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Foreign investments in developing countries – Legal personality of multinationals in international law*

Published online by Cambridge University Press:  07 July 2009

D. Kokkini-Iatridou  and
P.J.I.M. de Waart
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Multinational Enterprises (MNEs), in the terminology of the United Nations also called Transnational Corporations (TNCs) have developed organizational structures which are so complex that the primary, if not the only, legal concern in international economic relations is no longer the protection of investments in developing countries, as was the case in the 'sixties, but the protection of those countries themselves, and even of (hightly) developted countries.

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Netherlands Yearbook of International Law , Volume 14 , December 1983 , pp. 87 - 131
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Copyright © T.M.C. Asser Press 1983

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References

1. This article is a revised version of an article published in Dutch in 1 Themis (1981) pp. 4–35Google Scholar. The Department of International Law and Comparative Law of the law faculty of the Free University of Amsterdam has, since 1979, had “The juridical system of control of Multinational Enterprises” in its research programme. The authors wish to thank, in particular, Mr. I.F. Dekker, Assistant Lecturer in International Law, for his co-operation in the preparation of this article.

2. Kuusi, J., The Host State and the Transnational Corporation. An Analysis of Legal Relationships (1979) pp. 40–46Google Scholar. See also the book review thereon by Kokkini-Iatridou, D., 28 NILR (1981) pp. 368–371.CrossRefGoogle Scholar

3. Waldmann, R.J. states: “… there is a continuing U.S. interest in creating useful and effective international institutions and regulatory regimes … We should recognize that codes of conduct can raise regulatory consciousness in other countries and that this result may benefit U.S. businessmen in their competition with those from less regulated economies” in Regulating International Business through Codes of Conduct (1980)Google Scholar; Atkeson, T.B. and Gill, D.G., “The UNCTAD Restrictive Business Practices Code: A Step in the North-South Dialogue”, 15 The International Lawyer (1981) No. 2Google Scholar: “In 1975, Secretary of State Henry Kissinger at a special session of the United Nations indicated that the United States was willing to discuss the subject of codes of conduct for multinational corporations in various spheres, including restrictive business”.

4. OECD, International Investment and Multinational Enterprises. Mid-Term Report on the 1976 Declaration and Decisions (1982) pp. 10–11. This report has been prepared at midterm between the first review in 1979 and the next one, which is to take place in 1984. The then Executive Director of the UN Centre on Transnational Corporations, Mr. K. Sahlgren, observed in 1982 that many transnational corporations had modified their attitudes towards involvement in developing countries, while a number of those countries had shown an increased degree of pragmatism, flexibility and sophistication in their policies towards the corporations. Nevertheless, according to Mr. Sahlgren a number of the apprehensions that had been expressed about transnational corporations remained valid and the role of such corporations in the world economy and in the development process required continued attention 19 UN Chronicle (November 1982) p. 64.

5. Fatouros, A.A., “Problèmes et méthodes d'une réglementation des entreprises multinationales”, 101 Clunet (1974) p. 507Google Scholar. See also infra, nn. 111 and 113.

6. See e.g., Adedayo Ijalaye, D., The extension of corporate personality in international law (1978) pp. 147–246Google Scholar with references, and the book review thereon by Kokkini-Iatridou, D., 28 NILR (1981) pp. 365–368CrossRefGoogle Scholar. Adedayo Ijalaye opts for functional legal personality. Oh approximately the same lines see Cohen-Jonathan, G., “L'arbitrage Texaco-Calasiatic contre Gouvernement Libyen, 23 Annuaire François de Droit International (1977) p. 458.Google Scholar

7. See especially Bogouslavsky, M., “L'Etat en tant que partie à des contrats de concession ou d'investissement conclus avec des sociétès étrangères”, New Directions in International Trade Law, Unidroit vol. I (1977) pp. 310, 313, 315. See also infra, nn. 111 and 113.Google Scholar

8. Ago, R., Annuaire de l'Institut de Droit International II (1977) p. 202.Google Scholar

9. Lazarus, C., “Prise en charge par le droit des gens?” L'entreprise multinational face au droit (1977) p. 421Google Scholar; see also the discussions on the proposal of the rapporteur Goldman, B. on “le rattachement transnational de l'entreprise multinational à la collectivité des nations”, in Annuaire de l'Institut de Droit International II (1977) pp. 205, 208, 212, 219Google Scholar, where such expressions as utopique, actuettement irréalisable were repeatedly used.

10. See in particular Rigaux, F., “Des dieux et des héros. Reflexions sur une sentence arbitrale”, 67 Revue Critique de Droit International Privé (1978) p. 458Google Scholar and also Annuaire de l'Institut de Droit International op. cit. pp. 209, 212, 213.

11. See J. Castaôeda, U.N. Prov. Rec, General Assembly (XXIX), 2nd Comm. 1638 Meeting p. 5; Grigera Naôn, H.A., “Transnational Enterprises under the Pacto Andino and National Laws of Latin America”, in Horn, N., ed., I Studies in Transnational Economic Law, (1980) pp. 270–271.Google Scholar

12. The investment climate is determined by a number of factors of different natures: juridical, political, economic, social-cultural; see e.g., Fröhlich, W., Multinationale onderemingen, ontstaan, organisatie en management, (1976) pp. 44–59Google Scholar; Kirchner, Ch. et al. , Mining Ventures in Developing Countries Part I (1979) pp. 48–49Google Scholar and the book review thereon by Kokkini-Iatridou, D., in 55 NJB (1980) p. 278Google Scholar; on investment legislation in general see Rosenberg, A., “Les Codes des investissements: un exemple de souveraineté dans un ordre économique inégalitaire?” in Revue Juridique et Politique, Indépendance et Coopération (1978) p. 193 et seq.Google Scholar On recent investment legislation see Kokkini-Iatridou, D. and Moltmaker, J.K., “De Chinese wet over joint-ventures met buitenlandse investeerders”, in 55 NJB (1980) pp. 245–254Google Scholar; see also Kokkini-Iatridou, D., Investment law in China in Chinees Recht (1981) pp. 109–145Google Scholar. It is interesting to note that the most recent investment legislation originates from Cuba; see the Legislative Decree No. 50 of 15 Feb. 1982 on Economic Association between Cuban and Foreign Entities in 21 ILM (1982) pp. 1106–1114. Unlike, e.g., the Chinese law, which prescribes a minimum participation, the Cuban legislation prescribes a maximum of 49%. The Executive Committee of the Council of Ministers may, however, admit, in exceptional cases, a higher percentage of foreign participation (Art. 15).

13. On the various aspects of the policies of enterprises and the factors which can influence, the decision-making process see Fröhlich, op. cit. pp. 39 et seq. and 45 et seq.

14. Named after the Liberian President Tubman, who was the first to propose this in 1944; see Friedman, W. and Béguin, J.P. (eds) Joint International Business Ventures in Developing Countries (1971) p. 372.Google Scholar

15. See e.g., Lyon-Caen, A., in L'entreprise multinationale face au droit, pp. 87, 112.Google Scholar

16. See e.g., Fröhlich, op. cit. pp. 67–71 with references; Kirchner et al., op. cit. p. 151.

17. See e.g., Smith, D.N. and Wells, L.T., Negotiating Third-World Mineral Agreements, Promises as Prologue (1975) p. 53Google Scholar. On the percentage of participation of a large number of host countries in the petroleum sector see Asante, S.K.B., “Restructuring Transnational Mineral Agreements”, 73 AJIL (1979) pp. 342–344.CrossRefGoogle Scholar

