François Rigaux
in Peuples/Popoli/Peoples/Pueblos n. 4 (May 1984)
The concept of a new international economic order is just ten years old: under the impetus of two Third World political leaders, Mexican President Luis Echeverría and Algerian President Houari Boumediène, it received its legal form from the United Nations General Assembly with the vote of resolutions 3201 and 3202 on 1 May 1974, during the Sixth Special Session, and the Charter of Economic Rights and Duties of States on 12 December 1974, during its Twenty-ninth Ordinary Session (resolution 3281/XXIX).
The actual legal scope of these instruments is controversial not only because they are not supported in all parts by the governments of the industrialised capitalist countries, but also, and above all, because of the vague wording of the provisions they contain. Self-determination and development are certainly political or economic objectives that tolerate imprecise language. But to be binding, a legal norm needs to define precisely what is due to whom and by whom.
The question that must be asked about the right of peoples is whether the dynamism of global economic relations will not change sides. The right to development aims at satisfying the basic needs of all peoples; however, in the current state of affairs, the poorest of them are not indebted to the international community (which is only an abstraction) but to the economic agents controlling the resources, and among them the private economic powers of which the transnational corporations are the most complete expression.
A duty for the state
With this in mind, the governments of the “Group of 77” took the initiative to organise the first UN Conference on Trade and Development, which took place in Geneva in 1964. The basic legal instrument for their action was the Declaration on Permanent Sovereignty over Natural Resources, adopted on 14 December 1962 by the UN General Assembly (Resolution 1803-XVII).
The principle has been reaffirmed many times since, notably in Article 1, § 2, of the two Covenants of 16 December 1966 and in Article 2, § 1, of the 1974 Charter of Economic Rights and Duties of States: “Each State shall have and freely exercise full and permanent sovereignty over all its wealth, natural resources and economic activities, including the possession and right to use and dispose of them”. Paragraph 2 further specifies that the legislative and regulatory competence of the territorial State is exercised over foreign investments (§ a), over “the activities of transnational corporations” (§ 2, b) as well as for “the determination of compensation to be paid in case of nationalisation, expropriation or transfer of ownership of foreign property (§ 2, c).
Apart from the particular problem raised by nationalisations, the principles thus affirmed did not upset classic international law: the exclusive jurisdiction exercised by the State over its territory is one of the most traditional solutions of the law of nations. The innovation of the 1962 declaration and the texts that followed is less legal than political; by recalling the competences of each State with regard to goods and activities located on its territory, they place on the State the duty to place natural resources at the service of the development of the people. It is in keeping with the traditional techniques of international law that only States are invested with both rights and duties, but the former are only attributed in relation to the latter of which the people are the real beneficiaries.
Given the context, the significance of these provisions lies in the fact that they shift the approval of natural resources to the people themselves and, ultimately, vest the people with rights to assert against their own state.
The development of the first codes of conduct coincided with the emergence of the new international economic order. Here again, nothing revolutionary, but flexible legal instruments, specially adapted to multiform, elusive and powerful economic agents. In this respect, this attempt is an exemplary illustration of the difficulties of changing the old order.
Alongside the older, already relatively numerous achievements, the two main codes of conduct being drafted at the United Nations deal respectively with transnational corporations and the transfer of technology, an activity to which these corporations are directly linked. One of the main legal questions raised by the elaboration of such codes – but a significant one – concerns their legal nature. Are the rules of behaviour adopted binding and, if so, on whom? Or are they merely guidelines, providing for a recommendable practice that is not accompanied by means of coercion to enforce the obligations contained therein? In both drafts, the answer to this fundamental question is left open, as various drafting procedures are used to give legal form to the solution adopted.
