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Vol.1978/0168

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COMMISSION OFTHEEUROPEAN COMMUNITIES
CPM(78)447final
Brussels,20September1978
Preparation of"theUnutedNationsConference
onaninternational codeofconduct
ontransferoftechnology
(Geneva,16October-10November1978)
(Commissioncommunication ,totheCouncil)
fs"',-?-»•
|Tc", "«
G0M(78)447final

CONTENT ",
Paga
Introduction -1.
I.Présentsituation . ' 2
II.ThecodeandCommunitylaw 4
III.ThecodeandCommunitypowers - 6
IV.Thelegalcharacterofthecode -8
V.Interdependence withotherinternational negotiations 11
VI.ProposalforaCommunityposition 13

Introduction
Inaccordancewithresolution 32/188ofthethirty-second UNGeneral
AssemblyaUnitedNationsconferenoeisto"beheld,undertheauspices
ofUNCTAD,inGenevafrom16Octoberto10November1978inorderto
negotiateaninternational codeofconductontransferoftechnology
andtakeallthedecisionsnecessaryforitsadoption.
ThetaskofthisConferencewillbeparticularly difficult.
Despitethepreparatory workofanintergovernmental groupofexperts
therearestillconsiderable differences inthepositionsofthevarious
groupsofcountriesregardingthecontentand,aboveall,thelegal
statusofthefuturecode.Furthermore ,theconsiderable consequences
ofapolitical,legalandeconomicnaturewhichthiscodeislikelyto
entail,inparticularfortheWesternindustrialized countries,will
severelyrestrictthescopeforcompromise.
Inaddition,itistobefearedthatUNCTADVbeingclosebyandgiven
theGroupof77'stendencytoattributethelittleprogressmadeinthe
preparatory phaseofthecodetoalackofpoliticalwillonthepartof
theindustrialized countriestherewillbegreatpressureonGroupBto
givewaytotheGroupof77'sviewsandclaimsinthisarea.
Theproposednegotiations raisecertainproblemsfortheCommunity,the
principalonesbeingparticipation bytheCommunityassuchintheadoption
ofthecodeandthelatter'scompatibility withCommunitylaw.
ItisthereforevitalfortheCommunitytostartnowtodefineacommon
positiononthekeyproblemsofthecodeandonthebroadlinesofits
tacticsattheConference.Thispositionmustbebasedontheviews
whichtheCommunityanditsmemberStatesdefendedtogetherwiththeother
membersofGroupBinthepreparatory phaseofthecodeandinother
international forums.

This document presents theCommission 'sproposals onthesubject with
theaimofpreparing thecommon position which will "beneeded bythe
Community andtheMember States attheCaneva Conference ontheoode of
conduct • ■■ ■_
I.Présent situation
1.Inresolution 3362 (S–VII)of16September 1975 ?which wasadopted at
itsseventh special session ,theUnited Nations General Assembly called for
theestablishment ofaninternational code ofconduct ontransfer oftech­
nology andgave UNCTAD thetask ofpreparing such acode .
Pursuant tothis mandate ,resolution 89(IV)ofUNCTAD IVdecided toesta­
blish anintergovernmental group foexperts inorder toelaborate adraft
code andreooramended that aUnited Nations conference beconvened tonego–
tiate and adopt such acode *
Atitsthirty-second session the General Assembly decided that this Confe­
rence should beheld inGeneva from 16October to10November 1978 *V
2.The intergovernmental group ofexperts hassofar metsixtimes ,the
last session being from 26June to7July 1978 ,andhastried ;inaccordance
with themandate conferred upon itbyresolution 89(IV),toformulate a
draft code without prejudice toitslegal character .Itbased this work
onthree draft codes presented bytheGroup of77»Group BandGroup D
respectively# TheGroup of77'sdraft involves alegally binding code ,to
beadopted intheform ofaninternational treaty ,while Group B'sand ,
probably ,Group D'sdrafts provide only foranagreement ofanon-binding
nature . .
' . I .
3.Atthe endofitslast session thegroup ofexperts wasable topresent
only anincomplete draft code .There areconsiderable gaps inanumber of
chapters forwant ofacompromise between theviews ofthevarious groups
ofcountries ,particularly with regard torestrictive business practices ,-
theapplicable lawandthesettlement ofdisputes ,aswell astothe

