Kulubekova Galiya Aidarovna (Кулубекова Галия Айдаровна)

L. N. Gumilyov Eurasian national university, Republic of Kazakhstan (Евразийский национальный университет им. Л. Н. Гумилёва, Республика Казахстан)

First attempts to codify the standards of foreign investment and their impact on the modern regulation of transnational corporations' activities

A transnational corporation is usually a system of several legal entities, which separately are subjects of the national law of various states. However, it is difficult to regulate the activities of a transnational corporation on the national level of one particular country, as economically a transnational corporation operates as a unit regardless of its legal multiplicity. Therefore, the reality necessitates regulation instruments of the international character. However, this necessity meets a reasonable question: how can such a regulation be implemented in the absence of international legal personality of transnational corporations?

Currently, the international regulation of various aspects of transnational corporations' activities is carried out by a sufficiently large number of international instruments, so-called soft law. It is necessary to bear in mind that the essential part of a transnational corporation is the foreign direct investment. Therefore, the regulation of transnational corporations on the international level started with the idea of foreign investors' protection. The foreign investment in XX century mainly originated from developed countries as it is shown in the first chapter of this work. For the economies of countries-recipients, these foreign investment inflows were very important. However, the political situation in many of that states was unstable, and the legislation was not designed to serve the needs of the business.

The very first attempts to codify the standards for foreign investment were taken between two World Wars by the League of Nations agencies [1, 79]. During the 1920s, the League of Nations held economic conferences, attempting to codify international property law [2, 75]. In 1929, the League of Nations Committee drafted “Convention on the Treatment of Foreigners”, which manifested the principle of national treatment in fiscal matters, regulating freedom of circulation, residence, carrying on of trade, industries, exercise of civil, judicial, and succession rights [3, 226-227]. In 1930, the League of Nations held the Codification Conference in the Hague, which focused on three main subjects of public international law, including the responsibility of States for damage caused in their territory to the person or property of foreigners [4, 500]. In 1931, the International Chamber of Commerce at its Washington Congress adopted a resolution stating that the Chamber considers it necessary to frame international legal Conventions expressly guaranteeing the protection of private property belonging to nationals of Contracting States on the territory of the other States [5, 472]. However, all these inter-war period attempts to codify the standards concerning foreign investment were not successful.

After the Second World War studies of the question became more active. In 1948, the United Nations Conference on Trade and Employment, which was held in Cuba, resulted in Havana Charter for an International Trade Organization. The Charter admitted the importance of the foreign investment for the global economy and the fact that it should be stimulated. The Charter consisted of provisions recognizing the investment-receiving countries' rights of regulating the foreign investment inflows (art. 12). On the other hand the Charter's position on the protection of foreign investors' rights was not clear. That is why the Charter was not in the interests of the countries which had significant investment outflows. The Charter eventually was not ratified by several signatory states and never became effective [1, 80].

Another important conference on international law issues was Ninth Conference of American States held in Colombia in 1948. The result of this Conference was the Economic Agreement of Bogota which like the Havana Charter emphasized the importance of foreign investment and contained provisions regulating it. The Agreement's provisions on investment issues were one of the main parts of the document (the whole IV Chapter was dedicated to private investment) while the Havana Charter paid much less attention to this question. Agreement of Bogota reaffirmed the rights of countries receiving investment inflows to regulate coming foreign capital. In fact, art. 24 of the Agreement repeated some conditions of the Havana Chapter. However, the Agreement, unlike the Havana Charter, contained provisions protecting the investors rights (art. 22), including the prohibition of discriminatory actions leading to deprivation of property rights, payment of fair compensation for legal expropriation. Even though this time the interests of foreign investors were protected, the Agreement of Bogota was not efficient. A. Fatourus argued that the provisions of the Agreement had lost their importance due to the constant use of indefinite terms such as “appropriate”, “unjustifiable”, “just” or “equitable” [1, 81].

Later, in 1956 ECOSOC expressed its position on foreign investment, which implied that governments of capital-exporting and capital-importing countries are both interested in continuing the efforts to develop international confidence conducive to private investment, in conformity with the principles of the Charter of the United Nations.

The 1957, is famous for the International Industrial Development Conference, convened in San Francisco, which main theme were the preferred means of stimulating the flow of private capital to the less developed areas of the world, and also for the "International Convention for the Mutual Protection of Private Property Rights in Foreign Countries", which was drafted by the “Advance the Protection of Foreign Investments”, an organization of businessmen in West Germany [6, 371-372]. In 1958, another convention on foreign investments was drafted by the group of European international lawyers headed by Sir Hartley Shawcross [7, 33]. This initiative alongside with the one of the “Advance the Protection of Foreign Investments” mentioned earlier were combined into a single draft convention which was later taken up by OECD and led to the OECD Draft Convention on the Protection of Foreign Property, which, however, failed to be ever signed [8, 210]. The OECD Council Resolution of October 12, 1967, highlighted that the Draft Convention “embodies recognized principles relating to the protection of foreign property” and that it “will be a useful document in preparation of agreements on the protection of foreign investment” [9, 30]. Thus, even though the Draft Convention on the Protection of Foreign Property was not signed it made a certain contribution to the part of the international law dealing with foreign investment.

Despite being unsuccessful, the first attempts to codify the standards of foreign investment played a significant role in the international law. They raised the question. In other words, they gave an impulse for making research and analysis on how foreign investment could be regulated by international law, prepared an international ground for dialog on this topic, formulated general concepts of essential obligations and rights of both investors and recipients of investment, and paved the way for future more detailed and advanced documents such as OECD Guidelines on multinational enterprises and UN Draft Code of Conduct for transnational corporations.

BIBLIOGRAPHY

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2. Lipson, Charles. Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries. Berkeley: U of California, 1985. p. 75

3. Cutler, J.W (1933). The Treatment of Foreigners: In Relation to the Draft Convention and Conference of 1929. The American Journal of International Law, 27 (2). pp. 226-227

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10. Havana Charter for an International Trade Organization March 24, 1948. United Nations Conference on Trade and Employment, Final Act and Related Documents. U.N. Doc. E/Conf. 2/78. United Nations publication, Sales No. 1948.II.D.4

11. Economic Agreement of Bogota May 2, 1948. La Novena Conferencia Internacional Americana. Available on the Organization of American States website at http://www.oas.org/juridico/ spanish/tratados/a-43.html [accessed October 24, 2015]

12. ECOSOC. Resolution 619 (XXII) Financing of Economic Development. U.N. Doc. E/2929. 22nd Sess., Official Records, Supp. No. 1, Aug. 17, 1956