18. One of the repeated criticisms of developing countries against MNEs is that they refuse to grant their subsidiaries the autonomy necessary to enable them to integrate into the economic planning of the host country. In contradiction, it is claimed on the side of MNEs that the subsidiaries enjoy a large degree of autonomy. This standpoint would seem to be supported by two recent judgments. The Court of Justice of the European Communities (see 3 SEW (1980) p. 177 et seq.) stated in a case concerning BMW Belgium NV (a wholly-owned subsidiary of Bayerische Motorenwerke AC in Munich) that “the relationship of economic dependency between a parent company and its subsidiary does not preclude each following a different line of conduct or even having different interests” (Consideration No. 24), W. van Gerven (op. cit. p. 148) noted in his commentary that: “the theory of economic unity, accepted by the Court in other cases, is thus subject to limitations. As also stated in other cases, this theory is only valid in so far as the subsidiary is not truly able to determine independently its market policy”. More interesting is an English decision, because it concerns wholly-owned subsidiaries in developing countries. In Lonhro et al. v. Shell Petroleum Company and British Petroleum Company, 7 Weekly Law Reports, (1980) pp. 367–379Google Scholar the Court of Appeal accepted the principle of managerial autonomy of the subsidiary. It may be questioned whether this decision was not too restricted by the special circumstances of the case. Lonhro requested the disclosure of documents, in the possession of the subsidiaries of Shell and BP in Rhodesia, South Africa and Mozambique, in connection with an arbitration to which the parties were not only BP and Shell, but also Lonhro and another company in Mozambique. Lord Denning stated that “it is important to realize that the subsidiaries of multinational companies have a great deal of autonomy in the country concerned”, and further that the question whether a parent company has full say over the documents of its subsidiary is dependent on the facts of each individual case. The documents were not in the immediate power of Shell and BP. If those companies had to take further steps to get them, they were not in their immediate power, and not likely to be disclosed, and his Lordship saw no obligation on Shell or BP to take such steps as were suggested to get the documents. Besides, certain points should not be overlooked: the political character of the case (the interests of the U.K. in BP; the then current oil boycott against Rhodesia); a certain kind of loyalty of the English courts towards the executive; the general rule in English law that every company in a group of companies is a seperate juridical entity with individual rights and responsibilities (the appeal of Lonhro was dismissed by the House of Lords).

19. Leben, Ch. speaks of un mélange d'autonomie et de contrôle, L'entreprise multinationale face au droit p. 130.Google Scholar

20. See Leben, op.cit., pp. 139–145, on the so-called “formal” means of control (planning, budget, financial relations, evaluating the company's performance, etc.) and the “informal” means of control (human relationships). On the question of control in general, see also Wallace, C.D., Legal Control of the Multinational Enterprise (1982), pp. 24 et seq., 33 et seq.Google Scholar

21. Asante, op.cit., p. 347; see also Smith and Wells, op. cit., pp. 38–53, with references to investment contracts.

22. The licence agreements do not in principle imply a dependent relationship and thereby automatically control by the MNE of the local company; see Fröhlich, op. cit., p. 69; Lyon-Caen, op. cit., pp. 113–115.

23. Mangini, V. (II trasferimento di tecnologia ai paesi in via di sviluppo: materiali per una valutazione realistica, in Rev. dir. intern. priv. e proc. (1979) p. 50, n. 17)Google Scholar mentions the following: it appears from a study of 451 agreements concerning the transfer of technology to the countries of the Andes Pact that 81 % of the contracts contain an absolute prohibition against export and 86% contain restrictive clauses. See also, for examples of restrictive clauses, D. Kokkini-Iatridou, Chinees Recht, op. cit., p. 89.

24. Terms of Fröhlich, op. cit., p. 60.

25. The names given to these contracts do not always cover the same relationships. The same names are used in various countries, but without the substance of the contracts being the same, see Smith and Wells, op. cit., p. 27, with examples taken from the practice of investment contracts. See also D. Kokkini-Iatridou, Chinees Recht, op. cit., pp. 136–137.

26. Smith and Wells, op. cit., pp. 47 and 52–53.

27. See on these contracts the interesting observation made by Asante, op. cit., pp. 359–368.

28. There is an abundance of literature on “la question éternelle de la nationalité des sociétés” (terminology used by Goldman, in Annuaire de L'Institut de Droit International II. (1977) p. 197); of the most recent literature, see Leben, in L'entreprise multinationale, op. cit., pp. 187–235 (with many references), who starts his contribution with the observation that the nationality of the company is une de ces notions malaisées à center, en crise perpétuette (p. 187); Vlas, P., Rechtspenonen in het internationaal privaatrecht (1982) p. 38 et seq.Google Scholar

29. The same conclusion is reached by G. Perrin and H. Maire de Riedmatten, La protection diplomatique des sociétés commerciales et des actionnaires de droit international public”, Rev. Juridique et Politique, Indépendence et Coopération, (1978) p. 390 et seq.

30. E.g., the fact that an entity is founded in accordance with Dutch law does not mean that this legal person will be considered Dutch in all legal areas. According to the Wet heryerzekering investeringen [Reinsurance of Investments Act] of 23 April 1969 (Staatsblad [Official Statute Bulletin] (1969) p. 268) the Minister of Finance can exclude a Dutch legal person established in the Netherlands from reinsurance if, in his opinion, it does not have a “Dutch character” (Art. 5). The Minister has been given this competence for the purpose of preventing a subsidiary of a foreign parent establishing itself in the Netherlands in order to benefit from the guarantees offered by the Netherlands State (Bijlage Handelingen Tweede Kamer [Annex Parliamentary Reports], 1967/68, 9633). See Kokkini-Iatridou, D., “Le droit applicable à la détermination de la personne physique ou morale qui contrôle une société anonyme dont une filiale a son activité à l'étranger”, Netherlands Reports to the Eleventh International Congress of Comparative Law (Caracas, 1982) (Kluwer 1982), p. 125 et seq.CrossRefGoogle Scholar For the United States, see Darby, J.J., “The Guarantees accorded foreign investors”, 26 AJCL (Supplement) (1978) p. 184CrossRefGoogle Scholar; interesting information is also given by Behrens, P., “Der Durchgriff über die Grenze”, 46 Rabels Z (1982) p. 306 et seq.Google Scholar (German report for the Caracas Congress); by Struijcken, A.V.M., “Doorbraak van aansprakelijkheid in het internationaal privaatrecht”, 112 Weekblad voor privaatrecht, notariaaten registratie (1981) (No. 5575), p. 594 et seq.Google Scholar

31. Act No. 20 (557) which was in force until 1976, recognized a third class of companies, the so-called “mixed companies”, with national participation between 51% and 80%. This category was abolished on the argument that they formed a source of discouragement for foreign investors.

32. See the text in 16 ILM (1977) pp. 138–158. The Andes Code with respect to foreign investments was accepted by the Commission of the “Cartagena Agreement” on 31 December 1970. The “Cartagena Agreement” (for the text see 8 ILM (1969) p. 910) aims to realize Andean integration, and is considered to be the constitution of the Andes Group. The Andes Code – which entered into force on 30 June 1971, and has since then been repeatedly amended – is to-day in force in Bolivia, Colombia, Equador, Peru and Venezuela; Chile withdrew in 1976. As a result of the Code, a common control regime with respect to foreign investors has been introduced into the Andes countries, and the Andes Code proposes a “fade-out” plan as a result of which foreign enterprises will be transformed, within a certain period, into national enterprises or into joint-ventures. On the subject of “neutral capital” (i.e., investments carried out by financial public international legal entities as well as foreign governmental entities for aid and development) see Decree No. 124 of 1977, in 17 ILM (1978) pp. 394–395.

33. On the Andes Code, see Oliver, C.T., “The Andean Foreign Investment Code: A new phase in the quest for normative order as to direct foreign investment”, 66 AJIL (1972) p. 763 et seq.CrossRefGoogle Scholar; Aramburu Menchaca, A.A., “Multinational Firms and Regional Process of Economic Integration”, II Hague Recuett p. 337 et seq.Google Scholar, Kokkini-Iatridou, , “Protection of Foreign Investments”, Essays on the Law of International Trade, Hague-Zagreb Colloquium (T.M.C. Asser Instituut, The Hague 1976) pp. 281, 291Google Scholar and, from the most recent literature, Grigera Naón, Transnational Enterprises under the Pacto Andino and National Laws of Latin America, op.cit., p. 237 et seq. On the Andean integration process in general (Andean Common Market – ANCOM, Andean Parliament, Andean Reserve Funds, Andean Court of Justice) see Garcia-Amador, F.V., The Andean Legal Order: A new Community, (1978)Google Scholar; Colbert, A.S., “Latin American Economic Integration. An overview of trade and developments in the Andean Pact, the Central American Common Market and the Latin American Free Trade Association”, in Syracuse Journal of International Law and Commerce (1981) p. 138 et seq.Google Scholar

34. See ILM, op. cit., p. 142.

35. ILM op. cit., p. 141. Mention should be made here that both the Code and other investment laws define the terms “foreign investor” and “national investor”; under certain conditions a foreigner may be considered a “national investor”.

