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COM(81)167
Vol.1981/0042

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(81)167 final
Brussels/9thApril1981
INTRODUCTION OFACOMMUNITY CLAUSEINTHE
UKCODEOFCONDUCTFORTRANSNATIONAL CORPORATIONS
(NewYork,Spring1981)
(Communication fromtheCommissiontotheCouncil)
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CCKvSI)167final

The endeavour byiiicL'mtea Nations toeutabl lsih acod' .-ofconduct f<>r
Transnational Corporations (TNCS )originates intheEconomic andSocial
Council 'sresolution of5th December 1974 which created the Commission
'onTransnational Corporations (CTNC ).Atitsfirst session inMarch 1975
■dieCTNC decided toassign toppriority totheformulation ofacode of
conduct andcuring itssecond session inMarch 1976 the CIT^C established
anIntergovernmental Working Group ,This group wasdirected toprepare
anannotated outline ofthecode ofconduct tobesubmitted totheCTNC
atitsthird session inApril /May 1977 ,following which thegroup was
toprepare thefinal text ofadraft code of -conduct tobeconsidered
bytheCTNC . ■ ;
The Community has ircmthestart participated as .anobserver mthe
negotiations both intheCTNC anaintheIntergovernmental Working
Group sessions .
Inaccordance with UN-ECOSCC decision 1980/171theIntergovernmental
Working Group onacode ofconduct forTNCs will try tofinalise its
work onadraft code ofconduct fortransnational corporations (TNCs )
before thenext session oftheCTNC ,nowscheduled forSeptenber -1981 .
Before this CTNC session ,theIntergovernmental Working Group will hold
twonore sessions ,in .April -andinMay1981 ,inNewYork ,inorder
tocomplete itswork .
Although theWorking Group will befaced with negotiations onanumber
ofdifficult items ,completion ofitstasks within thesettime limits
isnotentirely irrpossible . ^ .
r
Inthinr.ituntion tho Comrrnjnity will r-oon booblige torai /:otho
problem ofitsposition with rogard tothecode anditsinstitutional
machinery inthenegotiations inNewYork .
Theproposed code raises similar problems fortheCommunity asthe
proposed code ofconduct or.theTransfer ^ofTechnology and thecode on

Restrictive Business Practices ,theprincipal ones being thepartici­
pation bytheCornmunity assuch intheadoption ofthecode andthe
latter' scompatibility with Community law ,independently ofitsfinal
legal nature ,aswell astheCommunity 'srole intheinstitutional
machinery setupinconnection with thecode .
■*I ' '
Code ofConduct onTransfer ofTechnology
Asstated intheCommission workingpaper (1)ontheintroduction ofa
Community clause irttheproposed code ofconduct ontheTransfer of
Technology ,these problems make itnecessary fortheCommunity toproposo
inthefinal negotiations onthecode : .
'ν;·· -·'
-that it -participates ,assuch intheadoption ofthecode
-andthat appropriate provisions inthecode will ensure that
.thecode will notaffect anyexisting orfuture application
andimplementation oftheCommunity Treaties ,,
.theCommunity assuch will ,insofar astheareas ofits
competence areconcerned ,beaparty tothecode inthesame
.manner asStates.and hence participate ohthis basis inthe
institutional machinery .
Prior .tothe first session ofthe UN-Conference onthe code ofconduct •
ontheTransfer ofTechnology ,initsCommunication totheCouncil of
20September 1978 (2),theCommission presented thereasons ,legal and
otherwise ,forincluding a"Community clause "inthecode concerning
theTransfer ofTechnology .This analysis wasfurther developed ina
Cornrniflijion staff paper of27October 1978 (3),which discussed in
particular thequestion oftheCommunity 'scompetence onthobasia
ofthojurisdiction oftheEuropean Court ofJustice .;*"
(1)OOM (80)595of21April 1980 .
(2)Srodoc .R/2421/78 (COMKR 49)of25.9.1978 orCOM (78)447final of
20.9.1978 respectively .
(3)'See doe .VIII (73)1217 of27.10.1978 .

