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PO Box A147
Sydney South
NSW 1235
3 April 2003
Ms Calissa Aldridge
International Unit
Foreign Investment Policy Division
Department of the Treasury
Email: [email protected]
Dear Ms Aldridge,
Australian Lawyers for Human Rights (ALHR) is a national network of Australian
lawyers committed to promoting awareness of and adherence to human rights
standards in Australia.
Thank you for the invitation to provide comments on the CIME meeting in
Paris from 9-11 April 2003, and to make suggestions for agenda items for
the NGO consultations scheduled for May 2003.
The one matter which we raise for your consideration is both difficult
and important. We propose that there be discussion of and agreement on
a definition of a Multinational Enterprise.
Proposal
ALHR is concerned that the concept of a multinational enterprise is
insufficiently defined, resulting in real uncertainty as to the effective
extent and effect of the OECD Guidelines for Multinational Enterprises,
2000 (‘The Guidelines’).
For the reasons we set out below, ALHR proposes that the issue of ‘clearly
defining the multinational enterprise’ be raised at CIMA, and be
on the Agenda at the proposed NGO-Consultation meetings, to help Governments
determine which entities the Guidelines should apply to. We note that
member “Governments wish to encourage the widest possible observance
of the Guidelines”1.
Defining with some precision the ‘multinational enterprise’
would be useful for the community and Government, and for those multinational
enterprises seeking to achieve the object and purpose of the Guidelines
Discussion
The Guidelines “are addressed to multinational enterprises operating
in or from the 30 OECD member countries and non-member adhering countries
(Argentina, Chile and Brazil)”2.
The purpose of the Guidelines is to “ensure that the operations of
these business enterprises are in harmony with government policies, to
strengthen the basis of mutual confidence between enterprises and the
societies in which they operate, to help improve the foreign investment
climate and to enhance the contribution to sustainable development made
by multinational enterprises”3.
According to the Guidelines, multinational enterprises “usually
comprise companies or other entities established in more than one
country and so linked that they may co-ordinate their operations
in various ways” (emphasis added). The Guidelines state that:
“A precise definition of multinational enterprises is not required
for the purposes of the Guidelines.”4
The Guidelines do not make clear what other entities are purportedly
regulated. Nor do they make clear the nature of the nexus between the
various entities which might comprise the multinational enterprise. Similarly,
without knowing with precision to whom the Guidelines apply, it is not
clear which ‘entities’ are “expected to co-operate and
to assist one another to facilitate observance of the Guidelines”5.
With a more precise, consistent and unambiguous definition of multinational
enterprises, the Australian Government could more effectively achieve
the purposes of the Guidelines in order to, among other things:
- “Prescribe the conditions under which multinational
enterprises operate within their jurisdictions, subject to international
law”;6
- Co-operate in good faith with a view to resolving problems
that may arise, when multinational enterprises are subject to conflicting
requirements by adhering countries7;
and
- “Ensure that timely, regular, reliable and relevant
information is disclosed regarding their activities, structure, financial
situation and performance”8.
It is not the case that a “precise definition of multinational enterprises
is not required for the purposes of the Guidelines”. Without a precise
definition, multinational enterprises can manipulate or organise their own
corporate structure and boundaries in such a way as to exclude those aspects
of their ‘operations’ which do not comply with the Guidelines.
Guides to a definition
To help the Australian Government and multinational corporations achieve
the objectives of the Guidelines, a more exact definition, which is consonant
with Australian and International law, is needed. This could be achieved
by developing a definition of the ‘multinational enterprise’ from
Australian and international sources of law, and academic commentary. Reliance
on other international standards, even in draft, will help to ensure the
Guidelines are consistent with the international and domestic frameworks
in which the they operate.
- The Corporations
Act 2001 (Cth) does not define the ‘multinational’ or
‘transnational’ corporation. However, a corporation is defined
by that Act as an entity which has been incorporated under the
Corporations Act 2001 or is treated as such under the law of
its place of origin.9
- The Corporate
Code of Conduct Bill 2000 has since lapsed, but is a useful starting
point in developing standards for multinational or transnational corporations.
It sought to impose environmental, health and safety and human rights
standards on Australian corporations ‘established in more than
one country’, the phrase used by the Guidelines to describe what
multinational enterprises usually comprise of.10
.