36. See e.g., the Agreement between the Netherlands and Egypt concerning mutual encouragement and protection of investments of 30 October 1976 (Trb. 1977, 9) Arts. I(b) (iii)III; the second ACP-EEC Agreement of 31 October 1979 (Trb. 1980, 72) Art. 64, which refers, in connection with the treatment of investments, to Annex IX (p. 261).

37. See e.g., the Agreement between the Netherlands and Kenya concerning economic co-operation of 11 September 1970 (Trb. 1970, 166), Art. XIV.

38. Art. 25(b), see the text in Trb. 1966, 152. The Treaty, which came into being under the aegis of the International Bank for Reconstruction and Development, has been ratified – up to and including January 1983 – by 82 States, ICSID Newsletter, No. 83–1, p. 1. The Centre, which was established in accordance with the Treaty, possesses legal personality in international law; it keeps a list of mediators and a list of arbitrators (Art. 18(3). Since 1978 ICSID can also operate on behalf of states which are not party to the Treaty but wish to make use of the “Additional Facility” created for that purpose (see Doc. ICSID/11 of June 1979). This Additional Facility for the Administration of Conciliation, Arbitration and Fact-finding Procedures of ICSID is reproduced in 21 ILM (1982) pp. 1443–1472. On the history, and for a detailed analysis of the Treaty, see in particular G. Sacerdoti, La Convenzione di Washington del 1965 per la soluzione delle controversie tra Stati e nazionali di altri Stati in materia di investimenti, in Riv. dir. int. priv. e proc. (1969) with many references. Of the most recent literature, see Kuusi, op. cit., pp. 145–146 and the literature mentioned in nn. 151–152, p. 161. See also Kokkini-Iatridou, Protection of Foreign Investments, op. cit., pp. 281, 292, 295; see the same author's: “Les garantics accordées aux investisseurs étrangers,” Rapport Néerlandais pour le Dizième Congrés International de Droit Comparé (Budapest, 1978), (1978) p. 150Google Scholar and her review of J. Cherian's book, Investment Contracts and Arbitration, The World Bank Convention on the Settlement of Investment Disputes 1975, in 23 NILR (1976) pp. 239–241; Delaume, G., “Le Centre International pour le règlement des différends relatifs aux investissements”, 109 Clunet (1982) p. 775 et seq.Google Scholar; Giardina, A., “L'exécution des sentences du Centre international pour le réglement des différends relatifs aux investissements”, 71 Rev. Critique de droit international privé (1982) p. 273 et seq.Google Scholar

For those cases which have already been submitted to the Centre, see Delaume, op. cit., p p. 776, nn. 6–8 and p. 835. Add: Société Ouest Africaine des Bétons Industriels (SOABI) (Senegal) v. The State of Senegal; this case was registered on 5 November 1982 on a request for the institution of arbitration proceedings by SOABI. On 5 October 1982 the first request made in the history of the Centre for conciliation proceedings was registered (on the request of SEDITEX): SEDITEX Engineering Berantungsgesellschaft für die Textilindustrie m.b.H. (Germany) v. The Government of the Democratic Republic of Madagascar, Information from 83–1 ICSID Newsletter p. 2. See also infra n. 78.

39. The legislation of the home country can influence the activities of the company established abroad. The now classic example is that of certain American laws, such as, e.g., the antitrust legislation and the “trading with the enemt” Act, which have prompted some famous decisions. One of these decisions, in the case involving Fruehauf-France, in connection with the trade embargo on China, has received a great deal of attention in the literature. See on such Acts, Vagts, D., “The United States and its Multinationals: Protection and control”, Harv. Int. L.J. (1979) pp. 235–251Google Scholar, and Wallace, op. cit., p. 99 et seq. For the most recent example, reference can be made to the Export Administration Regulations announced by President Reafgan on 22 June 1982 with respect to the export of technology destined for the Russian part of the network of pipelines under construction (the gas pipeline embargo was terminated in November 1982). These Regulations were also applicable to “non-U.S. goods” exported by “any person subject to the jurisdiction of the United States”. These persons were, according to para. 385. 2(c) para. 2: (i) every citizen or resident of the United States; (ii) any person in the United States; (iii) any corporation established in accordance with US legislation or in accordance with the law of US territories; and (iv) every corporation or other ortanization, whereever located, owned or controlled by the natural or legal persons mentioned in numbers (i), (ii) or (iii). It is interesting to mention that the President of the District Court of The Hague tested the extra-territorial effect of the American measure against international law in the Court's judgment of 17 September 1982 (van de Week, Rechtspraak, Kort Geding (1982) p. 167)Google Scholar. The Court found that para. 385 (2)(c) para. 2 (iv) was incompatible with international law; the result thereof was that the Dutch court did not need to take the embargo into account. The President emphasized the Dutch nationality of the company (wholly-owned by Geosource International BV in Amsterdam, which in its turn is a subsidiary of Geosource Incorporated, established in Houston, Texas) invoking the Treaty of Friendship, Trade and Shipping between the Netherlands and the United States of 1956. This Treaty bases the mutual recognition of companies on the incorporation system. On the judgment, see the article of Th.M. de Boer and R. Kotting, President Wijnholt v. President Reagan, (1982) pp. 1177–1186.

40. See e.g., Art. 21 of the Argentine law which reads: “The legal acts between a foreign capital local firm and the firm that controls it directly or indirectly, or a branch of the latter, shall be considered for all purposes to have been signed between independent parties when the considerations and conditions of such acts are consonant with normal market practices between independent bodies ….” However, this Article contains two exceptions: loans (under certain conditions) and contracts governed by the law on transfer of technology. The text of this article is taken from a publication of the Argentine Ministry of Economy, Treasury and Finance (1981).

41. This was the case, e.g., under the regime of the former Argentine law (before 1976), see supra, n. 31.

42. The “connecting ties” between companies are defined differently in the various legal systems. The criteria applied vary: certain kinds of capital-participation and/or the juridical or actual power to dispose of the means of or to direct the activities of another company.

43. See e.g., Art. 57 of the French “Code général des impôts” and one commentary thereon by Lazarus, in L'entreprise multinationale, op.cit., p. 254 et seq. Another example of a text in which the ties between companies is dealt with is Art. 482 of the American “Internal Revenue Code”. See also Wallace, op. cit., p. 128 et seq.

44. See e.g., Art. L. 122–14-8 of the French “Code du travail” and the commentary thereon by Lyon-Caen, in L'entreprise multinationale, op. cit., pp. 282–288 and 296.

45. The General Assembly of the United Nations apparently proceeds on the basis that (also) MNEs will have to abide by UN Resolutions in which members are called upon to suspend co-operation with South Africa until that country has revoked its national laws and government measures on apartheid and has ended its unlawful presence in Namibia. See recent Doc. E/1982/18(E/C.10/1982/19) Commission on Transnational Corporations, Report on the Eighth Session, Supplement No. 8, pp. 30–32. Art. 4 of the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (1977), also mentions MNEs as one of the addressees. See further section 3.2.

46. Verzijl, J.H., International Law in Historical Perspective, II International Persons (1969) pp. 39–43.Google Scholar

47. Hinsley, F.H., “International Law and International Organization in the Development of International Relations since the 18th Century”, 26 NILR (1979) pp. 39–40Google Scholar. Murphy, C.F. Jr. “The Grotian Vision of World Order”, 76 AJIL (1982) pp. 477–499.CrossRefGoogle Scholar

48. Reparation for Injuries Suffered in the Service of the United Nations, Advisory Opinion (ICJ Rep. (1949) p. 178).

49. P.P. Remec, The position of the Individual in International Law according to Grotius and Vattel (1960): “According to Grotius, the law of nature is a part of law regulating international relations. Individual rights according to the law of nature … that is human rights, are fundamentally within the scope of international regulation. According to Vattel the individual also has rights against the state which he can try to enforce on the basis of the law of nature. But the law of nature is applied to the individual on a different plane than it is, in a modified form to the sovereign states. They are legal subjects with a supposedly different nature” (p. 243); Nguyen Quoc, Dinh, Daillier, P., Pellet, A., Droit International Public, 2nd edn. (1980), paras. 469–501Google Scholar, where the position of individuals and MNEs in international law is further dealt with.