3.
guarantees andresponsibilities ofparties totransfers oftechnology .
Significant differences ofopinion also exist regarding thedefinition of
thetransfers oftechnology towhich thecode would apply .
There is,however ,aconsensus ontheuniversal nature ofthecode ,in
other words itsapplicability totransfers between allcountries andnot
only tothose between industrialized anddeveloping countries .
4«Theformulation ofthedraft code bythe intergovernmental group of
experts ran into two main obstacles ,namely :
(i)awide divergence between theviews oftheGroup of77andGroup B,
particularly over the oontent andscope oftheprinciples andrules to
beincluded inthe code ,the Group of77aiming tomake technological
transactions subject "todetailed ,rigid rules andtostrengthen the
national sovereignty ofthe acquiring State over such transactions ,
(ii)theuncertainty astothefinal legal character .ofthecode ,which has
considerably complicated the search forcompromises which would have
enabled the .diverging views tobereconciled ,given that Group Bin
particular was seeking toprotect itself against theeventuality ofa
mandatory codei byaccepting only formulations which ,even ifsuch a
hypothesis wasultimately inevitable ,would not runoounter tothe
essential principles ofitsposition .
5.Inview ofthese difficulties thegroup ofexperts wasunable toresolve
most ofthekeyproblems ofthe code arising inthe incomplete chapters
referred toabove .This task will therefore fall tothe Conference -.
TheConference will probably notbeable toopen thefinal ,overall negotia­
tions onthebasis ofthis fragmentary draft code .Itcantherefore be
ezpscted that alarge part ofthe Conference will begiven over tothe
discussion anddrafting ,atexpert level ,ofthechapters andparagraphs
which are aeyet inadequately prepared .

4.
Itis,however,possiblethattheConfer^iip?willembarkuponpartial
negotiationsatthepoliticallevel6ncertainfundamentalproblemssuch
asthedefinitionoftheinternationaltransferoftechnologytowhich
thecodewouldapply,theapplicablelawfortechnologicaltransactions
andthelegalcharacterofthecode,inconjvnciio-fi..possibly,witha
surveillance andreviewmechanism.
-\.
6iTheprospectofthesefori.hcomingnegotiation -.-athattheCommunity
roustnowdefineacommonpositionwithregardtocertainkeyproblemsof
thecodeandthebroadlinesofitstacticsattheConference,inthe\
lightinparticularoftheproblemofthefuturscode'scompatibility
withtheresponsibilities andrulesoftheCommunityassuch*
II*ThecodeandCommunitylaw
1*Atthepresentstageofthediscussionsit'ispossiblethatcertain
provisionswhichhavebeenproposedcouldconflictwithcurrentCommunity
law..
Suchconflict'smightarise,inparticular,betweenthecode'sprovisions
onrestrictivebusinesspracticesandtheimplementation ofCommunity
competitionlaw(articles85,.86and$0ofthe'EECTreaty)* *
2*Community ,competition lawisbasedonthegeneralprinciplethat
restrictive orabusivepracticesareprohibited *Thisprincipleismode­
ratedbythepossibility ofmaking,undercertainconditions ,byindividual
decisionorgeneralregulation,exceptionstothisprohibition *«This
characteristic contradicts withthenormativecharacterofthespecific
ruleswhichmaybeadoptedinthismatterunderthefuturecode*
\

5.
Firstly,atthelevelofprinciples,thepracticesregardedasrestrictive
orabusiveundertharulesoftheTreatyarenotnecessarilythesameas
therestrictivepracticesdenounced "bythecode,whichispartlydueto
thedifference inapproach "betweencompetition lawdevelopedwithinthe
frameworkofacommonmarketandacodewhichisuniversallyapplicable.
Secondly,withregardtospecificpractices,theriskofconflictsitua­
tionsarisingishighsincethacodemaycontainprovisionswherebya
numberofpracticeswillbespecifically prohibitedwithoutthepossibility
ofassessingtheimpactofsuchprohibition uponcompetition# Furthermore ,
thereisnothingtopreventthecode,insofarasitcontains -clauses
derogatingfromcertainrulesofprohibition ,fromacceptingrestrictive
practiceswhicharenotnecessarilyacceptablefromtheangleofCommunity
law.TheadoptionbytheCommunityofrulesofthiskindwouldtherefore
beincompatible withCommunitylawinthisfield.
3.Inordertoavoidinsolubleconflictsbetweentheprovisionsofthe
futurecodeandCommunitylaw^neithertheMemberStatesnortheCommunity
inthenegotiations onthecodecanacceptprovisionswhichwouldbe
incompatible withCommunitylaw;forthesamereasontheCommunitymust
requireaderogationolausetobeincludedinthecodewhichwouldensure
thatthelatterdoesnotinfringeuponanyexistingorfutureapplication
andimplementation oftheTreaties.
Themaineffectofsuchaclausewouldbetosubjugatetheapplicability
ofthefuturecodeonintra-Community transfersoftechnologyandon
technologyimportstotherulesofCommunitylaw.However,theclause
wouldnotaffeot,withafewexceptions ,theapplicability oftheoode
ontransfersoftechnologyfromtheCommunitytothirdindustrialized -
ordevelopingcountries.

