-Member countries, and in particular with developing countries, with a view to improving the welfare and living standards of all people both by encouraging the positive contributions which multinational enterprises can make and by minimizing and resolving the problems which may arise in connection with their activities. 4. Within the Organization, the program of cooperation to attain these ends will be a continuing, pragmatic and balanced one. It comes within the general aims of the Convention on the Organization for Economic Cooperation and Development and makes full use of the various specialized bodies of the Organization, whose terms of reference already cover many aspects of the role of multinational enterprises, notably in matters of international trade and payments, competition, taxation, manpower, industrial development, science and technology. In these bodies, work is being carried out on the identification of issues, the improvement of relevant qualitative and statistical information and the elaboration of proposals for action designed to strengthen inter-governmental cooperation. In some of these areas procedures already exist through which issues related to the operations of multinational enterprises can be taken up. This work could result in further agreements and arrangements between governments. 5. The initial phase of the cooperation program is composed of a Declaration and three Decisions promulgated simultaneously as they are complementary and interconnected in respect of guidelines for multinational enterprises, national treatment for foreign controlled enterprises and international investment incentives and disincentives. 6. The guidelines set out below are recommendations jointly addressed by Member countries to multinational enterprises operating in their territories. These guidelines, which take into account the problems which can arise because of international structure of these enterprises, lay down standards for the activities of these enterprises in the different Member countries. Observance of the guidelines is voluntary and not legally enforceable. However, they should help to ensure that the operations of these enterprises are in harmony with national policies of the countries where they operate and to strengthen the basis of mutual confidence between enterprises and States. 7. Every State has the right to prescribe the conditions under which multinational enterprises operate within its national jurisdiction, subject to international law and to the international agreements to which it has subscribed. The entities of a multinational enterprise located in various countries are subject to the laws of these countries. 8. A precise legal definition of multinational enterprises is not required for the purposes of the guidelines. These usually comprise companies or other entities whose ownership is private, state or mixed, established in different countries and so linked that one or more of them may be able to exercise a significant influence over the activities of others and, in particular, to share knowledge and resources with the others. The degree of autonomy of each entity in relation to the others varies widely from one multinational enterprise to another, depending on the nature of the links between such entities and the fields of activity concerned. For these reasons the guidelines are addressed to the various entities within the multinational enterprise (parent companies and/or local entities) according to the actual distribution of responsibilities among them on the understanding that they will cooperate and provide assistance to one another as necessary to facilitate observance of the guidelines. The word "enterprise" as used in these guidelines refers to these various entities in accordance with their responsibilities. 9. The guidelines are not aimed at introducing differences of treatment between multinational and domestic enterprises; wherever relevant they reflect good practice for all. Accordingly, multinational and domestic enterprises are subject to the same expectations in respect of their conduct wherever the guidelines are relevant to both. 10. The use of appropriate international dispute settlement mechanisms, including arbitration, should be encouraged as a means of facilitating the resolution of problems arising between enterprises and Member countries. 11. Member countries have agreed to establish appropriate review and consultation procedures concerning issues arising in respect of the guidelines. When multinational enterprises are made subject to conflicting requirements by Member countries, the governments concerned will cooperate in good faith with a view to resolving such problems either within the Committee for International Investment and Multinational Enterprises established by the OECD Council on 21st January 1975 or through other mutually acceptable arrangements. HAVING REGARD to the foregoing considerations, the Member countries set forth the following guidelines for multinational enterprises with the understanding that Member countries will fulfill their responsibilities to treat enterprises equitably and in accordance with international law and international agreements as well as contractual obligations to which they have subscribed. Enterprises should GENERAL POLICIES (1) Take fully into account established general policy objectives of the Member countries in which they operate; (2) In particular, give due consideration to those countries' aims and priorities with regard to economic and social progress, including industrial and regional development, the protection of the environment, the creation of employment opportunities, the promotion of innovation and the transfer of technology; (3) While observing their legal obligations concerning information, supply their entities with supplementary information the latter may need in order to meet requests by the authorities of the countries in which these entities are located for information relevant to the activities of those, entities, taking into account legitimate requirements of business confidentiality. (4) Favor close cooperation with the local community and business interests; (5) Allow their component entities freedom to develop their activities and to exploit their competitive advantage in domestic and foreign markets, consistent with the need for specialization and sound commercial practice;: (6) When filling responsible posts in each country of operation, take due account of individual qualifications without discrimination, as to nationality, subject to particular national requirements in this respect; (7) Not render-and they should not be solicited or expected to render any bribe or other improper benefit, direct or indirect, to any public servant or holder of public office; (8) Unless legally permissible, not make contributions to candidates for public office or to political parties