The communication oftheCommission gave rise toa'thorough discussion'
oftheproblem bytheRELEX-Group oftheCouncil .TheGroup proposed a
compromise formula tobointroduced inthenegotiations onthecode ofcon­
duct .Astothegeneral context forputting forward this formula ,the
Group indicated inparticular that (1);
''-thecompromise hadboon devised onthe assumption ofanon-binding
Code _which would boadopted bytheUnited Nations General Assembly
(inwhich case theproblem ofadoption oftheCode bytheCommunity
assuch would not arise );
-mthose fields where theCommunity undeniably hadcompetence ,the
Community should beable toparticipate inthenegotiation ofthe
Code ."
Atits 919t'n session of7November 1973 ,theCOREPER adopted ,onthe
basis oftheproposal oftheRELEX-Group ,thefollowing formula and
agreed that itshould beintroduced inthenegotiation onthecode
incase ofnecessity :
"Inthecase ofgroups which possess orareliable toattain powers
relating toquestions falling within thescope ofthis code ,thepro­
visions olthecoce will also apply tothose groups .
Theprovisions ofthis code will not affect therules inforce within
these groups ".
Onthebasis oftheCommission Working Paper (2)of21April 1980 ,
consultations continued both inBrussels andonthespot inGeneva
during th& (J>JCTAD-TOT Conference ,where agreement finally w.X".
reached on5.5.1980 (3)topropose theintroduction ofthefollowing
text inthe Code :
(1)Seedoc .s/1773/78 (RFI.F.X 172 )+Add .1of25.10.1978 .
(2)Sc-edoc .COM(ftO )695final of21April 1980.'
(3)SeeCouncil doc .6891/60of6May1980 .

-4-
"Anyrofercnco inthecode to"States "or"Governments "shall be
ccn /ntruM a.«sincluding .-myr«jionnl grouping ofstatft.i totho
.extent that they have co.tpetence inthefield ofTransfer of
Technology ,with respect to .such competence ".
Group Bwasnotified ofthis text .However ,due tolack oftime
I
Nthis text wasnottabled formally mtheConference .
Negotiations within ,UNCTADontheTransfer ofTechnology Code
• \ ...
,arestill continuing
Restrictive Business Practices
J ■ '
7.Similar questions with regard toCommunity competence andparticipation
. .arose inthecontext ofthepreparation oftheUnited Nations Confe­
rence onRestrictive Business Practices which held its first session
inGeneva from 19November to7December 1979 .Inits communication
totheCouncil concerning thepreparation ofaCommunity position for
this Conference (I)theCorrenission asked theCouncil inparticular :'
-toctjree that theCommunity assuch participates inthenegotiation
ofthecode forthecontrol ofrestrictive business practices and
ensures that itsprovisions apply ,totheCommunity assuch inthe
areas ofitscompetences ;
-toagree that theCommunity must make sure intheforthcoming nego­
tiations that thecode iscompatible with Corrmunity lawaiddoes
notinterfere with theapplication andimplementation ofCommunity
competition policy .' 1
• 1 . '•
8.TheCouncil initsmeeting of20/21November 1979 upon recommendation
ofthe .Committee ofPermanent Representatives of15November 1979 (2)
decided that thequestions negotiated intheframework ofthis con- .
ference could ,depending onthesituation ,fall within thecompetence
oftheMember States aswell asthat oftheCommunity .Asaconsequence
the Corrrrrunity rr.ust participate assuch inthenegotiation together
with the Merrber States .
(1)Seedoc .COM(79 )526final ordoc .9752(79 )respectively .
.(2)Seedoc .10683 /79of15.11.1979 .

-5-
9.IntheUNConferenceonRestrictive BusinessPracticesanunderstanding
amongthaspokesmenofallgroupswasreachedenablingtheCommunityto
participate assuchinthenegotiations .Inparticular ,twoclauses
Νwerenegotiatedextendingthescopeofapplicationoftheprinciplesand
rulesonRBP'stotheCommunityassuch"'andenablingtheCommunity
Τ./' ·.·_ ..toparticipateintheinternational institutional machinery.
Withrespecttofirstquestion,thefollowingwordingwassubmitted
-bythepresidentoftheconference (Mr.Sanchis-Muftoz ,Argentina):
"Anyreferenceto"States"or"Governments "shallbeconstruedasincluding
-anyregionalgroupingofStatessuchastheEuropeanEconomicCommunity,
totheextentthattheyhavecompetenceintheareaofrestrictive
businesspractices"(1). • •-
Withrespecttotheinstitutional machinerythechairmanofthenegotiating
groupsubmittedthefollowingtexttothePresidentoftheConference :
"TheIntergovernmental groupopentoall'membersofUKCTADaswellas
regionalgroupingshavingcorvpetenceinthisfield,shouldmeetasoften
asnecessary,butatleastonceayear •"(2).
GroupBaridtheGroupof77acceptedbothclauses,GroupDeventually .
- ■' *rejectedthesecondclause,justbeforetheconferenceclosed.Atthat
stageGroupBdidnotthinkitappropriatetoinsist,especiallysince
thematterofsettinguptheinstitutional machinerywasreferredtothe
UNCTADTradeDevelopmentBoard. '
7'
TheRBPCode,includingthefirstclausegivenabove,wasadoptedby
the"UNGeneralAssemblybywayofResolutionon5December1980..
. » «
«• . •' /
CodeofConductforTNCs
10.TheCommunityinterestsatstakeinthenegotiations ontheCedeof
conductforTNCsareentirelysimilartothoseinthenegotiations -
onthecodesmentionedabove..:-•'
WithregardtothequestionofCommunitycompetenceandparticipation ,
itwouldsufficetopointout,bywayofexamples,thechaptersof
theTNCCodeonaccountinganddisclosureofinformation ,competition
.,1)Seedoc.TD/R3P/CONF/8-p.21,
2)Seedoc.TD/RBP/CONF/8"-p.18.»