6.
4»Independently of"thisproblem!*towhichasolutionisinanycase
essentialinordertomakethecodecompatiblewiththeprinciplesand
rulesofCommunitylaw,thequestionarisesastowhetherornot,the
CommunityBhouldregard "itselfasasingleentityfortheapplicability
ofthecode*Thismatterarisesnotonlyfromth^lc-al,butalsofrom
theeconomicandpoliticalanglesinviewofthefactthat,forinstance,
thefuturecodewillcertainlynot.beappliedtoaacactionswithinthe
UnitedStates,togiveonlyoneexampleofanindustrialandcommercial
entitywhichiscomparableinsizetotheCoramunivy#
Inordertoexemptintra–Communityrelationsasawholefromapplication
ofthecodetheCommunityshouldproposeaclausewherebyaderogation
wouldbemadeinrespectofcustomsunions'andeconomicunionsthusenabling
relationsbetweenstatesorfirmswithintheCommunitytobeexcludedfrom'
application ofallorpartofthecode*
III#ThecodeandCommunitypowers
1.UnderCommunitylaw,inthosefieldswheretheCommunityhasadopted
commonrulesfortheimplementation ofaCommonpolicy-providedforin
-theTreatyofRome,theMemberStates,whetheractingindividually or
evencollectively ,donothavetheauthoritytoenterintocommitments
withnon-memberStateswhichareincompatiblewiththosecommon -niles(l)#
Nowthecodedealswithsubjectswhichundeniablyfallwithinthecompetence
oftheCommunity#ThisappliesparticularlytotheCommunity'scompetition
policy.
Inviewof.thissituationthe'Communityassuchhastoparticipateinthe
adoptionandapplication ofthecode#
(l)SeeJudgmentoftheCourtofJusticeoftheEuropeanCommunitiesof
31Karch1971inCase22/70(AETR),(1971)ECR263

2.TheCommunity'sabilitytoparticipate intheadoptionofthecode
derivesfirstlyfromCommunityresponsibility forcommercialpolicy
matters(articles113and114oftheEECTreaty),insofarastransfers
oftechnologyconstitutetrade.
Secondly,accordingtothedecisionsoftheEuropeanCourtofJustice,
theCommunityhasauthorityattheexternallevelwheneverithasto
enterintoaninternational commitmentforthepurposesofattaining
theobjectivesinrespectofwhichCommunitylawhascreatedforthe
institutions oftheCommunitypowersattheinternallevel(l).
Consequently ,anexternalCommunitypowertoenterintointernational
commitments withregardtothecoderesultsfromtheinternalpowers
enjoyedbytheCommunityinmattersofcompetitionpolicyinparticular
andfromthefactthatonjytheCommunityassuchhasthepowerto
applycertainrulesofthecodewithinthecontextofattainingthe
objectivesofthatcommonpolicy#
3.TheneedforaCommunitycommitment oncertainmatterstobedealt
withinthefuturecodeisnotmerelytheconsequence ofthedivision
ofresponsibilities betweenthememberStatesandtheCommunity *
ItisalsoaresponsetothepoliticalneedtogivethirdStateswhich
willadoptthecodeanassurancethattheirpartnersfromtheCommunity
willbecapableofrespectingalltheobligations providedforinthecode.
(l)ThisprinciplehasbeenstatedbytheCourtofJusticeinitsJudgment
of31March1971inCase22/70,Commissionv.Council(AETR),(1971)
ECR263
–initsJudgmentof14July1976inCases3»4and6/76,Kramer
v.Commission,(1976)ECR1279
-andinitsOpinionl/76of26April19771OJNoC107,3»5*1977»P«4)