or other political organizations; (9) Abstain from any improper involvement in local political activities. DISCLOSURE OF INFORMATION Enterprises should, having due regard to their nature and relative size in the economic context of their operations and to requirements of business confidentiality and to cost, publish in a form suited to improve publie understanding a sufficient body of factual information on the structure, activities and policies of the enterprise as a whole, as a supplement, in so far as is necessary for this purpose, to information to be disclosed under the national law of the individual countries in which they operate. To this end, they should publish within reasonable time limits, on a regular basis, but at least annually, financial statements and other pertinent information relating to the enterprise as a whole, comprising in particular: (i) The structure of the enterprise, showing the name and location of the parent company, its main affiliates, its percentage ownership, direct and indirect, in these affiliates, including shareholdings between them; (ii) The geographical areas1 where operations are carried out and the principal activities carried on therein by the parent company and the main affiliates; (iii) The operating results and sales by geographical area and the sales in the major lines of business for the enterprise as a whole; (iv) Significant new capital investment by geographical area and, as far as practicable, by major lines of business for the enterprise as a whole; (v) A statement of the source and uses of funds by the enterprise as a whole; (vi) The average number of employees in each geographical area; (vii) Research and development expenditure for the enterprise as a whole; (viii) The policies followed in respect of intra-group pricing; (ix) The accounting policies, including those on consolidation, observed in compiling the published information. COMPETITION Enterprises should, while conforming to official competition rules and established policies of the countries in which they operate, (1) Refrain from actions which would adversely affect competition in the relevant market by abusing a dominant position of market power, by means of, for example, (a) Anti-competitive acquisitions, (b) Predatory behavior toward competitors, (c) Unreasonable refusal to deal, (d) Anti-competitive abuse of industrial property rights; 1 For the purposes of the guideline on disclosure of information the term "geographical area" means groups of countries or individual countries as each enterprise determines is appropriate in its particular circumstances. While no single method of grouping is appropriate for all enterprises, or for all purposes, the factors to be considered by an enterprise would include the significance of operations carried out in individual countries or areas as well as the effects on its competitiveness, geographic proximity, economic affinity, similarities in business environments and the nature, scale and degree of interrelationship of the enterprise's operations in the various countries. (e) Discriminatory (i.e. unreasonably differentiated) pricing and using such pricing transactions between affiliated enterprises as a means of affecting adversely competition outside these enterprises; (2) Allow purchasers, distributors and licensees freedom to resell, export, purchase and develop their operations consistent with law, trade conditions, the need for specialization and sound commercial practice; (3) Refrain from participating in or otherwise purposely strengthening the restrictive effects of international or domestic cartels or restrictive agreements which adversely affect or eliminate competition and which are not generally or specifically accepted under applicable national or international legislation; (4) Be ready to consult and cooperate, including the provision of information, with competent authorities of countries whose interests are directly affected in regard to competition issues or investigations. Provision of information should be in accordance with safeguards normally applicable in this field. FINANCING Enterprises should, in managing the financial and commercial operations of their activities, and especially their liquid foreign assets and liabilities, take into consideration the established objectives of the countries in which they operate regarding balance of payments and credit policies. Enterprises should, TAXATION (1) Upon request of the taxation authorities of the countries in which they operate, provide, in accordance with the safeguards and relevant procedures of the national laws of these countries, the information necessary to determine -correctly the taxes to be assessed in connection with their operations, including relevant information concerning their operations in other countries; (2) Refrain from making use of the particular facilities available to them, such as transfer pricing which does not conform to an arms-length standard, for modifying in ways contrary to national laws the tax base on which members of the group are assessed. EMPLOYMENT AND INDUSTRIAL RELATIONS Enterprises should, within the framework of law, regulations and prevailing labour relations and employment practices, in each of the countries in which they operate, (1) Respect the right of their employees to be represented by trade unions and other bona fide organizations of employees, and engage in constructive negotiations, either individually or through employers' associations, with such employee organizations with a view to reaching agreements on employment conditions, which should include provisions for dealing with disputes arising over the interpretation of such agreements, and for ensuring mutually respected rights and responsibilities; (2) (a) Provide such facilities to representatives of the employees as may be necessary to assist in the development of effective collective agreements; (b) Provide to representatives of employees information which is needed for meaningful negotiations on conditions of employment; (3) Provide to representatives of employees, where this accords with local law and practice, information which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole; (4) Observe standards of employment and industrial relations not less favorable than those observed by comparable employers in the host country; (5) In their operations, to the greatest extent practicable, utilize, train and prepare for upgrading members of the local labour force in co-operation with representatives of their employees and, where appropriate, the relevant governmental authorities; (6) In considering changes in their operations which would have major effects upon the livelihood of their employees, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of their employees, and where appropriate to the relevant governmental authorities, and co-operate with the employee |