SYMPOSIUM: CODES OF CONDUCT
FOR TRANSNATIONAL
CORPORATIONS
TRANSNATIONAL CORPORATIONS AND
INTERNATIONAL CODES OF
CONDUCT: A STUDY OF THE
RELATIONSHIP BETWEEN
INTERNATIONAL LEGAL COOPERATION
AND ECONOMIC DEVELOPMENT
SEYMOUR
J.
RUBIN*
INTRODUCTION
The writing of articles on the subject of transnational corporations
has been one of the great growth industries of the world for quite some
time.' In the 1970's, it was not merely the writing of such articles,
books, treaties and the like, but rather the writing of codes of conduct
for transnational corporations that became such an industry. In the
past five years, hardly a day passed during which representatives from
states, observers from a panoply of organizations, scholars, and others
were not gathered somewhere in the world to discuss the fashioning of a
code of conduct, a set of guidelines, or an interpretation of an existing
* Professor of Law, The American University, Washington College of Law; Executive Vice
President, American Society of International Law; Member, Inter-American Juridical Committee;
U.S. Representative, U.N. Commission on Transnational Corporations. This article is entirely the
responsibility of the author, and should not be taken to express any official view.
1. See Rubin, Corporatiorn and Society: The Remedy of Federaland InternationalIncorporation, 23
Am. U.L. REV. 263 (1973) [hereinafter cited as Corporaionsand Society]. For examples of the literature, see R. VERNON, STORM OVER THE MULTINATIONALS-THE REAL ISSUES (1977); R.
THE MULTINATIONAL SPREAD OF U.S. ENTERPRISES (1971)
[hereinafter cited as SOVEREIGNTY AT BAY]; THE INTERNATIONAL CORPORATxION: A SymposIUM
(C. Kindleberger ed. 1970). See alro Rubin, Forewordto I E. BROWNDORF & S. RIEMER, BIBLIOGRAPHY OF MULTINATIONAL CORPORATIONS AND FOREIGN DIRECT INVESTMENT at xiii (1978).
VERNON, SOVEREIGNTY AT BAY:
904
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understanding. These talks were designed to affect the relationships between an entity about which everyone speaks but few define-the transnational corporation (TNC)-and the countries in which it operates or
2
in which its owners dwell.
Work on various codes of conduct continues. For example, the U.N.
Commission on Transnational Corporations has been engaged in work
on a proposed code of conduct since its Second Session in 1976. In fact,
as of May 1981, the Intergovernmental Working Group,3 charged with
drafting the code itself, had met in fourteen sessions, each of two weeks'
duration. At the 1980 Commission meeting, it was agreed that a draft
code should be put before the full Commission when it met next, in the
summer of 1981. 4 That deadline was not met, and at the Seventh Session of the Commission, held in Geneva in September 1981, the Intergovernmental Working Group was given an extension of three two-week
sessions, with the understanding that a draft would be put before the
Eighth Session. That session is now scheduled to meet in Manila at the
end of August 1982.
The Intergovernmental Working Group has the advantage of drawing on the experience of a number of international and regional efforts
to regulate foreign investment. The drafting of codes, with limited and
sometimes divergent objectives, has long been on the agendas of international organizations. The abortive charter of the International Trade
Organization addressed concerns similar to the issues currently under
consideration by the Intergovernmental Working Group. These issues
include entry of private investment, the right to regulate or limit such
entry, the conduct of the investor, and the right to, and consequences of,
5
expropriation.
In the last fifteen years, codes relating to foreign private investment
have flourished. In 1967, the Organization for Economic Cooperation
and Development (OECD) proposed a code for the protection of foreign
private investment. 6 In the 1970's, the attention of regional and international groups turned to TNC's. The OECD, in June 1976, adopted a
2. A partial listing, as of 1975, is given in Rubin, Tran-natinalCorporatzon.r:Superision,Regulation or What?, I INT'L TRADE LJ. 1 (1975). See W. FELD, MULTINATIONAL CORPORATIONS & U.N.
PoLircs--THE QUEST FOR CODES OF CONDUCT (1980); LEGAL PROBLEMS OF CODES OF CONDUCT FOR MULTINATIONAL ENTERPRISES (N. Horn ed. 1980).
3. The Intergovernmental Working Group was established by the U.N. Commission on
Transnational Corporations at its Second Session. 61 U.N. ESCOR, Supp. (No. 5) 3, U.N. Doe.
E/C.10/16 (1977).
4. Commission on Transnational Corporations, Report on the Sixth Session, 66 U.N. ESCOR, Supp. (No. 10) 14, U.N. Doe. E/C.10/75 (1980).
5. A history of early efforts to draft codes of conduct and a discussion of the problems inherent in any general statement of principles can be found in RUBIN, PRIVATE FOREIGN INVESTMENT:
LEGAL AND ECONOMIC REALITIES (1965). Experience has not led this author to materially alter his
earlier views.
6. Organization for Economic Cooperation and Development, Draft Convention on the Pro-
1981]
CODES OF CONDUCT FOR
TNC's
"Declaration, '" 7 "Guidelines," 8 and three "Decisions" 9 for TNC's that
are recognized as establishing standards of conduct, in spite of their explicit statements that they are "voluntary."' 0
In November 1977, the International Labor Organization (ILO)
adopted its Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy."I The U.N. Conference on Restrictive Business Practices, under the auspices of the U.N. Conference on
Trade and Development (UNCTAD), has promulgated a "Set of Principles" dealing with restrictive business practices.' 2 Another UNCTAD
effort, the Conference on an International Code of Conduct on the
Transfer of Technology, is at an impasse, as of late 1981, as a result of
conflict mainly over principles of "applicable law" to be invoked in settling disputes. t3 Work is also continuing, though with little evidence of
tection of Foreign Property, OECD Publication No. 23081 (1967), reprinted in 7 INT'L LEGAL
MATERIALS 117 (1968).
7. Organization for Economic Cooperation and Development, Declaration on International
Investment and Multinational Enterprises, OECD Doec. C(76)99 (1976), reprtntedin 15 INT'L LEGAL
MATERIALS 967 (1976) [hereinafter cited as OECD Declaration].
8. Organization for Economic Cooperation and Development, Guidelines for Multinational
Enterprises, annexed to OECD Declaration, supra note 7 [hereinafter cited as OECD Guidelines].