50. ICJ Rep. (1949) p. 179. The USSR contested the international legal personality of the U.N. until the 'sixties. The People's Republic of China has taken a similar stand, which it defended fiercely into the 'seventies. It is not entirely clear whether its accession to the UN has changed this standpoint. In any case this standpoint, even if it were still the current doctrine, is no longer a barrier to a positive effort by the People's Republic in the work of the UN and the specialized agencies. See Kaminski, G., chinesische Positionen zum Völkerrecht (1973), pp. 180 and 325Google Scholar; Kim, S.S., China, the United Nations and World Order (1979) pp. 405–415, 464–477 and 495–501Google Scholar; Greenfield, J., China and the Law of the Sea, Air and Environment (1979), pp. 231–235Google Scholar. Since 1982 this effort has also included, more specifically, the codification and development of international law. In that year, the People's Republic of China became a member of the ILC for the first time (G.A. Res. 36/136 of 23 November 1981).

51. Tammes, A.J.p., Internationaal Publiekrecht (1973) p. 56Google Scholar; Brownlie, , Principles of public International Law, 3rd edn (1979) p. 60.Google Scholar

52. Ramcharan, B.C., “Implementing the International Covenants on Human Rights” in Human Rights, Thirty Years after the Universal Declaration (1979) p. 187Google Scholar; see the same author's International Law and Fact-Finding in the Field of Human Rights (1982)Google Scholar; Henkin, L., (ed.), The International Bill of Rights. The Covenant on Civil and Political Rights (1981), pp. 332–370Google Scholar; van Boven, Th. C., “Internationale instrumenten en procedures ter bevordering en bescherming van de rechten van de mens”Google Scholar, and Valticos, N., “The international protection of economic and social rights%, in Rechten van de mens in mondiaal en europees perspectief (1978) pp. 45–76 and 142–185 respectivelyGoogle Scholar; Verzijl, op. cit. pp. 1–17.

53. McDougal, M.S., Lasswell, Harold D., Lung-Chu, Chen, Human Rights and World Public Order (1980) p. 230.Google Scholar

54. de Waart, P.J.I.M., The Element of Negotiation in the Pacific Settlement of Disputes between States (1973) p. 7 and n. 12.Google Scholar

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56. McDougal, op. cit., pp. 322–323; Bedjaoui, M., Towards a New International Economic Order (1979) p. 230Google Scholar; Nguyen Quoc Dinh, op. cit., paras. 149–150; Mosler, H., The International Society as a Legal Community (1980), pp. 17–20Google Scholar. The UN Charter contains the most far-reaching institutional provisions in the field of the maintenance of peace and security. With respect to the promotion of human dignity there is, however, also an indication for protection of a (minimum) basis of human dignity in conformity with generally accepted international standards. C.F., Doc. E/CN.4/1983/11 of 9 December 1982, Report of the Working Group of governmental experts on the right to development, Annex IV, Draft Declaration on the Right to Development, Compilation of the proposals made by the experts.

57. Nguyen Quoc Dinh, op. cit., para. 655; de Waart, P.J.I.M., “Legal Regulation of an NIEO with special reference to Non-State Actors in International Economic Relations”, in Dupuy, R.J., (ed.), The New International Economic Order, commercial, technological and cultural aspects (1981) pp. 167–177.Google Scholar

58. Bedjaoui, op. cit.; Dupuy, op. cit.; Hossain, K., (ed.), Legal Aspects of the New International Economic Order (1980)Google Scholar; van Themaat, P. VerLoren, The Changing Structure of International Economic Law (1981)Google Scholar; Meagher, R.F., An International Redistribution of Wealth and Power: A Study of the Charter of Economic Rights and Duties of States (1979)Google Scholar; Fawcett, J.E.S., Parry, A., Law and International Resource Conflicts (1981)Google Scholar; Yusuf, A., Legal Aspects of Trade Preferences for Developing Countries; A Study in the Influence of Development Needs on the Evolution of International Law (1982)Google Scholar. See further Doc. UNITAR/DS/5 of 15 August 1982, Progressive Development of the Principles and Norms of International Law relating to the New International Economic Order; International Law Association (Montreal Conference 1982), International Committee on Legal Aspects of a New International Economic Order, Second Report of the Committee.

59. Kemper, R., Nationale Verfügung über naturliche Ressourcen und die Neue Weltwirtshaftsordnung der Vereinte Nationen (1976)Google Scholar; Elian, G., The Principle of Sovereignty over Natural Resources (1980)Google Scholar; (Dutch) National Advisory Council for Development Cooperation No. 73, Recommendation on Permanent Sovereignty, Settlement of disputes concerning foreign private investment (1981); Committee of the Netherlands Branch of the International Law Association, Permanent Sovereignty, Foreign Investment and State Practice, Report for the ILA International Committee on Legal Aspects of a New International Economic Order, by P. Peters, N.J. Schrijver, P.J.I.M. de Waart (1982).

60. de Vattel, E., Le Droit des Gens ou Principes de la Loi Naturelle Appliqués à la Conduite & aux Affaires des Nations et des Souverains (1758) paras. 88–91Google Scholar. There is, in addition, no question of a corresponding natural right to reasonable selling prices. The recuring tendency of states to resort to protectionism in order to keep economic difficulties outside their frontiers shows that Vattel's viewpoint is still alive. See op. cit., para. 90: Every state has the right to refuse the import of foreign goods, and the nations affected by those measures have no right whatsoever to complain against them “pas même si on leur eût refusé un office d'humanité”.

61. VerLoren van Themaat, op. cit., pp. 261–315.

62. (Dutch) National Advisory Council, Recommendation No. 73, op. cit., para. 2(3), p. 14: “The Council believes that the link between permanent sovereignty over natural resources and human rights is meaningful to the elaboration of the concept in relation to states and private legal entities investing abroad (human rights obviously apply to natural persons investing abroad)”. For a survey of the relevant resolutions see ibidem Sect. 2(1), pp. 4–10 and Doc. E/CN.4/1489 of 25 January 1982, Report of the Working Group of governmental experts on the right to development, para. 11. See also Netherlands Branch Report on Permanent Sovereignty, op. cit., paras. 2, 1, 4.16 and 4.17.

63. CERDS, Art. 2. See also supra n. 61.

64. Second Report of the ILA International Committee on Legal Aspects of a NIEO, op. cit., para. 49 (III): “In an inter-state relations permanent sovereignty over natural resources is one of the legal expressions of the economic aspect of political sovereignty of states which is a cornerstone of the present organisation of the international community. It underlines the domestic jurisdiction of states with regard to the natural resources within their national boundaries, without, however, exempting it from the application of other rules or principles of international law”. See also Jimenez de Arechaga, E., “Application of the Rules of State Responsibility for the nationalisation of Foreign-Owned Property”, in Hossain ed., op. cit., p. 227Google Scholar: “It follows that it is not entirely accurate to say that international law has been ‘utterly rejected’ by the Charter of Economic Rights and Duties of States. Though expelled through the door because of its alleged identification with the doctrine of ‘adequate, prompt and effective compensation’, it has come back through the window in the garb of an equitable principle which takes into account the specific circumstances of each case and is, in such a way, more likely to assist in the settlement of investment disputes through negotiation or, if the parties so agree, through adjudication”. Jimenez de Arechega is of the opinion that the elimination of the phrase “in accordance with international law” in Art. 2(2)(c) CERDS “was caused by the insistence of the developed countries in asserting that international customary law provided for “adequate prompt and effective compensation” “ (p. 225).

65. Doc. E/CN.4/1489, op. cit., para. 23; Doc. E/CN.4/1983/11, op. cit., Annex IV Preamble para. 10: “Recalling the right of peoples to self-determination, by virtue of which all peoples have the right to freely determine their political status and have an inalienable right to pursue freely their economic and social development and to exercise full and complete sovereignty over all their natural resources subject to the principles referred to in Art. 1, para. 2, of the International Covenants on Economic, Social and Cultural Rights,….”

66. Tinbergen, P.J. (coordinator), Reshaping the International Order: A Report to the Club of Rome (1976)Google Scholar Section 5(8). See also Dolman, A.J., Resources, Regimes, World Order (1981) pp. 194–204.Google Scholar

67. Elian, op. cit., pp. 168–179; Asante, S.K.B., “The Concept of Stability of Contractual Relations in the Transnational Investment Process”, in Hossain, ed., op. cit., pp. 237–240.Google Scholar

68. Bedjaoui, op. cit., p. 229; Carreau, D. et al. , Droit International Economique, 2nd ed. (1980) pp. 624–625Google Scholar; Meagher, op. cit., pp. 54–56; OECD study North/South Technology Transfer: The Adjustment Ahead (1981); Nguyen Quoc Dinh, op. cit., para. 693.