4.Furthermore ,theprocedurefortheadoption,ofthecode"bytheCommu­
nityshouldensurethatsincetheCommunityhasjurisdictionintheareas
coveredby"thefuturecodeitshould in-thoseareasheaparty
tothecodeinthesame'mannerasStates.
IV.Thelegalcharacterof.thecode
1.Theproblemssetoutaboveoftheoode's,compatibility withCommunity
law,itsapplicationtointra-Community relationsanditaadoptionbythe*
Communityassuoharisewhateverthelegalcharacterofthefuturecode.
2.Anon-binding code,asenvisagedbytheGroupBcountries,which,wouldbe
adoptedbyanon-legal ,proceduresuchasaresolution"by-consensus",wpuld
notgiverisetoproblemsofprincipleint'hesamewayasamandatorycode
intheformofatreatythathasbeensignedandratified,sincetheformer .
wouldconsistmerelyofguidelinesforStatesandfirms,^guidelineswhich
could-notmodifyorreplaceeithertheprovisionsof'national,Community
orinternational lawortheobligations andresponsibilities resulting
therefromforStatesandfirms.Anon–bindingbodewouldthereforebe*.*
easierfortheCommunitytoapplyfromtheangleofitscompatibility with
-fcheprinciplesandrulesof.Communitylaw. '
3.However,1ifanon–bindingcodedoesnot,likeacodeadoptedundera
treaty,createlegalcommitmentsproperattheinternational levelitdoes,
•nevertheless establishanumberofkeyprincipleswhidharesupposedto
guidemoteorlessstrictlythebehaviourofthosewhohaveadopied'thera **
andofthoseforwhomtheyareintended,especiallywhentheseprinciples *
areformulatedinaclearandprecisemanner. ';

Byadoptingtextsorresolutions ofthiskindinaninternational forum
Statespledgetheirpoliticalwilltorespecttheprinciplesoftheir
declaration andto"bringtheappropriate rneaxisto"beartoenablethem
toattaintheobjectivesofthatdeclaration ,,Thereforesuchpledgesare
obviouslypolitically important,notwithstanding thefactthattheir
legalcharactercann-otbeacknowledged ,anditwouldbedifficultfor
theStateswhichhaveadoptedthemtobeeasilyabletoavoidtaking
accountofthisfact.
4»Thethesisofthebindingnatureofinternational resolutionsisupheld
inparticularbythedevelopingcountries ,whichareseekingtoestablish
inthiswaytheprinciples andguidelinesofthenewinternational economic
ordertowhichtheyaspire.Thecodemaythusbecomeatouchstonefor
North-South cooperatioii althoughthetransferoftechnologybetween
developingandindiistrialized countriesatpresentamountstobarely5%
ofthetransactions effectedbetweentheindustrialized countriesthemsel­
ves.
TheCommunityanditsmemberStatestherefore oweittothereputationof
theirpolicyforcooperation withthedevelopingcountriestostateclearly
totheirpartnersduringthefinalnegotiation ofthecodetheextentto
whichandtheconditions onwhichtheycanapplythefuturecodeinview
oftheCommunityrulesthattheyhaveestablished andintendtoestablish
amongthemselves.
5.Inconclusion ,whateverthelegalnatureofthecode,theCommunityas
suchmustparticipate intheadoptionofthecodeandmakesurethatthe
codeiscompatiblewithCommunitylawbymeansoftheolausesproposed
above,whichwouldbeincludedinorannexedtothecodeinaccordance
withprocedurestobedefinedduringthenegotiations .
6.Whilethelegalnatureofthecodeisultimatelyonlyofrelativeimpor­
tancewithregardtothematterofhowitgapplication wouldfitinwith
the_alesofCommunitylawitdoes,however,playaleadingrolefromthe
angleofitseconomiceffectsonfuturetransfersbetweensuppliersand
buyersoftechnology.