9. Organization for Economic Cooperation and Development, Decision of the Council on
Inter-Governmental Consultation Procedures on the Guidelines for Multinational Enterprises,
OECD Doc. C(76)117, reprinted in 15 INT'L LEGAL MATERIALS 977 (1976); Organization for Economic Cooperation and Development, Decision of the Council on National Treatment, OECD
Doc. C(76)118, reprinted in 15 INT'L LEGAL MATERIALS 978 (1976); Organization for Economic
Cooperation and Development, Decision of the Council on International Investment Incentives
and Disincentives, OECD Doe. C(76)119, reprinted in 15 INT'L LEGAL MATERIALS 980 (1976).
10. Set OECD Guidelines, supra note 8, para. 6.
11. Adopted by the Governing Body of the International Labor Organization (ILO) on November 16, 1977, ILO Doe. No. GN 204/4/2, reprintedin 17 INT'L LEGAL MATERIALS 422 (1978).
The ILO, a specialized agency within the United Nations system, has a tripartite composition, so
that government, labor and employers are each represented. See Baade, Codes of Conductfor Multinational Enterprses: An Introductog' SuiVe, in LEGAL PROBLEMS OF CODES OF CONDUCT FOR MULTINATIONAL ENTERPRISES 407 (N. Horn ed. 1980).
The ILO Tripartite Declaration had its genesis in a meeting of experts in October 1972 and
consists of both a policy statement and a declaration of principles. The Tripartite Declaration is
designed to establish criteria essentially in the area of "social policy."
12. U.N. Conference on Restrictive Business Practices, The Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restricted Business Practices, U.N. Doe.
TD/RBP/CONF/10 (1980), reprinted in 19 INT'L LEGAL MATERIALS 815 (1980) [hereinafter cited
as UNCTAD Restrictive Business Practices Code]. For a discussion of efforts to reach agreement on
the control of restrictive business practices, see Davidow, The UNCTAD Restrictive Business Practices
Code, in LEGAL PROBLEMS OF CODES OF CONDUCT FOR MULTINATIONAL ENTERPRISES 193 (N.
Horn ed. 1980). A proposed chapter on this subject was included in the abortive Charter for an
International Trade Organization, which was prepared by a U.N. conference in 1948. Efforts continued in various forums such as the U.N. Economic and Social Council (ECOSOC) in 1952. The
General Agreement on Tariffs and Trade (GATT) in 1960 produced a consultation procedure that
has remained unused. Id at 193-94.
13. UNCTAD has been working on a Code of Conduct on Transfer of Technology since 1975.
See UNCTAD, Report of the Intergovernmental Group of Experts on a Code of Conduct on Transfer of Technology, U.N. Doec. TD/B/C.6/I (1975). In May 1980, a draft code was presented to the
U.N. Conference on an International Code of Conduct on the Transfer of Technology. Draft International Code of Conduct on the Transfer of Technology, U.N. Doe. TD/CODE TOT/25 (1980).
Issues that remain to be resolved include the scope of the code's application, particularly whether
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progress, on a code outlining sanctions for illicit payments. 14
These are not the only attempts to reach some sort of international
regulatory scheme. The World Health Organization (WHO) has now
adopted (with the United States as the lone vote in opposition, though
others abstained) a code dealing with breast-milk substitutes.' 5 The
World Intellectual Property Organization (WIPO) is attempting to
draft revisions of the current international patent rules. Many regional
organizations, from the European Economic Community to the Andean
Common Market, as well as other organizations, such as those concerned with the environment, also seek international agreement on economic or social conduct of private international enterprise.
Although many codes or guidelines are very broad in scope, others,
such as the proposed international agreement on illicit payments under
development by ECOSOC and the WHO code on breast-milk substitutes, are quite specific and relatively narrow.16 In some of the proposed
codes, explicit statements are made regarding the nonbinding effect of
the document, as is the case with the OECD Guidelines. 17 In others, a
the code should apply to transactions between affiliated enterprises; the legal nature of the codes
(the view of business and the U.S. is that the code must be voluntary); the regulation of such
practices as arrangements; the scope of proposed provisions with regard to guarantees and obligations, in which "performance criteria" are of special importance; special treatment for developing
countries; and international collaboration and institutional machinery. Seegenera4'y Wilner, Transfer
of Technology: The UNCTAD Code of Conduct, in LEGAL PROBLEMS OF CODES OF CONDUCT FOR
MULTINATIONAL ENTERPRISES 177 (N. Horn ed. 1980).
14. See Report of the U.N. Economic and Social Council Committee on an International
Agreement on Illicit Payments, U.N. Doc. E/1979/104 (1979), repintedin 18 INT'L LEGAL MATERIALS 1025 (1979) [hereinafter cited as Illicit Payments Agreement]. Work in the area of illicit payments first was proposed by the U.S. Delegation at the Second Session of the U.N. Commission on
Transnational Corporations, in May 1976. The proposal was inspired largely by criticism from
abroad, especially from some developing countries, of the allegedly undesirable and possibly illegal
conduct of (mainly) U.S. TNC's in pursuit of business opportunities. Eventually, the proposal was
referred to ECOSOC.
The U.S. Delegation had been inspired in its efforts concerning illicit payments by the passage of
the Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat. 1494 (codified at 15 U.S.C.
§§ 78a note, 78dd-l, 78dd-2, 78m(b), 78ff (1976)). The American experience under this law, described as "by far the harshest, most comprehensive effort by any nation to suppress bribery outside
its own borders," may ultimately result in the downfall of the international effort. Seymour, Illhct
Panents in InternationalBusiness: National Legislation, International Codes of Conduct, and the Proposed
United Nations Convention, in LEGAL PROBLEMS OF CODES OF CONDUCT FOR MULTINATIONAL EN-
TERPRISES 223 (N. Horn ed. 1980).
Although most authorities agree that the Act has been successful in curbing illicit payments by
U.S. multinationals, there may have been a corresponding shift of foreign business away from
American firms. Arguably, the resulting competitive advantage to non-U.S. companies may act as
a disincentive to other nations to pass similar laws. Id at 225. The failure of the other countries to
adopt standards similar to those embodied in the Foreign Corrupt Practices Act has led to efforts in
Congress to alter U.S. law. See, e.g., S. 708, 97th Cong., Ist Sess., 127 CONG. REC. S2148 (daily ed.
Mar. 12, 1981).
15. World Health Organization, Draft International Code of Marketing of Breastmilk Substitutes, Report of the Director-General, WHO Doe. EB67/20, at 5-14 (1980).