Constraint or recommendation
Two sets of examples will help to better understand the nature and scope of the difficulties. The first concerns rules whose binding nature is not in doubt, because it follows from other principles of international law. Thus, Article 7 of the draft UN Code of Conduct on Transnational Corporations (Doc. E/C 10/1983/S2, 4 January 1983) provides that such corporations (or, in a variant, the entities of such corporations) “should/shall respect the laws and regulations of the countries in which they operate”. It is easy to see that both proposed formulations (“should” or “must”) are unsatisfactory. The first one, in that it seems to reduce to a mere “recommendable practice” the necessary submission of private legal agents to the territorial laws of the country where they operate. The second is that, as formulated, the rule appears to lack normative scope: not all the laws of a country apply indiscriminately to foreigners who operate there.
The provision only makes sense if the last sentence of Article 7 is also adopted. Placed in square brackets (meaning that it was not accepted by all members of the working group), this sentence reads as follows:
“Entities of transnational corporations are subject to the jurisdiction of the countries in which they operate to the fullest extent required by the national laws of those countries. The scope of such a provision is quite clear: it means both that it is up to the conflict of laws rules of the country in question to determine the extent of application of local laws to foreign entities and that the courts of these countries have jurisdiction to apply these laws.
One could multiply examples of this type. According to the second sentence of Article 13, “in their social and labour relations, transnational corporations shall not discriminate on the grounds of race, colour, sex, religion, language, social, national or ethnic origin, political or other opinion”.
Conceived as a simple recommendation, the provision is more offensive than useful. The sentence is only meaningful if it states a prohibition (and the wording “may not” would probably be more appropriate than “shall not”).
In a third case, the possibility of a pure recommendation appears to be due: this is the prohibition of corrupt practices, contained in two paragraphs placed in square brackets (Art. 20, para. 1 and para. 2), which has therefore not been approved as such, but which cannot decently be replaced by a simple encouragement not to make an illicit payment “to a public official”. In other words, this first set of examples concerns rules which are so fundamental that they do not tolerate a non-mandatory code: it is acceptable to omit them, not to present them in the form of a directive or recommendation.
The second set of examples concerns provisions whose content is so imprecise that the two proposed versions have more or less the same scope, that of a simple recommendation. Such as, among others, Article 29: “Transnational corporations should/shall pay attention to requests from the governments of countries in which they operate, in particular developing countries, for the staggering over a limited period of time of the repatriation of capital, in the event of divestment or transfer of accumulated profits, when, because of their magnitude or the dates on which they are planned, these operations would cause serious balance of payments difficulties for these countries. The very content of the obligation – to “pay attention” to certain requests – is so unbinding and so easy to satisfy in a purely formal way that there is little difference between the indicative form which is deemed to be binding (“shall”) and the conditional form (“should”) which is not binding.
The autonomy of private powers
In the same vein, and the following comments will rather take their examples from the draft international code of conduct for technology transfer as it stood at the fourth session of the UN Conference on an International Code of Conduct on Transfer of Technology (Doc. TD/CODE TOT/33 of 12 May 1981), it must be stressed that a code may subject technology transfers to conditions favourable to developing countries, but it cannot compel enterprises holding technological knowledge to transfer all or part of it. States do not have the power, either jointly or, even more so, separately, to compel private economic agents to transfer goods, services or technology. If the conditions for such a transfer are laid down in mandatory terms by a mandatory code, the code is likely to be ineffective, as companies will refrain from making transfers on terms they consider too draconian or too disadvantageous.
International economic relations take place in a strictly liberal order. Already, in a country where the means of production are, in principle, left to private appropriation, the state cannot oblige economic agents to do what they consider incompatible with their interests. Legally, the “plan” is not binding on the state or on public enterprises, let alone private enterprises. There are obvious similarities between the legal nature of the “plan” in the domestic order and that of the “codes of conduct” in the transnational order: in particular, the economic powers, or their representatives, are involved in their elaboration.