69. Declaration, para. 8 (Horn, N., Legal Problems of Codes of Conduct for Multinational Enterprises (1980) pp. 481–482)Google Scholar. See Günther, H., “The Tripartite Declaration of Principles (ILO): Standards and Follow-Up”, in Horn, Legal Problems of Codes of Conduct, pp. 159–160Google Scholar; van Houtrik, K., “De Tripartiete Beginselverklaring betreffende multinationale ondernemingen en sociaal beleid van de IAO” [The Tripartite Declaration of Principles concerning Multinationals Enterprises and Social Policy], 57 NJ (1982) pp. 459–469.Google Scholar

70. Doc. E/C.10/1983/S/2 of 4 January 1983, Completion of the Formulation of the Code of Conduct on Transnational Corporations, Information paper on the negotiations, para. 22: “The draft Code includes 71 provisions, excluding the uncompleted section on the preamble and the objectives. Out of the 71 provisions, two-thirds are fully agreed on; they contain definitive language acceptable to all delegations”.

71. Doc. E/C.10/1982/6, Report of the Intergovernmental Working Group on the Code of Conduct on its fifteenth, sixteenth and seventeenth sessions, Annex, para. 13. Pending the final resolution of the issue of the legal nature of the Code, the Intergovernmental Working Group adopted the formula of “shall/should” in its formulations to denote the mandatory and non-mandatory positions respectively. All delegations were, however, fully committed to an effective Code, irrespective of its legal nature (Doc. E/C.10/1983/S/2, para. 27).

72. OECD, International Investment and Multinational Enterprises. Mid-Term Report on the 1976 Declaration and Decisions (1982), pp. 18–29 and Annex V Clarification of the Scope of the National Treatment Instrument, pp. 67–79. Wallace, op. cit., p. 310, overlooks the connection which by virtue of the Introduction to the Guidelines, exists with the Decisions: “The initial phase of the co-operation programme is composed of a Declaration and three Decisions promulgated simultaneously as they are complementary and inter-connected, in respect of guidelines for multinational enterprises, national treatment for foreign-controlled enterprises and international investment incentives and disincentives”. Thus, the Guidelines do not exclusively address MNEs.

73. Section D and E, 19 ILM (1980) pp. 817–820.

74. Doc. E/C. 10/1983/S/2, para. 43.

75. Other major outstanding issues are the definition of transnational corporations, including the question of exclusive applicability of national law and national settlement of disputes in cases of nationalization and compensation (Doc. E/C. 10/1983/S/2, paras. 31–34 and 50–54). The UN Commission on Transnational Corporations drew from the final report of the Intergovernmental Working Group on the Code of Conduct the conclusion that the problems still obstructing the formulation of the UN codes of conduct require a political solution. For this purpose, the convening of a special session at the beginning of 1983 has been suggested, in which all states may participate (Doc. E/C.10/1982/6 as well as Doc. E/1982/18 – E/C.10/ 1982/19, pp. 2–4. See also 7 UN Chronicle (1982) pp. 106–107).

76. Nguyen Quoc Dingh, op. cit., paras. 651 and 655; VerLoren van Themaat, op. cit., p. 344: “(2) The regulation of the right of ownership in general and with regard to the means of production in particular is considered both in the existing international economic order and in the Charter i.e., CERDS) as a matter for national law. However, the Charter also leaves open the possibility of conventional international norms – particularly of public international law – concerned with the exercise of these national property rights. As steering instruments of substantive law are considered exchange of information, consultation procedures, unconditional and conditional financial incentives and binding decisions” (VerLoren van Themaat, op. cit., pp. 354–355). Wallace, states that “any MNE control regulations in international codes, where the intent is any more than one of ‘guidance’ in the strictest sense of the word, should consist mainly of directives to host governments to the end of harmonizing and rationalizing national legislation for controlling any abuses of power in corporate activity …” (op. cit., p. 316).

77. Elian, op. cit., p. 170.

78. Ibid., p. 148. See also Fawcett and Parry, op. cit., pp. 29–33.

79. Bedjaoui, op. cit., pp. 243–261.

80. Wallerstein, I., The Capitalist World-Economy (1979), pp. 69–70Google Scholar; Dolman, op. cit., pp. 268–291.

81. zu Donna, B. Graf, Die Grundprinzipien des Völkerrechts über die freundschaftlichen Beziehungen und die Zusammenarbeit zwischen den Staaten (1973), pp. 178–192.Google Scholar

82. VerLoren van Themaat, op. cit., 239–249.

83. de Waart, P.J.I.M., “Volkenrecht en solidariteit” [international Law and Solidarity], Liber Amicorum Pieter VerLoren van Themaat (1982), pp. 301–315.Google Scholar

84. Doc. E/5500/Rev. I, 1974, The Impact of Multinational Corporations on Development and on international Relations.

85. Fatouros, A.A., “Le projet de Code international de conduite sur les entreprises transnationales: essai préliminaire d'évaluation” 107 Qunet 1980, p. 3 et seq.Google Scholar See also Horn, ed., Legal Problems of Codes of Conduct, pp. 103 and 407Google Scholar; Feld, W.J., Multinational Corporations and U.N. Politics: The Quest for Codes of Conduct (1980) pp. 1–20.Google Scholar

86. Waldmann, op. cit., pp. 85–87; Wallace, op. cit., pp. 21–22 and 328–329.

87. For a survey of the doctrine see in particular Kuusi, op. cit., p. 87 et seq. and, for application of the concept that such contracts have been internationalized, see the arbitral decision of 19 June 1977 in the dispute between Texaco Overseas Petroleum Company/California Asiatic Oil Company and the Libyan Arab Republic in 17 ILM (1978) p. 3 as well as the commentary thereon by Lalive, J.F., 104 Clunet (1977) p. 320Google Scholar (where the original French text of the decision is also included); see also, Cohen Jonathan, op. cit., p. 452; Verhoeven, J., 14 Rev. Belge (1978/1979) pp. 209 et seq.Google Scholar; Asante, , 28 ICLQ (1979) p. 405CrossRefGoogle Scholar; Fatouros, , 74 AJIL (1980) pp. 134 et seq.CrossRefGoogle Scholar, and the sharp criticism of Rigaux, op. cit., p. 435, who predicts that in the long term” … le contrat internationalisé sera … tenu pour une fantaisie éphémère sans passé et sans avenir” (p. 459); Kuusi, who also takes a critical view, emphasizes the existing aversion of developing countries from subjecting contracts to other legal systems than their own. He speaks of “renationalisation of modern state contract with foreign corporations”. He refers to the practice of the petroleum industry in recent years, where numerous contracts contain clauses prescribing the law of the host country as the applicable law. From the most recent literature mention may be made of Wengler, W., “Les principes généraux du droit en tant que loi du contrat”, 71 Revue Critique de Droit International Privé (1982) p. 467 et seq.Google Scholar, and in particular p. 483, under “Contrats entre un Etat et des étrangers”; Weil, P., “Droit International et Contrats d'Etat”, Mélanges offerts à Paul Reuter (1981), p. 549 et seq.Google Scholar; Kahn, Ph., “Contrats d'Etat et nationalisation. Les apports de la sentence arbitrate du 24 mars 1982”, 109 Clunet (1982) p. 844 et seq.Google Scholar, where the author observes (p. 844, see also p. 868): “Rédigée dans un style très simple et sans apprêt, elle [i.e., the arbitral decision] est partiellement la traduction juridique du discouis sur le nouvel ordre international, mais dans une approche qui cherche à concilier les fondements du droit international public traditionnel, la diversité des intérêts en cause, la réalité des forces en présence”. Kahn discretely avoids mentioning who the parties were to the arbitration. The decision is, however, published in extenso in 21 ILM (1982), pp. 976–1054. The parties were the Government of the State of Kuwait and the American Independent Oil Company (AMINOIL). See also Delaume, op. cit., pp. 825–829, on Art. 42 of the ICSID Treaty, and, op. cit., pp. 830–835 for excerpts (without commentary) of the arbitral decision of the Centre in the case AGIP Spa. v. Government of the People's Republic of the Congo of 30 Nov. 1979 (on this decision see Battifol, H. in 70 Revue Critique de Droit International Privé (1982), p. 93)Google Scholar. According to Delaume (p. 835), the AGIP decision is the only one that was published. See, however, 22 ILM (1982) pp. 740–766, where the entire text of the decision in the case Ltd. Benvenuti et Bonfant srl. v. the Government of the People's Republic of the Congo is included.