16. For further illustration of the specificity of some codes of conduct, see the variety of codes
regarding investment and business operations described in 1 CTC REP. (No. 8) 11-13 (1980).
17. See OECD Guidelines, supra note 8, para. 6.
1981]
CODES OF CONDUCT FOR
TNC's
binding international treaty is sought, as is the trend in the work on
illicit payments.18
The variety of proposed codes is vast, the scope is virtually boundless,
and the amount of time and money expended on the drafting of codes is
enormous. In addition to the efforts of the global international organizations, regional organizations also are engaged in attempts at promulgating codes of conduct. At the meeting of Foreign Ministers of the
American Republics in Tlatelolco, 1 9 the participants devised various
formulations that have served as the basis for much of the work at the
United Nations. A series of lengthy sessions of the Inter-American Juridical Committee produced an "opinion" on regulation of TNC's. 20 Finally, many international private organizations have proposed their
21
own codes or guidelines. The list is long.
Underlying all of this work is the conviction that TNC's, because of
their size, have vast power to affect national policies. For example, annual sales of a corporation like General Motors exceed the gross national
product of all but twenty-two independent nations. 22 Moreover, the
rate of growth of TNC's has been very rapid. 23 Estimates made in the
early 1970's suggested that in the near future some 300 to 400 TNC's
would control sixty to seventy percent of the industrial assets of the
world. 24 Thus, it was quite understandable that interest in international
supervision and regulation would develop which sought to ensure that
TNC's would not frustrate--and possibly would contribute to-national
development strategies. Such interest was, of course, enhanced by the
18. See Illicit Payments Agreement, supra note 14; Seymour, supra note 14, at 231-32.
19. See U.N. Commission on Transnational Corporations, International Codes and Regional
Agreements Relating to Transnational Corporations, Report of the Secretariat, U.N. Doc.
E/C.10/9 (1976). A meeting of the Conference on Economic Cooperation Among Developing
Countries was held in Mexico in September 1976, as well as a meeting of experts of developing
countries on the Code of Conduct on Transfer of Technology. Meetings held at the U.S. Department of State in 1975 brought together representatives of the American republics for a dialogue
between the United States and the other countries of the region, which formulated suggested terms
for a code presented at the First Session of the U.N. Commission on TNC's. See Rubin, Rej'icions
Concerning the U.A Conmission on TNC, 70 AM. J. INT'L L. 73, 87-88 (1976) [hereinafter cited as
Rdflections].
20. Opinion of the Inter-American Juridical Committee on Transnational Enterprises, dated
Feb. 13, 1976, OAS Doe. CJI-27, OEA/Ser.Q/IV.12, at 25 (1976).
21. For some of the antecedents, see Reilctions., supra note 19. An example of work on the
regional scale is found in OAS Doe. CJI-19, OEA/Ser.Q/IV-8 (1974) and OAS Doc. OEA/Ser.
G/CP/SA.CP/RES (1974) dealing with work within its Inter-American Juridical Committee and
other organs of the Organization of American States.
22. Multinational Corporations: Hearings Before the Subcom. on International Trade of the Senate
Comm. on Finance,93d Cong., Ist Sess. 393 (app. A) [hereinafter cited as Hearingson TNC's]. General
Motors' gross sales in 1969 ($24.3 billion) exceeded, according to those hearings, the combined
GNP of Venezuela, Peru, and Chile ($22.89 billion). Id at 404 (Table 1).
23. The rapid growth rate, in all likelihood, is reduced by the rapid and substantial increase
in fuel prices, and at least partially consequent worldwide economic difficulties.
24. See Stoiber, EqualityandDicriminationin InternationalEconomic Law, 1977 Y.B. WORLD AFF.
908
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transnational nature of the business done by these corporations, the belief that their international structure might enable them effectively to
escape national regulation, and the possibility that only an international
response could meet the perceived challenge to national economic sovereignty. Additionally, the impetus toward codes of conduct or guidelines
was enhanced by the lack of equilibrium between developed and developing nations, a determination to rectify that imbalance, and by the
demand that TNC's make a major contribution toward the achievement
25
of developmental objectives.
It is clear that corporate power and its concomitant effect on the
achievement of governmental goals is far from being solely characteristic
of "the" TNC. In the first place, there is no such thing as "the" TNC,
except in the most formal sense of a business entity that has its effective
headquarters in one country and does business, or has subsidiaries or
branches, or both, in several other countries. For example, some TNC's
are in fact companies that engage in business in several countries,
through subsidiaries or other linked affiliations, but that are closely tied
either to resources in one or another country (as is the case in the extractive industries) or to markets (as would be the case for a company like
Sears, Roebuck & Co.). In such cases, though there may be other
problems, the "TNC" does not have that "mobility"-the ability to
transfer resources from one nation-state to another-that is said to be a
prime characteristic of "the" TNC, and a principal source of worries
over its power. Moreover, events have shown that in many situations,
even a small nation-state can effectively control a large TNC, at least
insofar as its activities in that country are concerned.
In any case, it seems clear that TNC's differ vastly-as to their ability
to control events in the various parts of the world in which they operate,
as to their own degree of centralization and effective control over even
their own branches or subsidiaries, as to the nature of the business in
which they are engaged, and as to their relation to substantial issues of
economic policy of the countries in which they operate. It is equally
noteworthy that concern over TNC's is not exclusively a function of
their international attributes. Concern has been expressed over many
years about the mere issue of largeness, whether on the national or international scene. Nations have, in various ways, been interested in the
way in which a large organization, able to mobilize enormous amounts
of capital and technology, affects national economies. This concern, at
least in the United States, has extended-indeed began-with national
entities. The antitrust laws of the United States did not, after all, origi25. For somewhat contrasting views, see Rubin, The MultinatibnalEnterpriseat Bay, 68 AM. J.
INT'L L. 475 (1974); Vernon, Economic Soveregnty at Bay, 47 FOREIGN AFF. 110 (1968).
19811
CODES OF CONDUCT FOR
TNC's
nate in a concern with transnational corporations, but with the so-called
"trusts."
The issue, indeed, is largely that of the corporate form of doing business, whether the entity itself is domestic or transnational in nature.