Given the autonomy of private economic powers, which the phenomena of transnationalisation or relocation have considerably reinforced, it would be unrealistic to claim to force these powers to take account of the real development needs of the populations of the Third World. We can do no more than moralise transnational economic relations by laying down standards of conduct (“guidelines”), which are not obligatory (in the traditional sense of positive law), but which are not, however, without effect. The observance of non-binding rules of conduct will be a criterion of the good repute of companies, likely to motivate the exercise by state authorities of their discretionary choices (for example, for the conclusion of administrative contracts, the granting of concessions). The development of an interstate public sector, as is appearing in particular for the exploitation of the seabed, will also be likely to increase the effectiveness of non-mandatory codes.
Other effects can be envisaged by combining a rule of conduct, even if non-binding, with certain provisions of state law. Most civil codes prohibit agreements that are contrary to public policy and morality (French Civil Code, Art. 6 and 1133). It is up to the judge to assess contractual morality in a specific environment, and the conclusion of a contract whose purpose is to transgress a rule of conduct, even if it is not mandatory, would certainly fall under the law.
Non-mandatory rules of conduct would still have the useful effect of encouraging States to adopt more binding regulations based on them, and cannot, under any circumstances, be criticised by virtue of the protection to be afforded to foreign interests.
International corporate crime
Alongside behaviour which, in the current state of international relations, private economic agents cannot be effectively coerced, there are activities which, “by their illicit or even criminal character, deserve, as of now, unequivocal condemnation. To the illicit payments to public officials (corruption), to the practice of racial discrimination, one can add the repression of the freedom of association of workers and trade union activities, the flagrant violation of fundamental norms in the area of public health and environmental protection, and the interference in the political life of the host country by an entity belonging to a transnational corporate group. The proposed codes of conduct seek to prohibit or discourage all such behaviour. However, a simple soft rule is inadequate. Such behaviour is not only unsavoury, it should be strictly prohibited.
Therefore, provisions in codes of conduct that address such issues should be mandatory. Mandatory for whom? Since private companies and their agents are not directly subject to the international legal order, they can only be reached through the mediation of states. It is therefore necessary that states, by concluding an instrument that is binding on them in the international legal order and that has effect in their respective domestic orders, undertake to punish the individual acts prohibited by the international code of conduct.
One of the paradoxes of the current situation is that unlawful behaviour that is even criminally punishable in some countries escapes punishment once it has been committed in a foreign country. The two most typical examples are the corruption of public officials and complicity with the apartheid regime in South Africa.
In the United States and Western European countries, acts of passive bribery by national public officials are severely punished. Is it acceptable that active bribery committed by persons under the jurisdiction of these countries (e.g. the governing bodies of a dominant company based there) should escape punishment on the passive ground that the bribery is a foreign authority?
The problem of the involvement of transnational corporate groups in the racist regime in South Africa and its illegal occupation of Namibia would be closer to being solved if the rules, mostly criminally punishable, prohibiting racial discrimination in the United States and Western Europe were applicable to acts of discrimination committed, at least as co-perpetrators or accomplices, by the organs of dominant corporations headquartered in South Africa, It would be closer to a solution if the rules prohibiting racial discrimination in the United States and Western Europe, which are usually punishable under criminal law, were applicable to acts of discrimination committed, at least as co-perpetrators or accomplices, by the organs of dominant companies headquartered in one of these countries and which have established a subsidiary in South Africa or Namibia.
The elaboration of a new international economic order requires a reversal of perspectives where the satisfaction of the basic needs of the underdeveloped peoples would take precedence over the will to enrich the most industrialised countries. Two kinds of new legal instruments could promote such an evolution. On the one hand, non-binding codes of conduct incorporating the new values should be proposed as models for the action of the various economic agents, public, private, national and transnational. On the other hand, in order to meet the fundamental requirements of solidarity between peoples, binding rules should be drawn up which are criminally sanctioned for individuals who contravene them and universally accepted. If the present injustices are to be corrected and the mistakes of the past made good, the concept of “international corporate crime” must occupy a place similar to that given in the field of war law to the crime against humanity. Hunger kills no less than weapons.
in: Peuples/Popoli/Peoples/Pueblos n. 4 (May 1984)