*{The OECD Multilateral Investment Agreement
- BIAC Views on Specific Elements of an eventual Instrument -}

BIAC was very pleased that the 1994 OECD Council Meeting at Ministerial Level endorsed "a new
phase of work aimed at elaborating a multilateral investment agreement"(MIA). We have strongly
supported this work since its inception, noting in 1992 that we considered the project to be the
Organisation's most important endeavour in the field of investment since the negotiation of the 1976
Declaration and related decisions. BIAC's position continues to be that the development of a
multilateral framework for rules affecting foreign direct investment, resulting in the removal of
direct or indirect obstacles to FDI in national legislation, practices and other government measures,
will be the OECD's single most effective contribution to promoting business confidence and
improving global economic performance. To realise this potential, BIAC believes the agreement
must yield significant up-front liberalisation of remaining barriers to international investment.

BIAC commends the OECD Member Governments and the Secretariat for the impressive pace and
extent of analysis over the course of the "new phase of work" endorsed by Ministers in May 1994.
We believe these efforts demonstrate a strong commitment to developing an MIA of the highest
possible standards, and reinforce BIAC's conviction that the OECD should begin the negotiations as
soon as possible. For this reason, BIAC will express its full support for a negotiating mandate for
the Organisation in its statement to the 1995 OECD Council Meeting at Ministerial Level.
Recognising that a truly valuable multilateral investment agreement will include Non-Member
Countries, BIAC completely agrees with OECD's plans to keep the Dynamic Non-Member
Economies (DNMEs) informed of the progress and to elicit their comments at various stages of the
project. This approach will clearly facilitate the accession by Non-Member countries to an eventual
agreement. While BIAC agrees with others that the ultimate objective should be a global agreement
with the highest achievable standards of liberalisation and protection of investments, BIAC, on the
other hand, believes strongly that the negotiations on the agreement at the OECD must be started
without further delay and be pushed ahead with purpose and vigour.

In the "BIAC Statement on a potential OECD Broader Investment Instrument"(3 December 1992),
we outlined in general terms a list of elements to be included in an eventual agreement. Although
the positions in the paper are still valid, BIAC is now pleased to contribute more substantive views
on many of the key issues to be dealt with in the negotiations. BIAC recognises that the
development process will require consideration of many complex issues, some of which may not
have been addressed before in either bilateral or multilateral discussions. Our intention in this note
is to give the negotiators a preliminary idea of how the business community would like to see
various elements treated in an MIA. In short, we point out what investors would find truly useful in
a multilateral framework of rules affecting FDI. BIAC would welcome an opportunity to be
consulted on any specific issue raised below.

The BIAC views are presented in the potential order of an eventual instrument.

*{Preamble}

BIAC believes the preamble should begin with language which would characterise the increasingly
global nature of business and the importance of international investment in terms of inherent
efficiencies which would provide the rationale for and the context to introduce the Agreement.

The preamble to an MIA should also include at least three main elements:1) a statement of
signatories' recognition of the value and contribution of foreign direct investment to economic
performance and development; 2) a clear statement of signatories' and their sub-nationals'
commitment to reduce restrictions of FDI, promote and protect FDI and to facilitate the flow of FDI,
thereby increasing market access; and 3) the importance of having Non-Member economies accede
to the agreement.

*partie=titre Definitions *partie=nil

The MIA should clearly define the scope of the Agreement's application. The key terms to be
defined include: investment, investor, national, returns, territories, company, company of a party,
covered investment, state enterprise, investment agreement, freely usable currency, taxation,
transfer, transparency, goodwill, intellectual property, etc. For the MIA to be truly "state of the art",
BIAC suggests that the definitions be as broad as possible to encompass not only current
understanding of what such terms might mean, but potential new developments in cross-border
investment relations.

For the term "investment", BIAC has considered whether the MIA should include one broad
definition or two definitions to be used separately in connection with either liberalisation or
protection provisions. BIAC believes the objectives of the MIA would best be served if the
Agreement used one broad, asset-based definition of investment regardless of its intended use (i.e.,
liberalisation or protection). In our view, this definition should include an open-ended list of what
constitutes an investment drawing from the provisions in the most extensive model BITs : shares,
stock, bonds and debentures or any other forms of participation in a company, business enterprise or
joint venture; strategic alliances; claims to money or to performance under contract having
economic value; real property, tangible property, intangible property, goodwill, intellectual property,
contractual obligations as under service or turnkey construction contracts, tangible property, legal
rights such as licenses, and other forms of business cooperation, etc.

