The 1976 OECD Declaration on International Investment and Multinational Enterprises (OECD Declaration) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines), which form an annex to the OECD Declaration, are not legally binding instruments.
62 ) Schrljver argues that its positive impact was that it identified issues and problems involved in the operation of MNCs. See: Schrijver, Sovereignty over Natural Resources: Balancing Rights and Duties (Cambridge: Cambridge University Press, 1997), 82. For more details on the Code, see: Minta, “The Code of Conduct on T N C ’s: In the Twilight Zone of International Law” (1985) 25 CTC Rep., 29-37. For Codes of Conduct generally, see: Horn (ed.).
Legal Problems o f Codes o f Conduct for Multinational Enterprises (Antwerp, Boston, London, Frankfurt: Kluwer- Deveter, 1980).
63 ) The ICC adopted a wide range of “Codes”, such as: ICC, Environmental Guidelines for the World Industry (Paris: ICC, 1976); ICC, International Code o f Marketing Practice (Paris: ICC, 1974) and ICC, Intematlonal Code o f Direct Sales Practice (Paris: ICC, 1978). For O EC D Codes, see: next section infra, chapter A IV 2c.
64 ) See also: the adoption of the Guidelines on Consumer Protection. G A Res. 39/248 dated April 9 ,1 9 8 5 .
65 ) Draft International Code of Conduct on the Transfer of Technology, 1985, Art. 7. For an early summary of the different views of developed nations, developing countries and socialist States on several issues addressed in this Code, see: UNCTAD, Report o f the Intergovernmental Group o f Experts on the Code o f Conduct on Transfer of Technology [Geneva: UNCTAD, 1975), Chapter I, Annex II and Annex III, UN Doc.TD /B /C .6/1.
The central provision of the OECD Declaration^^ is its section 2 granting national treatment to foreign enterprises of Member States. This section, often referred to as “National Treatment Instrument”, is a milestone in the liberalisation of rules on FDI.68 It applies to admission of foreign investors and to post-admission investment activities. However, the OECD Declaration fails to cover other key issues, such as provisions on expropriation or dispute settlement.
The OECD Guidelines, the first inter-governmental instrument addressing standards of conduct expected of MNCs, were in line with the trend during the 1970s of regulating such conduct on a multilateral basis. They were thought to carry “considerable weight of moral persuasion”,69 but it has not been proved that they have influenced or changed the behaviour of foreign investors in practice.^o All enterprises, domestic and foreign, operating in the territory of Member States were supposed to observe these Guidelines.^^ They contained numerous provisions on competition, taxation, employment and industrial relations. Reviews between 1979 and 2000 provided additional clarifications and comments.
Writers attributed much of the success of the OECD, in agreeing to the Declaration and the Guidelines, to the fact that Member States have homogeneous economic, political and legal systems, as well as a similar level of development.^^ The lack of common concepts of international business between Western countries, developing States and socialist nations, by contrast, was often cited as a reason for the UN’s failure in its efforts to achieve global a g r e e m e n t . ^ 3 Less attention was given to the fact that the OECD instruments represented a more balanced approach,
i.e.,
incorporating recommendations to MNCsand
addressing the protection of investments, a key feature UN proposals were lacking.67 ) Since its adoption in 1976 the O EC D Declaration has been am ended several times. See: e.g., Third Revised Decision of the Council of the OECD, dated Decem ber 1 9 ,1 9 9 2 . OECD, Third Revised Decision of the Council on National Treatment, O EC D Working Paper, Vol. //N O (Paris: OECD, 1995).
68 ) Houde, “Foreign Direct Investment: Trends and Policies” (1992) 176 The O E C D Observer 9 at 13. 69 ) Schwamm, “The O EC D Guidelines for Multinational Enterprises" (1978) 12 J. World Tr.L. 342 at 350. 70 ) Walde, Intemational Investment under the 1994 Energy Charter Treaty, 260.