Concern is likely to be small, however, when the entity itself is small,
when in fact it is merely a convenient substitute for another form of
business association such as a partnership or joint venture of limited
scope and, generally, limited resources. But the corporate form makes it
possible for formidable concentrations of economic power to be brought
together under the control of relatively few individuals and with little
more than a theoretical accountability even to the putative owners-the
shareholders. It thus has long been commonplace that corporations have
a capacity not only to achieve their business purposes, but also to affect
the society in which they function. The classic analysis, which has since
been recognized as a truism as well as the basis of much regulatory legislation, was popular as early as 1933. That analysis emphasized that it
was not solely the owners of the corporation who had an interest in its
activities. It argued that the large corporation could and did affect the
social values and interests of a large and diverse community. Under
these circumstances, much early debate dealt with concepts of corporate
26
responsibility.
In the international arena, there is still much to be learned from an
often neglected national experience. Recent debates in the United Nations, the International Labor Organization, the Organization of American States, and the arguments underlying such U.N. General Assembly
Resolutions as the Charter of Economic Rights and Duties of States,2 7 as
well as many proposals for codes of conduct, could well be founded not
in North-South confrontation, but in the opinion voiced many years
ago, albeit in dissent, by Justice Brandeis in the noted case of Louis X
28
Lzgget Co. v. L e.
Through size, corporations, once merely an efficient tool employed by
individuals in the conduct of private business, have become an institution-an institution which has brought such concentration of economic power that so-called private corporations are sometimes able to
29
dominate the State.
When the concept of the corporation was first evolving, the public
26. For a summary of these points, and reference to literature on the role of the corporation in
the national as well as the international context, see P. DRUCKER, CONCEPT OF THE CORPORATION
(rev. ed. 1972); J. GALBRAITH, AMERICAN CAPITALISM: THE CONCEPT OF COUNTERVAILING
POWER (1952); THE CORPORATION IN MODERN SOCIETY (E. Mason ed. 1959); R. NADER & M.
GREEN, CORPORATE POWER IN AMERICA (1973); Corporation and Society, supra note 1.
27. G.A. Res. 3281, 29 U.N. GAOR, Supp. (No. 31) 51, U.N. Doc. A/9631 (1974).
28. 288 U.S. 517 (1933) (Brandeis, J., dissenting).
29. Id at 565.
910
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 30:903
interest was a recognized element in deciding if a corporate charter
would be granted. The medieval "Company of the Staple," chartered
in Great Britain and the ancestor of the modern corporation in common
law jurisdictions, was established precisely because it was felt that there
was a public as well as a private interest in the staple goods trade. 30 The
state thus maintained a lively interest in the creature that it had created.
Early incorporation acts defined how corporations could act, what assets they could accumulate, and often granted them merely a limited
life. In the international sphere, the public interest was even more pronounced. Two of the earliest English corporations, the Andalusia Company and the Prussia Company, had as their principal resource a Crown
monopoly of foreign trade with certain nations. The East India Company, first chartered in 1600, expanded these governmental powers so
3
successfully that eventually it was merged back into government. '
Early corporations often were chartered to do international business as
well as domestic business. This early international scope was accompanied by the notion that some degree of public responsibility was inherent in the corporate charter. Given these early developments, it is not
surprising that international attention has focused on the transnational
corporation and its relation to the public interest. This attention has
been accentuated as a result of the enormous growth of the transnational corporation in recent years, which is itself a result of the increasing interdependence of the modem world.
The existence of a public interest, of course, does not lead automatically to conclusions about how that interest should be expressed. A vast
chasm lies between the opposing views on the subject of the proper role
of the modern private corporation in international economic relations
and particularly in developmental policy. This gap is especially evident
in discussions about the function of an international regulatory or supervisory scheme. 32 Governmental responsibility for fair treatment of the
30. See Corporationsand Soc'ep supra note 1; Stoiber, supra note 24.
31. See Williston, History of the Law of Business CorporationsBefore 1800, 2 HARV. L. REV. 105
(1888). The Company of Merchants of London (East India Company) was established, in part, due
to severe financial constraints placed on merchants who individually attempted to supply an entire
ship for an ocean voyage. By employing their capital in joint stock, all stockholders-noblemen,
shopkeepers, widows, and all other subjects-would share equally in company profits. Unlike the
modem corporation, however, individual members did not have to participate in the joint stock
ownership. Rather, individual members of the company could engage in private trade in the Indie--a privilege held exclusively by Company members. Id at 109.
32. For contrasting views of the impact of TNC's even in the domestic economy, see Stobaugh,
MultinationalEnterpriresand the US Economy, in 1 U.S. DEP'T OF COMMERCE, THE MULTINATIONAL
CORPORATION: STUDIES IN U.S. FOREIGN INVESTMENT 30-31 (1972) (view expressed that TNC's
increase domestic employment); Hearingson TWC's, supra note 22, at 443 app. B. As to costs and
benefits in the international scene, the conflict is even sharper. See A. TOYNBEE, THE RELUCTANT
DEATH OF NATIONAL SOVEREIGNTY (1971); Muller, Rover, is the Product, 13 FOREIGN PoL'Y 71
(1974); Report of the Group of Eminent Persons, The Impact of Multinational Corporations on
Development and on International Relations, U.N. Doc. E/5500/Rev. 1, ST/ESA/6 (1974) [here-
1981]
CODES OF CONDUCT FOR
TNC's
corporation and of those who have contributed to its capital (human as
well as material) is a proper and indeed essential component of a balanced concern over the practices of TNC's. Thus, there is no automatic
33
or simple answer in either the domestic or the international arena.
I.
CORPORATIONS AND NATION-STATES: A TENSE INTERACTION
The relationship between corporations and governments often has
been uneasy. Seldom is there general agreement that "what is good for
General Motors is good for the United States." Indeed, it is appropriate
to recall, as already stated, that corporations historically were created
only by a special and guarded act of the sovereign. General and permissive incorporation laws came late to the United States. Increasing industrialization, however, made it obvious that the corporate form of
doing business was a highly useful social and economic tool. The corporation permitted the capital of many persons to be brought together, to
guarantee to each investor that he would put at risk only an agreed and
limited amount of capital, that such capital would be centrally managed, and that the entity would survive the death of the natural persons
who contributed either their capital or skills. The corporation thus responded to the needs of society and hence its growth. Over the last few
decades, nearly the same set of considerations has dominated the exponential growth of the "transnational corporation," an entity whose operations extend beyond national frontiers. 34 TNC's have proliferated
because they are useful in a world in which efficiency often demands an
outlook that transcends national boundaries.