88. See Dolzer, R., “New Foundations of the Law of Expropriation of Alien Property”, 75 AJIL (1981) pp. 572–573CrossRefGoogle Scholar, and the awards in the cases referred to in the preceding note in general, and more in particular the Texaco case, 104 Clunet (1977) pp. 363, 371–373 and 384–387; LIAMCO case, 20 ILM (1981) pp. 40–41, 54–57, 59 and 63; AMINOIL case, 21 ILM (1982) pp. 1001, 1021–1024, 1031–1034 and 1049; AGIP case, 21 ILM (1982) pp. 731, 735–737.

89. Bedjaoui, op. cit., p. 129. The socialist countries subscribe in general to the standpoint of the developing countries. The Western countries emphasize, in particular, the necessity of effective international implementation, according to the Report on its 5th, 6th and 7th sessions of the Intergovernmental Working group on a Code of Conduct (Doc. E/C. 10/46 of 11 April 1979, paras. 26–34); See also the (Dutch) National Advisory Council for Development Cooperation, Recommendation No. 73, op. cit., para. 5(3) and Annex I. The only outstanding issue in the chapter on the implementation of the Code of Conduct on Transnational Corporations is whether the international institutional machinery should be entrusted with the function of providing clarification of the provisions of the Code in the light of actual situations in which the applicability and implications of the Code have been the subject of intergovernmental consultations. Most delegations favoured such a provision, arguing that it was essential to the effective application of the Code (Doc. E/C. 10/1982/S/2, para. 54); see Feld, op. cit., 104–106, who argues – at p. 104 –: “Regardless of whether the prospective code of conduct will be voluntary, mandatory, or partly voluntary, partly mandatory, the delegation of every country participating in the drafting and adopting of the code must be expected to aim at a degree of effectiveness. Otherwise, participation in this long and arduous process would make no sense at all, or would have been pure lip service”.

90. See the report of the UN secretariat for the UN Commission for Transnational Corporations, Transnational Corporations: Certain Modalities for Implementation of a Code of Conduct in reladnon to its Possible Legal Nature (Doc. E/C. 10/AC. 2/9 of 22 December 1978, para. 11); see also Fatouros, op. cit., in 107 Clunet (1980) p. 13Google Scholar. See also suupra, n. 74.

91. Doc. E/C. 10/1983/S/3 of 20 January 1983, Transnational Corporations: A code of conduct – Revised key elements on the preamble, Part B (Objectives and principles), para. 1(a): “To establish international standards for the regulation and supervision of the activities of transnational corporations, with a view to helping create mutually beneficial relations among all parties concerned”; para. 3 (Definitions) sub (b): “The Code is applicable to each transnational corporation as a whole or to its entities to the extent relevant in each case in accordance with the actual distribution of responsibilities among them and on the understanding that the entities will co-operate with one another to facilitate observance of the Code” (pp. 3, 4, 7, and 8).

92. OECD, International Investment and Multinational Enterprises, Review of the 1976 Declaration and Decisions (1979), para. 77. See also OECD, op. cit., n. 4, para. 13 and Annex IV, sub (a): “Reporting by multinational enterprises on support of and experience with the Guidelines” (pp. 57–61).

93. Doc. TD/RBP/Conf/10 of 2 May 1980, Part B (ii) 19 ILM (1980) p. 816; see Davidow, J., “The UNCTAD Restrictive Business Practices Code”, Horn, op. cit., p. 193Google Scholar; Atkeson Gill, op. cit., See Also Fikentscher, W., The Draft International Code of Conduct on the Transfer of Technology (1980), pp. 47–51Google Scholar; Hossain, (ed.), op. cit., pp. 20–23.

94. Doc. TD/CODE TOT/25 of 2 June 1980, para. 1 (l)(a) and 1(5), 19 ILM (1980) pp. 775 and 777; see Wilner, G.M., “Transfer of Technology: The UNCTAD Code of Conduct”, Horn, p. 177.Google Scholar

95. Revised Decision of the Council on Inter-governmental Consultation Procedures on the Guidelines for Multinational Enterprises, para. 2. OECD, International Investment and Multinational Enterprises, Mid-Term Report on the 1976 Declaration and Decisions (1982), para. 15: “An innovatory feature of 1979 Review of the Guidelines was the recommendation to governments to set up at the national level ‘contact points’ to handle matters of relevance to the Guidelines. This was welcomed by BIAC and TUAC; and the business community and the trade unions, especially the latter, have made active use of them in some countries” (see also Annex III to this report).

96. The principal – in total 132 – industrial, economic and employers organisations from the 24 Member States of the OECD participate in TUAC. BIAC is composed of 29 trade unions from 19 countries with together 26 million members; Blanpain, The Badger Case, pp. 31–37; Blanpain, OECD Guidelines, pp. 69–70 as well as p. 237; Blanpain, , “The OECD Guidelines and Labour Relations: Badger and Beyond”, Horn, op. cit., p. 145Google Scholar. See also, Vogelaar, Th. W., “The OECD Guidelines: Their Philosophy, History, Negotiation, Form, Legal Nature, Follow-up Procedures and Review”, Horn, op. cit., p. 127.Google Scholar

97. Doc. EC. 10/1982/6, Annex, para. 69. See also Doc. E/C/10/S/2, para. 54.

98. Section G (4), 19 ILM (1980) p. 822; Atkeson Gill, op. cit., pp. 18–19, according to whom this section, G4, is another crucial provision of the Code: “Its inclusion further bolsters the conclusion that the code is purely a voluntary set of Principles and Rules”. They conclude that continued business and legal group participation in future negotiations is essential in improving both the quality of the final product and the sense of realism in the ongoing North-South dialogue (p. 23).

99. See supra, n. 89.

100. Slot, P.J., Altes, A. Korthals, “International Law and National Regulations concerning the Protection or Advancement of National Merchant Fleets”, 26 NILR (1979) pp. 329–354 and 356, 358–359.CrossRefGoogle Scholar

101. Doc. A/Conf. 62/122 of 7 October 1982, Art. 188.

102. Para. 2(3) and n. 38; see also Broches, A., “Bilateral investment protection treaties and arbitration of investment disputes”, The Art of Arbitration, Liber Amicorum Pieter Sanders (1982) pp. 63–72.Google Scholar

103. GA Res. 31/98 of 15 December 1976. This on the recommendation of the arbitration rules, drawn up by UNCITRAL for world-wide use, both for capitalist and socialist systems, developing and developed countries as well as for Civil Law and Common Law systems. See Yearbook Commercial Arbitration, vol. 11 (1977) for the text of the UNCITRAL rules (p. 161) and the commentary thereon by P. Sanders, p. 172.

104. GA Res. 35/52 of 10 December 1980, adopted by consensus, 20 ILM (1981) pp. 300–306; 6 Yearbook Commercial Arbitration (1981) pp. 165–160; G. Herrmann, Commentary on the UNCITRAL Conciliation Rules, ibid., pp. 160–190.

