COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(91) 442 final - SYN 367 
Brussels, 18 November 1991 
OECD - National treatment instrument 
Approval by the Council of the outcome of the negotiations 
conducted by the Commission within the OECD 
on the national treatment instrument 
(Commission communication to the Council) 
Proposal for a - SYN 367 
COUNCIL DECISION 
on participation by the Community in the third revised OECD 
decision concerning national treatment 
(presented by the Commission) 
I. INTRODUCTION 
On the Commission's recommendation, on 28 May 1990 the Council authorized 
the Commission to negotiate a decision on national treatment within the 
OECD. To this end Joint guidelines were established. 
On 16 September 1991 the CIME - the OECD's Committee on International 
Investment and Multinational Enterprises, which had been conducting the 
negotiations - approved a report to be transmitted to the OECD Council for 
adoption at its meeting of 14 November. This Commission communication 
reviews the outcome of the negotiations and contains an accompanying 
proposal for a Council Decision marking the Community's acceptance of the 
results of the negotiations. 
I I. HISTORICAL BACKGROUND AND ASSESSMENT OF THE RESULTS 
1. On 21 June 1976 the governments of the OECD member countries adopted a 
déclarât ion on international investment and multinational enterprises. 
Section II of the declaration, which concerns national treatment, includes 
an undertaking given by the OECD member countries to grant the same 
treatment as given to their own nationals to companies under foreign 
control1 operating in their territory. National treatment means that the 
firms must not be discriminated against under the laws, regulations and 
administrative practices in force in the OECD member country concerned by 
comparison with firms controlled by nationals of that country. 
In its decision of 17 May 1984, adopted pursuant to Article 5 of the OECD 
Convention, the OECD Council laid down legally binding notification and 
review procedures for measures retained in the OECD member countries in 
derogation from the national treatment principle. 
2. At their May 1988 meeting the ministers of the OECD member countries 
called on the CIME to examine possible means of strengthening the national 
treatment instrument. 
In its present form the national treatment instrument is composed of two 
parts: 
the revised section on national treatment contained in the 1976 
déclarât ion on international investment and multinational enterprises, 
defining the policy undertakings given by the member states in respect 
of national treatment and liberalization; 
These are firms controlled by nationals of other OECD member 
countries. 
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- the second revised decision on national treatment containing legaliy 
binding obligations concerning notification and review of exceptione 
and derogations and setting out the procedures for the settlement of 
disputes. 
3. From the beginning the Committee decided to aim at a binding 
instrument, modelled on the Codes of Liberalization of capital movements 
and current invisible operations. In practice, this involved the adoption 
of an OECD decision pursuant to Article 5 of the OECD Convention. 
4. The Joint guidelines adopted by the Council cf the Communities on 
28 May 1990 contained the following elements: 
the decision to be negotiated must be consistent with the Community's 
internal legislative process and with obligations arising from other 
international instruments in existence or in the process of being 
negotiated; 
specific provisions must be worded in such a way as to cover all 
situations for which Community legislation contains provisions 
limiting national treatment for third-country nationals; 
the national treatment instrument will have to provide for an 
equivalent degree of commitment by the various OECD member countries, 
whatever their internal organizational structure. 
5. A relatively speedy solution was found to the problems arising from 
the measures adopted with a view to completing the single market. In 
particular, consensus was quickly arrived at on the idea of the Community's 
becoming party to the decision, in view of the external implications of the 
single market and the existence of derogations from national treatment 
which could only be notified at Community level. Provisions were also 
adopted to take into account the outcome of current Uruguay Round 
negotiations in the field of services. 
6. However, negotiations to arrive at a binding instrument stumbled on 
two major obstacles and this eventually led the ministers of the OECD 
member countries meeting on 5 June this year to settle for a less ambitious 
object ive. 
In accordance with the Joint guidelines, the Commission and the delegates 
of the Member States strove to obtain from all OECD members a comparable 
degree of commitment, whatever their internal organization. A number of 
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member countries with a federal structure (United States, Canada, 
Australia) refused to accept any binding commitment involving their 
territorial subdivisions for reasons of Jurisdiction or political 
expediency. In the case of the United States in particular, the government 
took the view that the field covered by the draft decision on national 
treatment was too "narrow"; in the circumstances it preferred not to submit 
the draft national treatment instrument to Congress so as to preserve the 
"political capital" needed to obtain Congress' approval once an agreement 
on an international instrument covering all investment fields was reached. 
Accordingly the parties came to the conclusion that it was impossible to 
reach a balanced agreement on the objective that the Committee had set 
itself at the outset. 