Even in the national arena, the corporation has sometimes exacerbated fears. The aggregation of economic power that the device permits
often has been viewed as being powerful and not always responsive to
popular concepts of the "best interests" of the general public. Separation of investment and of management carries with it at least some possibilities of abuse. The interests, for example, of labor and of consumers,
inafter cited as Eminent Persons' Report]. For the U.S. reaction to the U.N. Report, see Department of State, The Views of the United States Government Concerning the Report of the Group of
Eminent Persons on the Impact of Multinational Corporations on the Developmental Process and
on International Relations (Nov. 6, 1974).
33. Compare C. BERGSTEN, T. HORST & H. MORAN, AMERICAN MULTINATIONALS AND
AMERICAN INTERESTS 467 (1978) and GOVERNMENT OF CANADA, FOREIGN DIRECT INVESTMENT
IN CANADA (1972) [hereinafter cited as GrayReport] with Goldberg & Kindleberger, Towarda G,477
for Investment: 4 ProposalforSupervision of the InternationalCorporation, 2 LAw & PoL'Y INT'L Bus. 295
(1970) (proposal to establish a forum of international experts for purpose of framing basic procedures precedent to General Agreement on International Corporation (GAIC)) and Kindleberger,
The MultinationalCorporationin a World of Militant Developing Countries, in GLOBAL COMPANIES, THE
POLITICAL ECONOMY OF WORLD BUSINESS 70 (G. Ball ed. 1975) [hereinafter cited as MNC's IN
DEVELOPING COUNTRIES].
34. Much of this and the following paragraphs owe a great deal to A. BERLE, THE 20TH
CENTURY CAPITALIST REVOLUTION (1954).
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and the likelihood that corporate interests will not always coincide with
the public interest, have thus led to suggestions for reform of the institution of the corporation and to a myriad of regulatory measures. One
aspect of this reformist sentiment has been the recurrent crusade in the
United States for a federal incorporation law, in the belief that national
standards are appropriate for entities that have continent-wide operations. That proposal has come to the fore at intervals since its incorporation in the Democratic Party platform of 1908, though it has never
prospered. An analogous concept lies behind much of the present emphasis on international regulation, as well as the proposals for a European Countries "Companies Law."
Though no federal general incorporation law exists in the United
States, there are many statutes and regulations that are applicable to
corporate conduct on a nationwide scale and which, if consolidated,
could well be called a corporate code of conduct. For example, the laws
that regulate the offering of securities by corporations 35 and their sale to
the public determine what a corporation may do to raise capital, and
what it must do to give information to its shareholders3 6 as well as to
government. State legislation often exists concurrently. 3 7 Moreover, labor laws prohibit unfair labor practices; other laws regulate price-fixing
and other unfair business practices; antitrust laws control mergers that
may conflict with the public interest; and other regulations affect such
diverse areas as standards of accountancy and protection of the
environment.
In spite of this legislation, other public interest concerns arise. One
source of these concerns is that a corporation may be perceived as not
conferring benefits or costs equally on all regions of even a single country. The economic and political repercussions of uneven distribution of
natural resources, or other factors of comparative advantage, are evident
in many nations: in the United States, as industry moves out of the
Northeast to the so-called Sunbelt; in Britain, where Scottish nationalism is fortified by oil discoveries; and in Canada, where separatism is fed
not merely by linguistic and perceived cultural differences but also by
questions of who should profit from resources found in different parts of
the nation.
35. See Securities Act of 1933, 15 U.S.C. § 77 (1976), which regulates the public offering of
securities by requiring the issuer to make full disclosure of all material facts in order to provide the
public with adequate information regarding securities.
36. See Securities Exchange Act of 1934, 15 U.S.C. § 78 (1976), which applies to trading in
securities that are already issued and are outstanding by imposing disclosure requirements on publicly-held corporations and prohibiting fraud in connection with the purchase or sale of securities.
37. State securities laws, commonly called "Blue Sky Laws," establish various requirements
for the registration of broker/dealers, registration of securities to be offered or traded in the state,
and sanctions against fraudulent activities.
1981]
CODES OF CONDUCT FOR
TNC's
An entirely domestic corporation may thus find itself caught up in
such regional conflicts, and may be seen as serving the interest more of
"foreigners" than of the natives of the resource-rich region in which it
operates. Consequently, tensions can be considerable. If the corporation
is transnational, the tensions are greatly magnified, because the corporation is perceived as being one that owes its allegiance not merely to another group within the same country, but to persons in another nation.
Benefits of TNC's are seen as remaining principally in one country, with
the costs--or the lack of benefits--in another. Further, when the corporation is an entity that is foreign-owned and foreign-controlled, the suspicion that regulation might bring a better order tends to harden into
conviction. That conviction is likely to become an article of faith when
the corporation has its headquarters in a developed nation, while maintaining many or most of its operations in developing countries. 38 Moreover, the likely disparity in the standards of living between the two
countries powerfully exacerbates the human tendency to put more of
the blame on a foreign concern than on one's own shortcomings or on
the dictates of economics.
An additional factor brings transnational corporations under suspicion-the possibility that they may act as conduits for the policies of a
foreign state.39 Though in most cases the corporation will be unwilling
to play such a role, that hardly matters. What does matter, for example,
is that the home government may seek to impose its antitrust laws on
host states. In addition, policies such as those embodied in the "trading
with the enemy" concept, which are concerned with embargo policies of
one country, might be imposed on subsidiaries in other countries. Corporations also may be asked to follow policies with respect to repatriation of earnings that respond more to the needs of the home than of the
host country. This results in a feeling of "dependency" that may or may
not have undesirable economic aspects but that certainly is psychologically unsettling.
Developing countries generally believe that an unjust international
economic order exists and that a transfer of resources is necessary to
correct the inequities. The developing countries also are aware of the
important role that TNC's play in the present international economic
system.4 Hence the call for regulation. Such regulation would seek to
38.
Cf Corporationsand &detpy, supra note 1, at 7.
39. Se, e.g., United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945) (extraterritorial application of antitrust law); United States v. Imperial Chemicals Indus., Ltd., 100 F.
Supp. 504 (S.D.N.Y. 1951) (liability), supplementedby 105 F. Supp. 215 (S.D.N.Y. 1952) (remedies);
Societe Fruehaufv. Massardy [1965] J.C.P. II No. 14,247 (Cour d'appel, Paris). Seegenerally Rubin,
MultinationalEnterpriseand NationalSovrteigny: A Skeptihc¢ Ana sis, 3 LAw & PoL'Y INT'L Bus. 1, 10
(1971) [hereinafter cited as A Skeptis's Analysis].