105. Jenks, C.W., “Multinational Entities in the Law of Nations”, Transnational Law in a Changing Society, essays in honour of Ph. C. Jessup, 1972, p. 82Google Scholar; McDougal, , “International Law, Power and Policy: A Contemporary Conception”, 82 R.d.C. (1953) 137Google Scholar; Friedmann, W., The Changing Structure of International Law, 1964, pp. 64–71Google Scholar; Röling, B.V.A., International Law in an Expanded World, 1960Google Scholar. This vision apparently still dominated in the project of the Centre for Interdisciplinary Research of the University of Bielefeld, BRD, carried out in 1978/1979, the result of which constituted the so-called Bielefeld Papers, a work published and edited by Horn, mentioned above in n. 69. Baade apparently adopts the traditional international legal point of view. His idea on the fact that MNEs are referred to as addressees of the codes of conduct is namely that: “MNEs are, however, neither states nor public international organizations, and thus neither general ‘natural’ nor ‘artificial’ subjects of international law as presently defined” (“The Legal Effects of Codes of Conduct for Multinational Enterprises”, Horn, op. cit., pp. 7–8). Grigera Naón defends the viewpoint of the Inter-American Legal Commission that “Transnational enterprises and their affiliates and subsidiaries are not subjects of international law; therefore, they do not have ‘jus standi’ before international courts” (op. cit., p. 271). He considers such non-recognition of MNEs as subjects of international law even to be a rule of ‘jus cogens’, op. cit., p. 265, n. 144, but without introducing any new aspects thereto. In his opinion, MNEs should be regulated by private international law and not public international law. Fatouros expresses himself in the Bielefeld Papers somewhat more cautiously: “Although representatives of developing and socialist countries frequently emphasize that TNCs are not a ‘subject of international law’ (in order to insist that TNCs and states should never be treated on an equal gooting), it is hard not to see in the decisions to address TNCs directly an acknowledgement of their economic and political significance, and even an acceptance of their reality as international actors” (Horn, op. cit., p. 110).

106. See the foreword of the Secretary-General, P. de Visscher, to the Annuaire de L'Institut de Droit International (1978), p. 15: “Cette multiplicité de problèmes ne pouvait pas manquer d'alimenter un débat riche en substance qui, par delá les positions proprement juridiques des uns et des authres, témoigne de certaines options plus fondamentales”.

107. Annuaire de L'Institut de Droit International (1977).

108. Ibid., p. 195.

109. Ibid., p. 212.

110. Ibid., pp. 221–224.

111. Waldmann, op. cit., p. 6: “It is generally agreed that there is little likelihood that MNCs will be subject to the authority of a comprehensive international regulatory organization in the near future. It is no wonder, therefore, that great attention is now being pad to establish codes of conduct to regulate particular actions of multinational enterprises”; Hailbronner, op. cit., p. 339: “Der Schluss, dass durch den Verhaltenskodex transnational Unternehmen als Völkerrechtssubjekte akzeptiert werde, die zu ihrem Gaststaat in völkerrechtliche Beziehungen treten, wäre daher voreilig”; Sanders, , “Codes of Conduct and sources of law”, Le Droit des Relations Economiques Internationales, Etudes offertes à Berthold Goldman, (1982) p. 295Google Scholar: “MNEs, unlike States, are not subjects of international law”; Wallace, op. cit., pp. 312–313: “An international code could indeed contribute to the avoidance of overlapping or conflicting legislative jurisdiction to alleviate the position of the MNE being subject to more than one jurisdiction when multiple jurisdiction means conflicting and mutually incompatible directives; but international directives to MNEs can clearly do nothing to ameliorate such conditions, as the MNEs themselves are powerless as regards jurisdictional questions, being neither general ‘natural’ nor ‘artificial’ subjects of international law as currently understood, nor possessing ‘the power to participate directly in the norm-creating process’”; See also infra n. 113.

112. Doc. E/C. 10/1983/S/3, p. 2.

113. Nguyen Quoc Dinh, op. cit., para. 655: “Il n'en reste pas moins qu'à défaut d'être sujets du droit international – ce qu 'elles ne sont que de maniére limitée (ibid; sc. paras. 497–501) – les sociétés transnationales jouent un rôle fondamental dans les relations économiques internationales et que le droit international appréhende mal et peu leur action: ce sont des acteurs des relations internationales plus que des sujets du droit international; comme telles elles échappent en grande partie à l'analyse juridique” (italics supplied).

114. See also n. 12.

115. European Communities, Comments on the U.S. Regulations concerning Trade with the U.S.S.R., 21 ILM (1982) pp. 891–904; Löwe, A.V., “Blocking Extraterritorial Jurisdiction: The British Protection of Trading Interest Act, 1980”, 75 AJIL (1981) pp. 257–283CrossRefGoogle Scholar; Maier, H.G., “Extraterritorial Jurisdiction at a Crossroads: An Intersection between Public and Private International Law”, 76 AJIL (1982) pp. 280–321.CrossRefGoogle Scholar

116. See n. 39.

117. Chowdury, “Legal Status of the Charter of Economic Rights and Duties of States”, Hossain etc., op. cit., p. 87 states: “It is generally recognized in international law, that the State has responsibility for the conduct of its nationals abroad”; Hailbronner, op. cit., p. 337 argues: “Nach allgemeinen Völkerrecht kunnen Heimatstaaten für die Tätighkeit “ihrer” transnationaler Unternehmen nicht verantwortlich gemacht werden, sofern nicht besondere völkerrechtliche Zurechtnungsstatbestände eine Haftung begründen”; idem Nguyen Quoc Dinh, op. cit., para. 624. See also the UN Convention on the Law of the Sea, Annex III, Art. 4(4), according to which a sponsoring State is not “liable for damage caused by any failure of a contractor sponsored by it to comply with its obligations if that State Party has adopted laws and regulations and taken administrative measures which are, within the framework of its legal system, reasonably appropriate for securing compliacnce by persons under its jurisdiction”, 21 ILM (1982) p. 1331Google Scholar. In this connection see the considerations of the ICJ, on State responsibility in its judgment in the United States Diplomatic and Consular Staff case, ICJ Reports (1980) para. 58.

118. Virally, M., “Un tiers droit? Réflexions théoriques”, Etudes offertes à Berthold Goldmann, op. cit., pp. 374–385Google Scholar. See also n. 67.

119. McDougal, op. cit., p. 801; Asante, op. cit. (n. 67), p. 243, argues (with regard to renegotiation) that it is submitted “that most juristic writing in this area has suffered from excess of formalism and has failed to address itself to the crucial issues of a practical and functional character which beset the economic and legal relations between host governments and transnational corporations … Thus a blind insistence on the application of pacta sunt servanda to such transnational contracts betrays a lack of sophisticated appreciation of the nature and origin of such transactions … Equally, a bold assertion of an unqualified sovereign right to unilaterally abrogate or modify such agreements … cannot provide a viable basis for a meaningful economic relationship between a host government and a transnational corporation”.

120. Annuaire de L'Institut de Droit International II (1978), p. 341. The practical difficulty – as already observed in n. 18 – is, however, that a clear decision-making centre need not be present in all MNE structures.

121. Annex OECD Declaration on International Investment and Multinational Enterprises of 27 June 1976, Doc. DCB 48/28/6/76, para. 8 and ILO Doc. GB 204/42/2 of 18 November 1977, Art. 6.

122. Nguyen Quoc Dinh, op. cit., para. 500, p. 563. A flexible definition presupposes, however, that all types of enterprise may be covered, including state enterprises. Despite their acceptance of the ILO Declaration, socialist states continue to oppose the application of a UN Code of Conduct on Transnational Corporations to state enterprises. See Doc. E/1982/18 – E/C. 10/1982/19, para. 142: A few delegations “considered that transnational corporations were the specific socio-economic type of enterprises whose activities had given rise to the mandate of the Commission. In theii view, the enterprises of the socialist countries had nothing in common with transnational corporations”. Developing countries, on the other hand, adopt the practical standpoint that “ownership should not be a determining criterion. The main concern was the manner in which corporations operated” (ibid., para. 143).

123. UN Convention on the Law of the Sea, Art. 153, 21 ILM (1982) p. 297.

124. Ibid., Annex III, Art. 4(4), p. 1331.

125. See n, 101. This is inherent to the functional international legal personality of the MNE concerned.

126. See, inter alia, Ijalaye, op. cit., pp. 57–147.

127. See Wildhaber, L., “Multinationale Unternehmen und Völkerrecht”, Intemational-rechtliche Problemen multinationaler Korporationen, 18 Berichte der Deutschen Gesellschaft für Völkerrecht, (1978), pp. 1–73Google Scholar, and the discussion thereon, pp. 371–401. See also n. 111 and Hailbronner, op. cit., p. 340: “Darübei hinaus ist im Umkehrung einer Formulierung Wildhavers die Frage zu stellen, ob eine funktionell beschränkte transnational Socialpflichtigkeit” ohne entsprechende Rechtssubjektivität denkbar ist. Beinhaltet die Schaffung eines internationales Kodex nicht notwendig die Entstehung völkerrechtlicher Rechte und Pflichten auf der Basis der Gegenseitigkeit? … Eine deraitige Souveränitätsbeschränkung kann aus den Ver-haltenskodizcs aber nicht abgeleitet werden”. This objection implies that the granting of international legal personality to MNEs involves limiting state sovereignty. In international economic relations, however, this by no means corresponds to reality, as the sovereignty of states in this field is not the same as in the field of maintaining peace and security. See n. 113.