The Bill would have applied
to a corporation or related corporation which employed more than 100 persons
in a foreign country and was:
- a trading or financial corporation formed within the limits
of the Commonwealth; or
- a holding company of such a corporation; or
- a subsidiary of such a corporation; or
- a subsidiary of a holding company of such a corporation.11
The Corporations Act
2001 provides a precise definition of when one corporation is a subsidiary
of another.12
- The United
Nation’s Draft Fundamental Human Rights Principles for Transnational
Corporations and Other Business Enterprises defines the terms “transnational
corporation” and “other business enterprises” as follows:
“The term "transnational
corporation" refers to a cluster of economic entities operating in
two or more countries - whatever their legal form, whether in their home
country or country of activity, and whether taken individually or collectively”
13; and
“The phrase ‘other business enterprise’ includes any business
entity, regardless of the international or domestic nature of its activities,
including a transnational corporation; the corporate, partnership, or other
legal form used to establish the business entity; and the nature of the
ownership of the entity.”14
- Paul Redmond
is Professor of Corporate Law at the University of New South Wales,
specialising in Corporations and Human Rights. He uses the term ‘transnational
corporation’:
“To refer to firms
(typically groups of companies) under common ownership or significant economic
influence whose income-generating operations cross national borders. Such
firms are also variously called international or multinational; some entities
in the group may be unincorporated”15.
- Stephen
Bottomley, is Professor of Corporate Law at the Australian National
University, also specialising in Corporations and Human Rights. He refers
to:
“An aggregate of
corporations and business organisations that is characterised mainly by
the dispersal of its managerial centres among several nations.”16
- The Global
Reporting Initiative, in making recommendations on reporting on
organisations, sets out relevant considerations:
“[R]eporters [should]
clearly and explicitly define the boundary conditions used in the report
for the reporting organisation. Financial accounting and reporting standards
currently exist to define boundaries for different forms of corporate control
(joint ventures, associates, subsidiaries, etc.) such standards do not yet
exist to define boundaries for GRI. Until such standards are developed [emphasis
added] GRI reporters may choose to use the traditional financial accounting
and reporting boundary definitions as a starting point”17.
There are numerous other uses of the term that could be collated in readiness
for the a discussion of this issue at the NGO consultation.
I trust that this proposal is helpful. Please do not hesitate to contact
us if you would like to clarify any aspect of it.
I confirm that ALHR would like to be present at the NGO consultation in
Sydney. We would be represented by one of our members, Sophie McMurray.
Yours sincerely,
By email
Simon Rice OAM
President
Australian Lawyers for Human Rights
1
Paragraph 5, “Concepts and Principles”, The Australian
National Contact Point for the OECD Guidelines for Multinational Enterprises,
“Introduction to the Guidelines” The OECD Guidelines for Multinational
Enterprises, 2000 [‘The Guidelines’]
2 ANCP, “Introduction to the
Guidelines”, The Guidelines
3 ANCP, “Introduction to the
Guidelines”, The Guidelines
4 Paragraph 3, “Concepts and
Principles: Annex 1” in The Guidelines
5 Paragraph 3, “Concepts and
Principles” in The Guidelines
6 Paragraph 7, “Concepts and
Principles” in The Guidelines
7 Paragraph 7, “Concepts and
Principles” in The Guidelines
8 Paragraph 1 “III, Disclosure”
in The Guidelines
9 s. 57A Corporations Act 2001
10 Paragraph 3, “Concepts and
Principles: Annex 1” in The Guidelines
11 6. Interpretation, Corporate
Code of Conduct Bill 2000
12 S. 46 Corporations Act 2000
13 According to 19. (a) United Nations,
“Draft Human Rights Principles for Transnational Corporations and
Other Business Enterprises effectively defines transnational corporations”
“Human Rights Principles and Responsibilities for Transnational Corporations
and Other Business Enterprises, U.N. Doc. E/CN.4/Sub.2/2002/XX, E/CN.4/Sub.2/2002/WG.2/WP.1
(February 2002 for discussion in July/August 2002)” <http://www1.umn.edu/humanrts/principlesW-OutCommentary5final.html>
accessed 19/11/02
14 According to 19(b), Ibid.
15 The elements of this definition
are discussed in P. T. Muchlinski, Multinational Enterprises and the Law
12-15 (revised ed. 1999). The United Nations Conference on Trade and Development
(UNCTAD) reported in 2002 a total of 64,592 parent corporations in the
latest available national reporting year, with 851,167 foreign affiliates:
World Investment Report 2002: Transnational Corporations and Export Competitiveness
270-273 (Annex table A.1.3) (2002). Over the past 10 years, the number
of parent corporations has almost doubled (from 35,000) and foreign affiliates
have increased more than five times (from 150,000): World Investment Report
1992: Transnational Corporations as Engines of Growth (1992).
16 Stephen Bottomley, “Corporations
and Human Rights” in Bottomley and Kinley (eds), Commercial Law
and Human Rights (Ashgate, Sydney, 2002), p. 47, citing R Ells, Global
Corporations: Emerging System of Economic Power (Interbook, New York,
1976) p. 42
17
Global Reporting Initiative (GRI) "Sustainability reporting
Guidelines on Economic, Environmental and Social Performance" June
2000, p. 13; <www.globalreporting.org>
accessed 5/06/02, p. 13
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