40. See Charter of Economic Rights and Duties of States, G.A. Res. 3281, 29 GAOR, Supp.
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achieve several objectives such as rectification of past injustices; enhancement of the contribution which it is conceded that TNC's could,
and on occasion do, make to the development of the countries in which
they operate; and the creation of a balanced and equitable world economic order basically in accordance with the spirit of the several U.N.
resolutions that set out a program for achievement of a "new interna'4
tional economic order." '
Both the interdependence of nations and the major role of TNC's in
international trade and investment are salient features of the international economic landscape. The role of TNC's has been emphasized,
and perhaps overly so. Although both proponents and critics agree on
the importance of the TNC, there is no consensus on the effects of that
importance. Some writers, such as Arnold Toynbee, regard the transnationalism of the TNC as a beneficial means of overcoming nationalism,
which they believe must be eliminated if the world is to survive. 42 Many
have regarded the TNC as a threat to national sovereignty, an attitude
reflected, for example, in several Canadian reports, 43 as well as in the
opinions of representatives of the developing countries. Others have
perceived the TNC as an instrument of division that perpetuates an inequitable allocation of benefits that impoverishes the less developed
countries. The TNC thus may be regarded as widening disparities not
only between nations, but also between economic classes within a nation, while simultaneously destroying indigenous cultural patterns. The
more skeptical have argued that sovereign states have become actors in
a world situation in which they have limited power and freedom of
choice. 44
Almost all nations agree on the desirability, if not the necesssity, of
some form of international regulation of TNC's. Although there was
wide divergence in the attitudes toward TNC's among the members of
the Group of Eminent Persons established by the Secretary General of
the United Nations, that body suggested in a 1974 report that the U.N.
Commission on Transnational Corporations be established. In 1974, the
U.N. General Assembly created both the Commission and the Informa(No. 31) 50, U.N. Doc. A/9631 (1974). See also
Reflections,supra note 19; U.N. Commission on Transnational Corporations, Transnational Corporations: Issues Involved in the Formulation of a Code
of Conduct, U.N. Doc. E/C.10/17 (1976).
41. For a dramatic and generally exaggerated exposition of the ill aspects of the TNC, see R.
BARNET & R. MULLER, GLOBAL REACH: THE POWER OF THE MULTINATIONAL CORPORATIONS
(1974). Contrast to this the considerably rosier attitude of Ball, The Promise ofthe MulltnationalCorporation, FORTUNE, Jan. 1, 1967.
42. See, e.g., A. TOYNBEE, supra note 32.
43. See, e.g., Gray Report, supra note 33.
44. .4Skeptic's Anaoysir, supra note 39. See generall Eminent Persons' Report, spra note 32;
United Nations, Multinational Corporations in World Development, Annex II, U.N. Doe.
ST/ECA/190 (1973).
1981]
CODES OF CONDUCT FOR
TNC's
tion and Research Center on Transnational Corporations. 45 The Commission, composed of forty-eight U.N. members, held its first annual
meeting in the spring of 1975; the Center began operations in time to
present a set of documents to the second Commission meetings in
1976.46
In the work program of the Commission, preparation of a code has
always been a priority. The resolution establishing the Commission assigned several other tasks to it as well, including the preparation of a
comprehensive information system, and the creation of a program of
technical assistance to developing countries that is generally aimed at
enhancing their negotiating capacities. The Commission also was directed to work on a definition of TNC's. 47 Work on the information
system, including possible harmonization of accounting and reporting
standards, has been mainly in the hands of the Center, although some of
the work on the information system has been delegated to a special
group set up to analyze questions of accounting. The Commission itself
has devoted much time to discussing these matters.
Certain matters are thus far clear. Corporations themselves are important economic actors on both the national and international scenes.
Their international importance has increased enormously in recent
years, just as international trade, commerce, and investment have increased. 48 Moreover, great benefits have been realized as a result of
their activities. The concerns of developing nations regarding the "more
equitable" distribution of resources and wealth are also great. TNC's
often are as much concerned with issues of fair treatment, especially in
light of numerous expropriations (most prominently in the extractive
industries), stability, and an appropriate investment climate, as governments are with excesses or lack of responsiveness by TNC's to the national objectives of the host countries. Perceiving the advantages in a
compact, businesses and governments, host and home alike, agree on the
desirability of a "code of conduct." It was with little difficulty, therefore, that the U.N. Commission on Transnational Corporations was able
to agree at its Second Session to give priority to the preparation of such
45. The Commission was established pursuant to ECOSOC Res. 1913, 57 U.N. ESCOR,
Supp. (No. IA) 31, U.N. Doc. E/5570/Add. 1 (1975). The Information and Research Center was
established by ECOSOC Res. 1908, 57 U.N. ESCOR, Supp. (No. 1) 13, U.N. Doc. E/5570 (1974).
46. For a general overview of the background and work of the U.N. Commission on Transnational Corporations, see Retlections, supra note 19, at 5.
47. This writer has elsewhere suggested that definitions, to be useful in analyzing and possibly
solving problems, should describe functions rather than formal structure, e.g., Rubin, The International Firm and the NationalJuridttion,in THE INTERNATIONAL CORPORATION: A SYMPOSIUM (C.
Kindleberger ed. 1970) [hereinafter cited as INTERNATIONAL FIRM]; Rubin, IntemationalRules for
TransnationalCorporations 1 J. INT'L TRADE L. 1, 10 (1975).
48. See generaly MNC's IN DEVELOPING COUNTRIES, supra note 33; R. BARNET & R.
supra note 40; INTERNATIONAL FIRM, supra note 47; SOVEREIGNTY AT BAY, supra note 1.
MULLER,
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49
The content, form, and nature of such a code, however, is very far
from being agreed upon even after five years of discussion and negotiation. Some of the difficulties were foreseen from the outset; some have
been overcome; some have developed out of the negotiation process itself
and out of a perceived need for acceptable definitions. The code, if it
emerges as a consensual document, or even if it does not, is likely to have
a significant effect on corporate-state relations. 50
II.
PROSPECTS FOR A
U.N. CODE OF CONDUCT
The writing of a code of conduct will not be on a tabula rasa. Indeed,
any code that is produced by the U.N. Commission on Transnational
Corporations obviously will reflect to some degree the considerable array of existing "regulatory" agreements, or works in progress. 5 ' Indeed,
some part of the U.N. Commission code will be based on work in other
fora. It is likely that the provisions of the ILO Tripartite Declaration on
social standards, the work of ECOSOC on illicit payments, and the
work already accomplished on restrictive business practices or transfer of
technology will provide a basis for code provisions in those areas or will
52
be incorporated by reference in a code.