In particular on strategic alliances, BIAC believes there is no difference between these arrangements
and other international investments. Any assets (tangible or intangible) which are part of a strategic
alliance can be located in a particular country, and thus should enjoy the full benefits , including
national treatment, accorded by the MIA. This should also be the case for the intellectual property
rights related to the alliance.

We believe that any type of investment defined for a liberal entry provision must be similarly
covered by the Agreement's protection guarantees. If the MIA were to delineate the coverage of
different types of investment, BIAC believes the Agreement would essentially create preferential
treatment (in, e.g., protection) for certain forms over others and thus influence the choice of
investment options.

The term "investor" must similarly be broadly defined to include business entities (traditional and
other), natural persons, joint ventures, business organisations, strategic alliances, etc. Again, BIAC
would suggest that the definition be open-ended so as not to preclude possible new forms of
investor arrangements which might fall outside of a narrow definition and thus not be covered by
the Agreement.

BIAC believes the definition of "national" is crucial in view of the relevance of direct and indirect
investment. A "national" of a party to the MIA should include any natural person who is a citizen or
permanent resident of that party and any entity (e.g., corporation, trust, partnership, joint venture,
sole proprietorship or other association) constituted or organised under the laws of that party.

The "returns" from an investment should also be defined broadly to include: profit, capital gains,
interest, dividends, royalties and fees including service fees, and other financial or performancerelated
remunerations, and proceeds from the liquidation of an investment.

The scope of the MIA should also include a definition of the territorial entities and the regional
economic integration arrangements to be bound by the obligations of the agreement. In BIAC's view
the effectiveness of an MIA would be reduced if its provisions did not apply equally to subnationals
and to the members of regional arrangements, some members of which will be parties to
the MIA.

*partie=titre Liberalisation *partie=nil

BIAC believes the MIA should incorporate the highest possible liberalisation standards covering
entry and establishment, national treatment, non-discrimination, transparency, and rules concerning
derogations and exceptions. The spirit and intent of the MIA should be reflected in signatories'
commitments to obtaining up-front liberalisation of remaining restrictions.

In BIAC's view, it is of fundamental importance that the MIA ensures that the free flow of capital
and investment, and thus free access to markets, is provided for by national legislation in all
signatories. Investment and access to markets must not be prevented by, for instance, national
governments or authorities capriciously resorting to discretionary powers to decide whether and on
which conditions an acquisition, an establishment or a transfer of capital should be allowed.

*partie=titre Entry and Establishment: *partie=nil

While recognising the sovereign right of governments to ensure that foreign investments conform to
national laws and regulations just as national investors must, the exercise of such rights should not
be used as a pretext to protect local markets. BIAC believes it is thus crucial that the MIA clearly
oblige signatories to allow investors to freely establish and operate their investments according to
most-favoured nation status, and facilitate the entry and establishment of foreign investment by
refraining from political, legal or administrative measures which would impede such investment. It
is also very important that sectors restricted on the basis of "national security" should be kept to an
absolute minimum and not be used as guise for investment protectionism. In any case, any reserved
sectors should be kept to a minimum and explicitly listed by all signatories.

*partie=titre Screening: *partie=nil

The MIA should prohibit screening for economic purposes. Screening for national security -
narrowly drawn and executed - would be permitted (see section on Reservations, Exceptions, and
Derogations).

*partie=titre National Treatment/Non-Discrimination: *partie=nil

National treatment and non-discrimination provisions should be cornerstones of the MIA since
foreign investors must be able to compete on equal footing with their domestic and foreign
counterparts. Treatment of foreign investment must therefore be no less favourable than that
accorded to national investors or those of any other country, both on entry, and during the postestablishment
period in all aspects and all sectors including R&D consortium. The most-favoured
nation clause should also ensure that all signatories to the MIA benefit from the same treatment
accorded in any bilateral investment treaty to a non-MIA party by an MIA party.