andRBP,taxation.ThebasesforCommunitycompetence inthese
areasir.f.-.liaarefoundinthe'RomeTreaty,especiallyin
articles85and86aswellasinCommunitylegislation ,suchasthe
FourthCouncilDirective (78/660/EEC)ontheannualaccountsof
certaintypesofcompaniesandtheCouncilDirective (77/799/EEC)
concerningmutualassistanceinthefieldofdirecttaxation.
FurtherCommunitylegislationprovidingnewbasesforcommunity
competenceintheseandotherareas(e.g.consumerprotection )
coveredbythe.TNCcodeisinproces.•'
Itisfurthermore notedthattheCommissionalreadyhasanauthorisation
tonegotiatesfortheCorrsnunityindiscussions onthedevelopmentof
2international accountingandreportingstandards »\
InviewofthexfactthattheCOREPERhas'askedpreviouslyontheocca­
sionofthenegotiations onacodeofconductontheTransferof
Technologyfortheintroduction ofaCommunityclauseintothatcode,
amitakirvjintoaccountth'sa/Joptionof«uchaclau/iointh'iRHPCode,
asindicatedabove,itwouldseemconsistentthatitshouldnow
likewiseagreeontheintroduction ofacommunityclauseintothe
presentcodeofconductforTNC's.Itwouldthereforeseemindis-,
pensabletoraisethisproblemduringtheAprilandMaysessionsof
theIntergovernmental WorkingGroup,whichisexpectedtoconclude
thedraftingexorciseontheimplementation chapterofthecode.
1)ThematterofConmunitycompetencehasboonexplainedbythe
Cotrmi.-iiilon ,init.iCorwriunicatlon toCouncilot20u^rilxir
1978(seedoc.R/2421/78(COMER49)of25.9.1978orCOM(78)447
final'of20.9.1978'respectively )andwasfurtherdevelopedin
CommissionStaffPaperVIII(78)1217of27.10.1978.
2)SeeCouncilDocument10096/79of30October1979.

Forthis purpose itseems advisable topropose theintroduction
into the code ofthe clause already 'adopted with regard tothe RBP
instrument .The text ofthis clause was theresult ofextensive and
difficult negotiations .Itwill have tobeemphasized ,therefore ,
that there isnoreal scope forfurther negotiation andthat the
clause should ,insubstance ,remain aspresently drafted . 1
•• I
This clause .would ,asitreada now ,al»o enable theCommunity to
participate adequately inthework oftheinstitutional machinery ,
which ,inanyway ,isindispensable with respect toallquestions ,
relating tosettled aswell asfuture EECpolicy .Itwould ,however /
also seem useful toagree topropose ,ifnecessary ,theintroduction
ofacommunity clause inthechapter ontheinstitutional machinery ,
along th'elines ofthedrafting results inthis 'respect atthe .RBP
conference .Such aclause would guarantee theCommunity 'spartici-'
pation inthework oftheinstitutional machinery should this be
* i '
left indoubt bytheResults ofthenegotiations onthefirst
clause .
The Conroission therefore asks the Council :
-toagree that theintroduction ofsuch clauses inanyappropriate
place ofthecode beproposed bytheCommission onbehalf ofthe
Community atanearly stage intheforthcoming sessions ofthe
Intergovernmental Working Croup ;
-tx>bring itsdecision totheattention ofthedelegations ofMember
States onthespot inNew .York «'' \V

OOREPER formula
Inthecase ofgroups which possess orareliable toattain
powers relating toquestions falling within thescope ofthis
code ,theprovisions ofthecode will also apply tothose
groups « . -
•J
\ ...
Theprovisions ofthis code will not affect therules inforce
within these groups .
f
UNCTAD RP-P-Codo formuln (drafting ronults )
Anyreference to"States "or ,"Governments ",shall beconstrued
asincluding anyregional grouping ofStates such astheEuropean
Economic Community ,totheextent that they have competence in
*
thearea ofrestrictive business practices .
' ' '
TheTntergovernmental group open toallmembers ofUNCTAD as
well asregional groupings having competence inthis field ,
should meet asoften asnecessary ,but atleast once ayear
X.
N.3.' :Only theformula ,sub1)wasfinally adopted .
: ;τ'>::".... ■'■ ■·' :
I .
: \· ' . !■. ■ ■.·
*)This should rend forthecode ofconduct forTNC 's:
.competence inalloranyoftheareas covered by
this code