It seems evident that at least one of the basic issues that has divided
the Commission from the outset-namely, the mandatory or voluntary
nature of the code-has largely been decided in other fora. If a code
dealing with a relatively narrow range of issues, such as those of restrictive business practices (on which many nations already have national or
regional binding legislation) cannot be made "mandatory," there seems
little possibility that a code of the sort being negotiated in the Commission will be put into treaty form. Hence, formal national commitments
to matters as ill-defined as the broad commitment to "respect for socio49. Actually, the formulation of a code of conduct for transnational corporations has been
given a high priority by the Commission since its initial session. Commission on Transnational
Corporations, Report on the First Session, 59 U.N. ESCOR, Supp. (No. 12) para. 9, U.N. Doc.
E/5655, E/C.10/6.
50. During the First Session, for example, views differed on whether the code should take on a
moral tone, should be obligatory and containing penalties for nonobservance, and whether the code
should be addressed solely to TNC's or should also contain "general principles guiding the policies
of governments." See general, id paras. 41-50.
51. See notes 6-21 & accompanying text supra.
52. One such existing set of regulatory principles that has been generally taken as a broad
statement of the position of countries of the Third World regarding TNC's are the principles relating to the conduct of transnational companies put forward at the third preparatory meeting of the
Working Group on Transnational Enterprises of the American Republics. Included in these ten
principles were such guidelines as: TNC's should be subject to the laws of host countries and the
exclusive jurisdiction of their courts; they should not serve as a policy instrument of a foreign state;
TNC's should contribute to the development of the host country; they should refrain from restrictive business practices; and finally, TNC's should respect the cultural identity of the host country.
Those principles have received support from the Group of 77. Refections, supra note 19.
1981]
CODES OF CONDUCT FOR
TNC's
cultural objectives, values and traditions" of countries in which TNC's
operate, or those subject to varying interpretation as "adherence to economic goals and development objectives" would go unenacted.5 3 Indeed, the 1980 edition of the CTC Reporter, alludes to the possibility
that the Commission and ECOSOC might decide to convene an international conference to deal with final adoption of a code. The Reporter
then notes that "[s]uch conferences are called, of course, not only for the
adoption of treaties, but also for the adoption of recommendations or
non-formally binding instruments." In the latter category, the CTC Reporter includes the results of the UNCTAD conferences on restrictive
business practices (already concluded with a nonbinding instrument)
54
and on transfer of technology.
It does not follow, however, that a "voluntary" code would be ineffective. Frequently, references have been made in informal conversations
during meetings of the Intergovernmental Working Group on the code
as well as the sessions of the Commission to the possibility of a "zebra"
code--one in which some provisions would be adopted as binding international agreements, while others would be voluntary. But in view of
the position of many delegations that each part of the code is and must
be dependent on all other parts, 5 5 and the confirmation of that position
by consensus at the 1980 Commission meeting, this seems an unlikely
solution. It is of course possible that some provisions will be more precatory in nature than others. The more likely prospect would seem to be
that certain areas, addressed only in general terms in the code, might be
developed further in specialized meetings into standards that could be
the subject of collateral and perhaps binding agreements.
In any case, the legal effect of a multilaterally accepted code of conduct is a matter of some debate.56 It has been suggested that even unilateral declarations can create international "law." The effect of
General Assembly resolutions is similarly controverted, though the majority-or at least more traditional-view is that obligations under the
U.N. Charter require Security Council action. Even codes explicitly declared to be "voluntary," such as the OECD Guidelines, may establish
norms of conduct that would probably be observed-perhaps as much
53. U.N. Commission on Transnational Corporations, Work Related to the Formulation of a
Code of Conduct: Report of the Intergovernmental Working Group on a Code of Conduct on its
Eighth, Ninth and Tenth Sessions, U.N. Doc. E/C.10/62, at 12 (1980).
54. 1 CTC REP. (No. 8) 4 (1980).
55. This position is seen in the statements of the head of the U.S. delegation to the First
through the Sixth Sessions of the U.N. Commission on TNC's, who indicated that this proposition
has been accepted. Set afro U.N. Commission on Transnational Corporations, Transnational Corporations: Issues Involved in the Formulation of a Code of Conduct, U.N. Doc. E/C.10/17 (1976).
56. See Baade, 7he Legal Efcfr of Code ofConAtfor MultinationalEnterprses, in 22 GER. Y.B.
INT'L L. 11 (1979).
918
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as if they were formally "mandatory." On the other hand, codes explicitly stated to create no binding obligation may be considered interpreta57
tive of other explicitly binding agreements.
Moreover, to make a nonbinding code "effective" may be to blur the
distinction between a voluntary and a mandatory code. Most international fora, including the U.N. Commission on Transnational Corporations, would agree that a code should be effective, and that it should be
reviewed from time to time. There already has been considerable discussion as to whether the review mechanisms of the OECD Guidelines
that are explicitly voluntary and not designed to judge the conduct of
any individual corporation have imported considerable compulsion into
even those Guidelines. 58 A generally accepted set of standards eventually may have an effect as significant as a more formal commitment.
Indeed, because a formally adopted commitment is likely to be narrowly
worded, the looser standards may be more, rather than less, effective in
influencing conduct. In any case, review of the effectiveness of such standards will tend to ensure that they do have the intended effects. Already
it seems clear that the conduct of corporations-in the field of public
disclosure, for example, and in the area of labor relations-has been affected significantly by the existing understandings already mentioned,
as well as by the continuing negotiations and complementary discussions
in board rooms and in international organizations.
This ongoing debate indicates that the code negotiations have already
had an effect, and will have effects, almost without regard to the eventual attainment of a formal code. This is a comforting consideration,
because attainment of a universally accepted and comprehensive code
still has many hurdles before it. The Sixth Session of the U.N. Commission on Transnational Corporations, on the final day of its 1980 session,
adopted a resolution 59 that was designed to provide guidance to the
Working Group in its preparation of a code that would be presented at
57. Id at 40 (pointing out that the "modalities" paper of the U.N. Center on Transnational
Corporations states that even a code adopted explicitly in nonbinding form can become "a 'source'
of law for national authorities as well as for the transnational corporations themselves." See U.N.
Commission on Transnational Corporations, Certain Modalities for Implementation of a Code of
Conduct in Relation to its Possible Legal Nature, U.N. Doc. E/C.10/AC.2/9, at 8 (1978).