T«Operationsfor"the"transferof"technologyaregenerallyspeakingof
acomplexandspecificnature*In"transfersbetweenWesternindustrialized
countries,butalsointheirtransactionswiththeEastern–bloccountries,
suppliersand.buyersoftechnologyaxenormallyfreetodeterminethe
contentandthetermsoftheirarrangementsaccording-totheirneedsand
theircapabilities *Theyarealsofreeto.choosefortheirarrangements
thelaw,courtsandarbitrationboardsappropriatetotheirneeds.
* » *
Thefuturecodewillcontainanumberofoutlineprovisionsofferingthe.
recipientcountriesinparticularthepossibilityofrestricting'these
freedomsandmakingtransfersoftechnologybeyondnationalfrontiers
subjecttomultiplecontrolsandrules.•Inaddition,manyrulesofthe
-code,particularly inthefieldsofrestrictivebusinesspraoticesand:
guarantees,areaimedatimposingstandardsofconductonfirmsinvolved ,
>intransfersoftechnology. ,:
8.Theserestrictions andrulesaffectingarrangements betweenfirmstendto
hinderthedevelopment of;thetransferof.technology ,particularly tothe
developingcountries,asillustratedinrecentyearsbycertaindeveloping
countrieswhichhaveadopteda-veryrestrictivepolicyinthismatter.
Itisalsotobefearedthatsuchobstacleswillaffectabovealltransfers
madebysmall-andmedium-sized firms,whosetechnologyandknow-howare
generallyregardedasbettersuitedtotheneedsofthedevelopingcountries
9.Clearly,abindingcodewouldbelikelytoreinforcethistrendsince
themandatorynatureofitsprovisionswouldlimittheoptionsavailable
tosuppliersandbuyersinsuchaway,orwouldentailforthemsuchcoID–^
plications,thatthetransferoftechnologywouldnologgerbeofinterest
to,them.Anon-bindingcode,whoseprovisionsinrespectoffirmswould
ultimatelyremainoptional,would,however,apriorioffergreater

flexibilityioradjustingtotheneedsandcapabilities oftheparties
concernedandwouldthereforebemoreconducivetothedevelopment of
thetransferoftechnologyingeneralandtothedevelopingcountries
inparticular®
10.Ta3memberStatesoftheCommunity ,whichareamongtheworld'smajor
ger.-ators,suppliersandbuyerscftechnology andwhoseindustrial and
cooiercialdevelopmentinyearstocomedependslargelyontheir -capacity
fortechnological innovationarethereforenetinterestedinsubmitting
tobindinginternational rulesinthisfieldwhichmightcomplicate and
raisethepricesoftheirtechnological tradeandwhich,forreasons
setoutabove,wouldnetbesuitableforfacilitating thetransferof
technologytothedevelopingcountrieseither<,
V.Interdependence withotherinternational negotiations
1«Theproblemsconnectedwiththetransferoftechnology andthecompa­
tibilityofthecodesandother -international standardswithComiriunity
rulesdonotatpresentarisesolelyinthecontextofUNPTAB'sworkon
thecodeofconductinquestion#
2»Anintergovernmental groupofexpertsundertheUnitedNationsCommission
onTransnational Corporations isintheprocessofdrawingupaninterna­
tionalcodeofconductgoverningtheactivitiesofsuchcorporations®
Thisgroup,whoseworkhasonlyjuststarted,hasdecidedtopostpone
discussionofthechaptersonthetransferoftechnology andrestrictive
businesspracticesuntiltheresultsofthenegotiations onUNCTAD's
codeofconductareavailable.Thelattermaythereforeinfluencethe
codeontransnational corporations insuchmattersandserveasaprecedent
foranumberofotherproblems,suchasthelegalnatureofthelatter
code.