128. Mavrommatis Palestine Concessions case, 1924 PCIJ, Series A, Nos. 2–12; see also the Nottebohm Case, ICJ Rep. (1955) pp. 4, 24; Barcelona Traction Case, ICJ Rep. (1970) pp. 3, 32–52.

129. See Lillich, R., “The diplomatic protection of nationals abroad: an elementary principle of international law under attack”, 70 AJIL (1975) p. 359 et seq.CrossRefGoogle Scholar

130. Terms of Judge M. Ammoun in his individual opinion in the Barcelona Traction Case, ICJ Rep. (1970) p. 292.

131. According to the traditional doctrine. For example of cases in which the domicile of the natural person played a role, see Ko Swan Sik, Nationaliteit in het Volkenrecht, Preadvies voor de Nederlandse Vereniging voor Internationaal Recht (1981) p. 17 (a summary in English is given in 29 NILR (1982) p. 100 et seq.).

132. The institution of diplomatic protection has been the subject-matter of extensive literature, in particular after the Barcelona Traction Case; of the most recent literature, see Leben, in L'entreprise multinationals, op. cit., pp. 199–208, and Brownlie, Principles of Public International Law, p. 328 et seq., 480 et seq. (at pp. 485494, on companies and shareholders) with many references. See also Wallace, op. cit., p. 281 et seq. on the Barcelona Traction Case.

133. Only the following need be mentioned here: Barcelona Traction was a holding company, founded in 1911 in accordance with Canadian law, with its seat in Toronto. Its objective was to establish and develop production and distribution networks for electrical energy in Catalonia. For this purpose, it set up fourteen operating companies, which it controlled, eleven in Spain and three in Canada, established in accordance with Spanish and Canadian law respectively. Barcelona Traction itself was controlled by Belgian company, Sofina. After several complications – caused by the two World Wars and the Spanish Civil War – Barcelona Traction was declared bankrupt by a decision of a Spanish court in 1948, which court also. declared the seizure of the companies' property to be valid. Finally, in 1952, the shares of the subsidiaries were converted into money by a judicial sale, being bought by a Spanish company established especially for this purpose. After Canada had undertaken certain steps it lost interest in the case. In the first phase (in 1948) Belgium attempted to protect the company as such, by appealing to the control theory (i.e., the country of the main shareholders who had the most extensive control of the company), subsequently, in the second phase (in 1962) the interest of the Belgian shareholders. The International Court of Justice denied Belgium jus standi.

134. ICJ Rep. (1970) p. 42.

135. ICJ Rep. (1955) p. 1.

136. Reference is to the various systems of (re-)insuring foreign investments introduced by the capital-exporting countries which do not follow the Barcelona Traction judgment, but require a “genuine link”: incorporation and the statutory seat are not sufficient; the existence of substantial ties between the company and the state from which reinsurance is claimed is required. See on these systems Kokkini-Iatridou, Protection of foreign investments, op. cit., p. 287 ct seq.

137. G. Perrin and H. Maire de Riedmatten, op. dit., p. 394, who write: “Le vrai danger du critère retenu par la Cour n'est donc pas l'abus de protection, mais bien plutôt l'absence de protection”.

138. Leben, op. cit., p. 200; Perrin and Maire de Riedmatten, op. cit., p. 391.

139. Like Canada, which no longer had any interest in the Barcelona Traction Case once the company fell under the control of Belgian interests.

140. Information taken from Kuusi, op. cit., p. 46; this author refers, as far as America is concerned, to Morton Mintz, “Senate Panel Report Urges End to Aid to Multinationals”, The International Herald Tribune, 16 October 1973, p. 3. See also Brownlie, op. cit., p. 486.

141. See on this point Brownlie, op. cit., p. 493 with numerous references, also Caflisch, L., in 21 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (1971) p. 185Google Scholar, who, hesitantly, writes: “It would seem, therefore, that foreign shareholders' interests are protected by international law if the company is a national of the defendant State, regardless of whether the entity is ‘practically defunct’ or not, and regardless of the amount of shareholding involved”; and his conclusion on p. 195: “It is still possible to assert that foreign shareholders' interests … are protected by international law if the company is a national of the defendant State”.

142. ICJ Rep. (1970) p. 48.

143. See, e.g., Perrin and Make de Riedmatten, op. cit., p. 399; see also Kojanec, G., Investimenti all' estero. Regime giuridico e garancie internazionali, 1970, p. 147Google Scholar and the book review by Kokkini-Iatridou in 22 NILR (1975) pp. 98–104.

144. The position taken by Judge Tanaka, ICJ Rep. (1970) p. 126.

145. See Dubois, L., “La distinction entre le droit de l'Etat réclamant et le droit du ressortissant dans la protection diplomatique”, 67 Revue Critique de Droit International Privé (1978) pp. 635–636.Google Scholar

146. Another condition attached to the exercise of diplomatic protection is the exhaustion of the local remedies of the host country. By “local remedies” is meant all means of a legal nature, including administrative means. The available remedies must be “effective”. Judging whether local remedies are available and effective is not always an easy task. What happens when, e.g., the law of the host country is not always clear with respect to certain subjects, such as state immunity or the Act of State doctrine or, when the national courts take a dependent position with respect to the executive, or when the national courts have no jurisdiction according to international criteria? Examples taken from Brownlie, op. cit., pp. 489–499.

147. See Goldman, who writes in Annuaire Français de Droit International I, p. 352: “… force est bien de constater que celui-ci n'est point parfaitement adapté à la situation des entreprises multinationales…” Also J. Charpentier, Annuaire Français de Droit International (1970) p. 328, where he observes that: “La verité est que la rigidité des rapports interétatiques, auxquels se rattache l'institution de la protection diplomatique est inadaptée à la souplesse des sociétés transnationales”.

148. See Charpentier, op. cit., p. 316, who qualifies this as a “probatio diabolica”.

149. For the International Court of Justice, an amendement of Art. 34 of its Statute would be required, see Ijalaye, op. cit., p. 267.

150. One could refer, e.g. to the provision of Art. 54 of the ICSID Treaty; to the effect of decisions of the Court of Justice of the European Communities ordering money payments; to the effect of decisions of the Sea-Bed Disputes Chamber provided for in the UN Convention on the Law of the Sea, UN Doc. A/Conf.62/121 of 21 October 1982, Ait. 187, Annex VI and 39; see Giardina, op. cit., p. 276 et seq. On Art. 54 of the ICSID Treaty see also Delaume, op. cit., p. 836 et seq. On the question of the execution of international decisions in general, see Ouali, A. El, “La sentence internationale directement applicable”, Mélanges offerts à Paul Reuter (1981), p. 269 et seq.Google Scholar

151. See the short survey of the vicissitudes of LIAMCO with respect to the enforcement of an arbitral decision in four countries by Paulsson, J., 108 Clunet (1981) p. 544Google Scholar. On the question of immunity of execution in general, see, among the most recent literature, 10 NYIL and, in particular, the report of L. Bouchez (pp. 3–33) who advocates restrictive immunity; see the critical comments thereon by Lagarde, P., in his review published in 70 Revue Critique de Droit International Privé (1982) p. 612Google Scholar, See also Report of the Sixtieth Conference of the International Law Association (Montreal, 1982) pp. 325–348.

152. It is common knowledge that the ICSID Treaty (Ait. 55) docs not infringe the internal rules of the Contracting States concerning immunity from execution (both with respect to the state concerned and other states). On the regulation of the ICSID Treaty see in particular Giardina, op. cit., p. 287 et seq.; Delaume, op. cit., p. 840. It may be recalled that the European Agreement concerning the immunity of States of 16 May 1962 (Trb. 1973, No. 43) leaves immunity from execution unimpaired.

153. There have been contracts in which the host country waives its immunity from jurisdiction as well as its immunity from execution, see the examples cited by Delaume, op. cit. pp. 841–842; one case even concerned the exploitation of natural resources (diamond mining).