58. For a general discussion of this point in the context of a well-known case before the
OECD, see R. BLANPAIN, THE BADGER CASE AND THE OECD GUIDELINES FOR MULTINATIONAL
ENTERPRISES (1977). The OECD Guidelines have also evoked a statement in the "authorized"
summary of that case, to the effect that parts of the Guidelines "though voluntary in origin, may
. . . pass into the general corpus of customary international law evenfor those multinationalenterprises
which have never acceptedtherm." (emphasis added). The summary, prepared by Dr. T.W. Vogelaar of
the OECD Secretariat, caused some consternation and controversy in at least some governments of
the OECD.
59. Progress Made Towards the Establishment of the New International Economic Order and
Obstacles That Impede It: The Role of Transnational Corporations (Draft Resolution II), in Commission on Transnational Corporations, Report on the Sixth Session, 66 U.N. ESCOR, Supp. (No.
10) 5, U.N. Doc. E/C.10/75 (1980).
1981]
CODES OF CONDUCT FOR
TNC's
919
the Seventh Session of the Commission. The resolution affirms the priority status of work on the code, and maintains that it will be "an essential contribution in the accomplishment of the goals of the new
international development strategy and the new international economic
order."0 It also affirms that the code should be "effective, comprehensive, generally accepted and universally adopted."' 6 ' This may prove
difficult to achieve, particularly in light of the broad, difficult, and
sometimes differently viewed concepts contained in other items listed for
the guidance of the Working Group. The purposes of the code are to
associate TNC's effectively within the new international order; to reaffirm principles of respect for national sovereignty, for established policies of countries in which TNC's operate, and for the right of the host
countries to regulate and monitor TNC activities; to foster TNC contributions to developmental goals; to prohibit subversion or "interference
in the internal affairs of countries and other inadmissible activities"; to
deal effectively with activities of TNC's in South Africa and Namibia; to
include "provisions relating to the treatment of transnational corporations, jurisdiction and other related matters"; to provide appropriate implementary provisions; and to be considered as an integrated whole.
Some of these desiderata are viewed quite differently by various members of the Commission. Most of the industrialized countries, for example, would consider "treatment" to mean "fair treatment," but how that
concept would be defined by the developing countries, especially by the
Socialist or Communist countries, is another matter. Furthermore, reasonable defense of rights guaranteed by international law in the concept
of one nation may be "interference" to another. Other difficulties
abound.
The overarching difficulty is to achieve agreement in broad terms on
matters ofpnn~cle. Many negotiations over the course of the years have
demonstrated that countries, even those with widely divergent social
and economic systems, can come to agreement on specif issues even
though the results often are not completely satisfactory to either side.
Agreements generally are reached at least partially because both sides
are looking for a solution to enable them to get on with business, not for
a victory for the principles of either side. That the agreements,
whatever may be the disputes between the parties, are at least a modus
vivendi is evidenced by the increase and the growth of international investment and international trade, a large part of which the TNC's control. For example, the dispute between the United States and Mexico
that arose out of the oil and agrarian expropriations of the 1930's, has
60. Id at 11.
61. Id
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never been resolved in principle. Both sides stand on their original and
flatly opposed theories of international law. Yet American investment
in Mexico has grown-to the apparent satisfaction of both countriesand Mexico is the United States' third largest trading partner.
The basic problem of agreement on a code of conduct then is precisely
that it deals with principles, not with specific and identifiable cases.
The foreseeable consequences of establishing these principles, however,
are largely unknown, if not unascertainable. One cannot reasonably
predict just what factual situation will arise, or just how the general
principle will be applied to it. Nevertheless, imagination tends to emphasize the worst case scenario. The necessary vagueness of the language, which in many diplomatic settlements is intended, understood,
and a useful aspect of a settlement, becomes a hazard of indefinable
dimensions. 62 Despite the guidance of the resolution adopted at the
Sixth Session, difficulties remain in attaining a code that will be generally accepted, universally adopted, and uniformly interpreted.
If methods of interpetation, review, and possibly resolution of differences can be reconciled, there is reasonable hope that a code in draft
form can be offered to the 1982 session of the Commission. A considerable amount of progress has been made, though it has been slow and has
been made on the easier issues. Moreover, there has been a measure of
success in other fora-the ILO, the OECD and UNCTAD, for example.
Corporate practice actually has tended to conform to the standards being enunciated and without undue harm. Much discussion has had the
effect of taking at least some of the mystery and fear out of the concepts.
In addition, it is widely perceived that failure would have a major and
negative effect at a time when real and not merely verbal cooperation is
essential to the welfare of all. Achievement of a generally acceptable
code would not do a great deal to satisfy demands for a massive transfer
of resources from North to South, for such a transfer of resources is not
within the legal or economic power of privately owned corporations. A
code, however, would be at least one perceptible indicia of cooperation.
Thus, although both content and timing remain largely undefined,
reasons exist on all sides to make a strenuous effort to achieve a code.
All have recognized that a code need not be engraved in stone, and
instead that it may be an evolving set of understandings of varying nature. Further, all recognize that, whatever may be the economic signifi62. These issues have been dealt with at some length earlier. See also ReftclionL, supra note 19.
The article discussed the differences that are likely to complicate the future progress of the U.N.
Commission on Transnational Corporations in making proposals on a code of conduct. The controversial areas include the language to be used in the Commission's report; identification of areas
of concern; scope and nature of information-gathering functions; technical cooperation; and the
definition of a TNC.
1981]
CODES OF CONDUCT FOR
TNC's
cance of code provisions, achievement or nonachievement of a code will
have substantial psychological and political implications. A code may
or may not have important beneficial effects, but failure in this effort has
very grave risks. Not the least of these risks, from the point of view of
the industrialized countries and the TNC's themselves, would be the
possibility that an unsuccessful code would nevertheless be adopted as a
resolution of the U.N. General Assembly. Although the majority opinion is that such a resolution would have no binding effect, it would provide a precedent for enactment of national or regional legislation.
Moreover, it would constitute a mandate to a U.N. secretariat-in this
case, the U.N. Center on Transnational Corporations-which would
then have both the authority and the resources for preparation of a series of reports, research studies, and other activities designed to implement such a resolution. This is a possibility that must be borne in mind
by those who feel that the code exercise itself is unrealistic--or worse.
The hope-and if realism prevails, the expectation-thus must be
that a code will be achieved. It may not be a thing of logical harmony
and beauty, but it will be at least something more than a finger in the
dike.