CELEX: 51991PC0442
Language: en
Date: 1991-11-18
Title: Proposal for a COUNCIL DECISION on participation by the Community in the third revised OECD decision concerning national treatment

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)
 ---pagebreak---  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.
 ---pagebreak---                                     - 2 -
-      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
 ---pagebreak---                                     - 3 -
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;
 ---pagebreak---                                     - 4 -
(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.
 ---pagebreak---                                                                  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:
 ---pagebreak---                                  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
 ---pagebreak---                                          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 2 c ) , 2 d ) , 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:
 ---pagebreak---                                           8
                                    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.
                                      11
 ---pagebreak---                                       >
                               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.
 ---pagebreak---                                          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.
 ---pagebreak---                                          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.
 ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM(91) 442 final
                                                      DOCUMENTS
EN                                                                              11
                                 Catalogue number : CB-CO-91-489-EN-C
                                                             ISBN 92-77-77193-3
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