An attempt was made to arrive at a strengthened instrument which would 
preserve the twin structure - policy declaration and decision on procedures 
- but would incorporate the progress achieved through the Committee's 
efforts. It failed in the end because the United States and Canada did not 
succeed in finding common ground on the exceptions concerning the 
protection of cultural identity - the second obstacle that the working 
party had been unable to overcome. 
7. To safeguard the progress made in respect of procedures, the 
ministers decided nevertheless to adopt a third revised decision. It 
should be noted in particular that, unlike the previous decision, this 
revised version will apply to all members in respect of measures taken both 
centrally and at territorial subdivision level. This is a first positive 
step, if a modest one, towards full integration of territorial subdivisions 
in undertakings concerning national treatment. Further progress may be 
possible in future if the preliminary work on a general instrument covering 
investment in all its aspects should lead to specific proposals. Progress 
might also be made at the Uruguay Round negotiations. 
In agreement with the Member States it was decided to confirm the resolve 
of the Community as such to be party to the national treatment instrument. 
More specifically, this implies a twofold approach when the Committee's 
report is formally adopted by the OECD Council: 
(I) the Community should endorse the 1976 declaration on national 
treatment. This being a policy declaration, it will not require the 
adoption of any legal provision at Community level. The Commission 
will inform the OECD member countries of the Community's intention to 
comply with the undertakings contained in the declaration; 
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(ii) the Community should notify the Secretary General of the OECD of its 
acceptance of the third revised OECD Council decision on national 
treatment. 
The measures involved concern the conditions in which firms under foreign 
control operate on the territory of OECD member countries and are therefore 
linked with the growth of trade in goods and services between OECD 
countries. They are also relevant to the completion of the internai 
market. These considerations are of capital importance when choosing a 
legal basis. 
In view of the fact that the Community has Jurisdiction in this field, the 
Member States will be able to commit themselves to being party to the 
decision once the relevant Community formalities have been completed. This 
will call for implementation of the procedure agreed in 1988 in respect of 
OECD instruments. 
In accordance with Article 1 of the third revised decision of the OECD 
Council on national treatment, the Commission will notify the OECD of any 
measures derogating from national treatment. 
CONCLUSION 
The Commission calls on the Council: 
(i) to authorize it to declare on behalf of the Community that the 
Community endorses the principles contained in the declaration on 
international investment and multinational undertakings adopted by 
the governments of the member states of the OECD on 21 June 1976; 
(ii) to declare, in accordance with the procedure agreed with the OECD, 
that the Community intends to be party to the third revised OECD 
Council decision after completion of the internal procedures; 
(ill) to adopt the annexed decision. 
ANNEX 
COUNCIL DECISION 
on participation by the Community in the third revised OECD 
decision concerning national treatment 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
and in particular Articles 57 and 113 thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Whereas the OECD member countries adopted on 21 June 1976 a declaration on 
international investment and multinational enterprises; 
Whereas the OECD Council adopted 18 May 1984 a second revised decision on 
national treatment modifying the procedures laid down to examine the laws, 
regulations and administrative practices representing a departure from 
national treatment; whereas that decision together with the declaration on 
international investment and multinational enterprises make up the national 
treatment instrument; 
Whereas at the OECD Council meeting of 19 May 1988 the member countries 
decided to strengthen the national treatment instrument and opened 
negotiations to this end; 
Whereas the European Community took part in these negotiations in 
accordance with its powers; 
Whereas the European Community, in view of the outcome of the negotiations, 
has endorsed the declaration on international investment; 
Whereas the Community should become party to the third revised decision on 
national treatment and any further amending decisions in accordance with 
Article 7 of that decision, 
HAS DECIDED AS FOLLOWS: 
Article 1 
The text of the third revised OECD decision on national treatment is hereby 
approved. 
The text is annexed to this Decision. 
Article 2 
The Commission shall give notification of the Community's participation in 
the third revised OECD decision on the national treatment instrument in 
accordance with the procedures provided for therein. 
It shall also notify the OECD of all Community legislative provisions which 
represent a departure from national treatment, and any other measure 
affecting national treatment, in accordance with the provisions of the 
decision referred to above. 
Done at Brussels For the Council 
The President 
Annex 2 
THIRD REVISED DECISION OF THE COUNCIL ON 
NATIONAL TREATMENT 
THE COUNCIL. 