12
3.At-WIPOworkisunderwaytoamendti»-^rigConventionontneprotec­
tionofpatentsandotherindustrialpropertyrights.Thenegotiations
inthisforumarepartlyconcernedwiththedevelopingcountries'demands
thatthesystemfortheprotectionofindastial--x^htsbebetteradapted
totheirpoliciesandtheirneeds.Theywill^c-re"beguidedbythe
principlesandruleswhichtheUNCTADcodewil.l,tonthismatter.
4.Similarly,thecode'sprovisionsj*eg'vv5ingrev;"ictivebusinessprac­
ticeswithrespecttothetransferoftechnologywayprejudicethe
deliberations oftheUNCTADgroupofexpertsonthegeneralaspectsof
suchpracticesandhowtocontrolthemwithinthecontextofinternational
trade.Thereisobviouslyacloselinkbetweenthetwosubjectmatters
S .
andagreatnuiriberofcontroversial problemswhicharecommonto"both
ofthemsuchasthetreatmentofrelationsbetweenparentcompaniesand
theirbranches.
5«Lastly,mattersrelatingtothetransferoftechnologyarealsounder
discussionwithinth'e*contextoftheConference ontheLawoftheSea.
6.Giventheinterdependence oftheseproblemstheCommunitymustadopt
aharmonized,coherentpositionatthesedifferentnegotiations ,with
regardtoboththesubstantiveprovisionsandthelegalaspectsofany
international agreements,particularly insofarasthebindingor.non-
bindingnatureofsuchagreementsandtheircompatibility withCommunity .
lawareconcerned.
Theprogressonthecodeofconductforthetransferoftechnology-as
comparedtoothernegotiations onthissubject–meansthatthiscode
willbetakenasaprecedentfort.henegotiations intheforumsreferred
toabove.IndefiningitspositionfortheConferenceonthecodethe
Communitymustthereforeensurethatthispositiondoesnotunnecessarily
restriotitsroomformanoeuvreintheothernegotiations .

VT.ProposalforaCommunityposition
1.InrecentyearstheCommunityhasdefineditspositiononthecode
ofconductforthetransferoftechnology onanumberofoccasions,in
particularattheCIECandUNCTADIV.
InitsstatementtotheCIEConthetransferoftechnology (l)theCommu­
nityconfirmedthatitaccepted "boththeobjectivepursuedthroughsuch
acode-namelyimprovement oftheconditions Tinderwhichtechnology
wastransferred –andtheveryconceptofacodeonthissubject.It
printedout,however,thatitconsideredthattheadoptionoftheGroup
of77'sdraftcodeintheformofacodewhichwasmandatoryunder
international lawwouldnotonly"beimpracticable inthemarket-economy
industrialized countries–whichwouldpreventthemfrombeingableto
acceptitinthisform–butmightalsoseriouslyimpedethetransferof
technologytothedevelopingcountriesinsteadofstimulatingit,which
wouldbethereverseoftheintendedresult.
ForthesereasonstheCommunityadvocatedthatacodedefiningnon­
bindinglinesofconductshouldbeestablished whichinitsopinion
wouldinthelongrunbemorelikelytohaveapositiveeffecton
technological transactions betweenindustrialized anddeveloping
countries.
2.ThenegotiatingstanceadoptedbytheCommunityforUNCTADIV(2)
thereforeproposedthattheCommunityshouldcontinuetoinsistwith
itsGroupBpartnersthatonlyanon–mandatory ,universally applicable
codecouldhaveapracticalimpact;itshouldbeadoptedbyaresolution
oftheUnitedNationsGeneralAssembly.TheCommunitycouldnotaccept.
acodecontainingbothmandatoryandnon–mandatoryparts("mixedcode").
Thepossibility ofareviewprocedureshouldbeconsidered.
(1)StatementbytheEuropeanEconomicCommunityof24April1976
(2)SeeT/366/76(COMEWR)(DIAL)of30April1976

14.
ItwasonthebasisofthispositionthatthememberStatesofthe
CommunityadoptedResolution89(IV),whichentrustedtheintergovern­
mentalgroupofexpertswiththetaskofdrawingup'adraftcode,
withoutprejudicetothefinaldecisiononthe.leg^.1characterofthe
code.
3.TheCommunitypositionfortheConferenceonthecodeofconductto
beheldinOctober/Novembermustbebasedonthevievswhichthe
CommunityanditsmemberStateshavedefendedbothintheprevioustwo
conferencesandwithintheintergovernmental groupofexpertsinthe
preparatory phaseforthecode. *
•• i >
4.Sincetheintergovernmental groupofexpertswasnotabletocomplete
thedraftofthecodetheConferencewillhavetocarryoutthetasks
»
ofdraftingthemissingchaptersandseekingcompromiseformulason
controversial subjects.TheCommunityshouldoontinuethiswork,as
inthepast,withintheframeworkandinclosecoordination withthe
othermembersofGroupB.''
5.Withregardtothelegalnatureofthecode,itsbasicconceptand
thepossibleconsequences ofitsprinciplesandrulesasalreadydefined,
orproposedbytheGroupof77inparticular ,scarcelyenablethe
Communitytoadoptapositionwhichisdifferentfromthatdefendedby
•itattheCIECorUNCTABIV.Inordertoavoidlegalandpolitical
difficulties relatingtotheapplication ofabindingcodetotransac­
tionsbyindependent firmsandinanefforttoavoidimpedingthe
transferoftechnologybyasystemofschematic,rigidrulestheCommu­
nityshouldnegotiatethecodeonthebasisofanagreementintheform
ofnon–bindinglinesofconductandadoptonlyacodeofthiskind.
Inviewofitspotentiallegalconsequences ,themagnitudeofwhichis
unclearforwantofadetailedexamination ,a"mixedcode"formula
involvingboth"bindingandnon–mandatorysectionsshouldberejected
bytheCommunity. -