71 ) Guidelines on Multinational Enterprises, Sec. 9.
72 ) Aranda, “Experience with the O EC D Guidelines: The Clarifications” (1988) 25 CTC Rep., 34.
73 ) Vogelaar, “The O E C D Guidelines: Their Philosophy, History, Negotiation, Form, Legal Nature, Follow-up Procedure and Review” in Horn (ed.). Legal Problems o f Codes o f Conduct for Multinational Enterprises (Antwerp, Boston, London, Frankfurt: Kluwer-Deveter, 1980) 127 at 129.
Throughout the 1970s there was no (draft) multilateral instrument which comprehensively addressed the treatment and protection of FDI. Nearly all proposals were heavily influenced by the demands of host States, particularly Third World countries, to protect their independence from “economic imperialism" and to control the activities of MNCs. Many host States, which became independent during the 1960s, were concerned that too much economic influence from foreign investors would undermine their newly established sovereignties. The large number of new nations enabled developing countries to gain considerable influence in the international fora, particularly within the GA. Thus, it is not surprising that many voices demanding radical changes in the world’s trading and financial system were raised in this forum. The most prominent of these projects was the Charter of Economic Rights and Duties of States, adopted by the GA in 1974.^4 it was not mainly intended to be an instrument on investment, but it contained certain provisions indirectly affecting the activities of foreign investors. Its famous Art. 2(2)(c) emphasised the right of States to expropriate foreign property upon payment of “appropriate compensation” with no further objective definition of this term. The same article provided for investor-State dispute resolution over such compensation by local courts applying local laws; a restatement of the Calvo D o c t r in e . ^ s jh e Charter failed to receive support from most developed States, which either voted against it or abstained. Its focus on sovereign rights of host States and its lack of adequate provisions to protect foreign investors resulted in a continuing denial of authoritative status for it by major capital exporting co u n trie s .^ G
Similar instruments were the Declaration on the Establishment of a New International Economic Order, adopted by the GA in 1974^7 and the Resolution on Development and International Economic Co-operation adopted in 1975.^® These and other GA r e s o l u t i o n s ^ ^ had a certain impact on the trend in the 1970s to leave aside the codification of a comprehensive legal framework on FDI, and to focus instead on norms protecting the economy and sovereignty of
) GA Res. 3281 (XXIX) dated December 1 2 ,1 9 7 4 .
75 ) Rogers, “O f Missionaries, Fanatics and Lawyers: Some Thoughts on Investment Disputes in the Americas” (1978) 72 A J IL 1 at 5-6. For more details on the Calvo Doctrine, see infra: chapter A IV 3a.
76 ) Denza and Brooks, Investment Protection Treaties: United Kingdom Experience, 910.
77 ) GA Res. 3201 (S-VI) dated May 1, 1974. See also: GA Res. 3202 (S-VI) dated May 1, 1974. For a critical analysis of the New International Economic Order see: Walde, “A Requiem for the ‘New International Economic Order’ - The Rise and Fall of Paradigms in International Economic Law” in Al-Nauimi and M eese (eds.), intemational Legal issues Arising under the United Nations Decade o f intemational Law (Dordrecht, The Hague, Boston: Martinus Nijhoff Publishers, 1995), 1301.
78 ) GA Res. 3362 (S-VII) dated September 1 6 ,19 75 .
host States. The Codes of Conduct described above are examples of this tendency. The trend declined, and in fact even reversed, in the 1980s and 1990s, when host countries realised that FDI was not as evil to their economy as they had earlier predicted, and that they could not adequately fund their own development by frightening off inward investment. The failure of the economic model of central planning as evidenced by the collapse of communism has probably supported this tendency.®° Instead of imposing broad restrictions on FDI, States nowadays adopt liberal investment policies, and nationalisations of foreign private properties -
the
main concern of investors in the 1970s and 1980s - are rare in times of increasing privatisation of former Stated-owned enterprises.3. Regional and Sectoral Agreements