Having regard to the Convention on the Organisation for Economic 
Co-operation and Development of 14th December 1960 and, in particular, to 
Articles 2c), 2d), 3 and 5 a) thereof; 
Having regard to the Resolution of the Council of 13th December 1984 on 
the Terms of Reference of the Committee on International Investment and 
Multinational Enterprises [C(84)171(Final)]; 
Having regard to the Section on National Treatment of the Declaration by 
Governments of OECD Member countries of 21st June 1976 on International 
Investment and Multinational Enterprises [hereinafter called "the 
Declaration"]; 
Having regard to the Second Revised Decision of the Council of 17th May 
1984 on National Treatment [C(84)91]; 
Having regard to the report on the National Treatment Instrument by the 
Committee on International Investment and Multinational Enterprises 
[C/MIN(91)7/ANN2]; 
Considering it appropriate to strengthen the procedures established 
within the Organisation for reviewing laws, regulations and administrative 
practices (hereinafter called "measures") which depart from National Treatment, 
as defined in the Declaration (hereinafter called "National Treatment"); 
On the proposal of the Committee on International Investment and 
Multinational Enterprises; 
DECIDES : 
The Second Revised Decision of the Council of 17th May 1984 on National 
Treatment [C(84)91] is repealed and replaced by the following: 
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Article 1 
NOTIFICATION 
a. Members (1) shall notify the Organisation, of all measures constituting 
exceptions to National Treatment within 60 days of their adoption and of any 
other measures which have a bearing on National Treatment. All exceptions 
shall be set out in Annex A to this Decision. 
b. Members shall notify the Organisation within 60 days of their 
introduction of any modifications of the measures covered in paragraph (a). 
c. The Organisation shall consider the notifications submitted to it in 
accordance with the provisions of paragraphs (a) and (b) with a view to 
determining whether each Member is meeting its commitments under the 
Declaration. 
Article 2 
EXAMINATION 
a. The Organisation shall examine each exception lodged by a Member and 
other measures notified under Article 1 at intervals to be determined by the 
Organisation. These intervals shall, however, be not more than three years, 
unless the Council decides otherwise. 
b. Each Member shall notify the Organisation prior to the periodic 
examination called for in paragraph (a), whether it desires to maintain any 
exception lodged by it under Article 1 and if so, state its reasons therefore. 
c. The examinations provided for in paragraph (a) shall be directed at 
making suitable proposals designed to assist Members to withdraw their 
exceptions. 
d. The examinations provided for in paragraph (a) shall be country reviews 
in which all of the exceptions lodged by a Member are covered in the same 
examination. 
e. Notwithstanding paragraph (d), the examinations provided for in 
paragraph (a) may focus on specific types or groups of measures of particular 
concern, as and when determined by the Organisation. 
(1) For the purposes of this Decision, "Members" means all parties to the 
Decision. 
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Article 3 
REFERENCE TO THE ORGANISATION 
a. If a Member considers that another Member has. contrary to its 
undertakings with regard to National Treatment, retained, introduced or 
reintroduced measures and if it considers itself to be prejudiced thereby, it 
may refer to the Organisation. 
b. The fact that the case is under consideration by the Organisation shall 
not preclude the Member which has referred' to the Organisation from entering 
into bilateral discussion on the matter with the other Member concerned. 
AO 
Article 4 
COMMITTEE ON INTERNATIONAL INVESTMENT 
AND MULTINATIONAL ENTERPRISES: GENERAL TASKS 
a. The Committee on International Investment and Multinational Enterprises 
(hereinafter called "the Committee") shall consider all questions concerning 
the interpretation or implementation of the provisions of the Declaration or of 
Acts of the Council relating to National Treatment and shall report its 
conclusions thereon to the Council. 
b. The Committee shall submit to the Council any appropriate proposals in 
connection with its tasks as defined in paragraph (a) and, in particular, with 
the abolishing of measures constituting exceptions to National Treatment. 
Article 5 
COMMITTEE ON INTERNATIONAL INVESTMENT 
AND MULTINATIONAL ENTERPRISES: SPECIAL TASKS 
a. The Committee shall: 
i) consider, in conformity with paragraphs (a) and (b) of Article 2, 
each exception notified to the Organisation and make, where appropriate, 
suitable proposals to assist Members to withdraw their exceptions; 
ii) consider, in accordance with Article 1, the notifications submitted 
to the Organisation; 
iii) consider references submitted to the Organisation in accordance 
with the provisions of Article 3; 
iv) act as a forum for consultations, at the request of a Member, in 
respect of any matter related to the Declaration and its implementation. 
b. The Committee may periodically invite the Business and Industry Advisory 
Committee to the OECD (BIAC) and the Trade Union Advisory Committee to the OECD 
(TUAC) to express their views on matters related to National Treatment and 
shall take account of such views in its reports to the Council. 
M 
Article 6 
REVIEW OF THE DECISION 
This Decision shall be reviewed, within three years. 
Article 7 
PARTICIPATION BY THE EUROPEAN ECONOMIC COMMUNITY 
The present Decision, as well as any'further Decision amending it. shall 
be open for accession by the European Economic Community. Such accession shall 
be notified to the Secretary-General of the Organisation. 
EN ISSN 0254-1475 
COM(91) 442 final 
DOCUMENTS 
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