TheCommunityshould,however,encouragethepreciseformulation of
theprovisionswhichwillultimately beincorporated inthecode.
Thiswouldprovideaclearandhencemorepersuasivepictureofthe
linesofconductwhichthepartiestoatransferoftechnologyoperation
should–voluntarily-aimat.Thiswouldfacilitatethetaskoffirms
andofthepublicauthorities insofarasthepracticalapplication of
thecodeisconcerned.
6»Asthecod**ofconductissupposedtoregularizeprogressively
international tradeinanareawhichisofprimeimportanceforboth
industrialized anddevelopingcountriesthepracticalapplication of
thecodemustberegularlymonitoredanditshouldbepossibleto
reviewthecodeifitfailstodoitsjobadequately.'
Aproposal,alreadyputforwardinformallybyanumberofsides,to
supplementthecodewithprovisions ofthiskindcouldmaketheconcept
ofthenon-binding codemoreattractivetotheGroupof77»while
confirmingth§industrialized countries'intentiontoensurethatthe
guidelinesofthiscodearestrictlyobservedbyalltheparties
concerned®
Suchprovisionsinthecodeshouldnot,however,involvetheestablish­
mentofcumbersomemonitoring andsurveillance machinery.
TheCommunityshouldsupportanyproposalenvisagingareasonable ,flexible
mechanismformonitoring andreviewingthecodeifsuchaproposalcould
helpmakethecodeintheformofnon-binding guidelinesacceptableto
theGroupof77*
7.SincetheCommunityhascompetenceincertainfieldscoveredbythe
futurecodetheCommunityshoulddemandtobeallowedtoparticipate as
suchintheadoptionofthecode,whateveritslegalnature.

16.
8®Tosettletheproblemof.thecode'scompatibilitywithCommunity
law"theCommunictyshouldproposeanEECclauseensuringt
(i)thatthecodewouldnotinfringeuponanyexistingorfutureapplica­
tionandimplementation oftheTreaties,
(ii)thattheCommunityassuchwillinsofarastheareasofitscompe­
tencesareconcerned,beapartytothecodeinthesamemanneras
States.
Suchaclausecouldbeincludedinthetextofthecode(forinstance
inthechapteronfinalprovisions )orcouldbeattachedtoitin
accordancewithaproceduretobedefined,forinstanceintheformof
aprotocolannexedtothecode,oranexchangeofletters#
IftheCommunityfailedtohaveoneoftheseformulasaccepteditcould
issueanexplanatory statementrelatingtothecodeorenterareserva­
tion,regardingthestatusofCommunitylawandrules,whenthecodeis
adopted#
9„WhentheConference onthecodeofconductisopenedtheCommunity
shouldmakeastatementdrawingtheattentionoftheparticipants to
thisCommunityproblemandannouncingitsintentiontoensurethatthe,
codetakessuitableaccountthereof.
InthisstatementtheCommunitycouldcommentuponitspositionregarding
thelegalnatureofthecodeandthedesirability ofamonitoringand
reviewmechanism.Itcouldalsostateitswillingness topursuethe
negotiations onthecodewithanopenmindtotheneedsofthepartners,
particularly thedevelopir^gcountries,inordertoarriveataresult
acceptabletoallparties.TheselastpassagesoftheCommunitystatement
should,however,becloselylinkedtothepositionwhichGroupBasa
wholewilladoptonthatoccasion.