*partie=titre Taxation: *partie=nil

One area for consideration in the negotiation of an MIA is whether taxation should be dealt with in
the context of national treatment. BIAC appreciates the sensitivity of this issue in light of
sovereignty concerns. However, we believe taxation is an element of national treatment where it is
not covered under treaties to avoid double taxation. Such conventions should have precedence. In
addition, signatories should endorse, respect and adhere to internationally accepted taxation
principles as laid down in a.o. taxation guidelines, model taxation treaties and in bilateral and
multilateral taxation treaties.

*partie=titre Transfer of Funds: *partie=nil

Because the right to make financial transfers is intrinsic to foreign investment projects, the MIA
should clearly state that investors shall have the freedom to transfer all payments related to an
investment (i.e., capital, current income, and proceeds from liquidation, payments for technical
services and royalties for the use of trade marks, patents and other intellectual property) without
delay and in a freely usable currency. The MIA should restrict the recourse to balance of payments
considerations as a justification for limiting financial flows.

*partie=titre Standstill/Rollback: *partie=nil

This is an important issue insofar as it will shape the content and character of the negotiations and,
hence, the resulting agreement. BIAC believes that an agreement which provides for few or no
liberalising measures up front, relying instead on "standstill" of existing restrictions with "rollback"
to be negotiated at some future date, will impede/delay enhanced market access. The MIA should
thus require that all signatories undertake new significant investment liberalisation upon entry into
force of the agreement.

*partie=titre Reservations, Exceptions and Derogations: *partie=nil

BIAC recognises that the ability to establish reservations and exceptions to certain provisions of the
MIA may facilitate adherence to the agreement. However, it should be clear that such measures
would weaken the potential impact of the MIA on the investment environment from the beginning.
For this reason, negotiators must endeavour to keep long-term reservations or exceptions to an
absolute minimum. BIAC would offer the following comments on the most important
exceptions/derogations:

*partie=titre National Security and Public Order; *partie=nil All countries assert some type of national security powers
which have the potential of conflicting with the terms and objectives of an effective MIA. The
objective should be to ensure that those powers are drawn and exercised very narrowly and are not
used for economic purposes. The MIA should provide for full transparency and explanation of any
measures taken for national security reasons.

The very notion of countries resorting to measures for "public order" leaves open the possibility for
misuse for protectionist purposes. BIAC sees no benefit in retaining public order as a legitimate
standard for governments to deny the benefits of national treatment or taking measures that would
otherwise contravene the high standards of the MIA.

*partie=titre Reciprocity: *partie=nil BIAC does not accept reciprocity measures as true liberalisation and favours treating
any such measures as simply exceptions to MFN or national treatment as the case may be. In
particular, we strongly object to the use of reciprocity measures in government-administered
technology programs. BIAC believes participation in government-sponsored research and
development consortia should be based on national treatment, not on nationality. In short, the MIA
should treat reciprocity measures as it treats other non-conforming measures.

*partie=titre REIOs: *partie=nil BIAC would oppose any general "carve out" for regional economic integration or other
supranational arrangements (based on, for example, Article 10 of the OECD Code of Liberalisation
on Capital Movements) which would have the effect of undermining the primary objectives of the
MIA: non-discrimination and increasing the degree of predictability in the global investment
environment.

*partie=titre Sectoral Exceptions: *partie=nil The MIA should avoid sectoral exception to national treatment/MFN. For
example, we oppose reservations/exceptions based on a cultural carve out.

*partie=titre Derogations (e.g., Balance of Payments): *partie=nil Although short-term derogations are viewed as useful
safety valves which may effectively reduce recourse to longer term reservations and exceptions,
BIAC believes the MIA should strive for a higher standard than exists in existing agreements and
should thus aim to preclude derogations, particularly for balance of payments reasons, at least for
OECD member countries.

*partie=titre New Liberalisation Issues *partie=nil

*partie=titre Movement of Key Personnel: *partie=nil

BIAC believes that this issue should be an important element of the MIA. The objective should be
to ensure multinational enterprises' right to transfer between entities in different countries the key
personnel of their choice, including but not limited to management/ technical personnel and
consultants, in order to establish, develop, direct, administer, control or advise on the operations of
their investments. The second objective should be to provide investors with the right to employ
certain personnel regardless of nationality, as long as these personnel are lawfully within the
territory.

It is important to note that this initiative should not be intended to abolish national requirements for
work permits for certain professions. The aim is to ensure that such permits are provided
automatically and without delay as soon as it is established that the application is made by an
individual on behalf of an international enterprise, parent company or subsidiary by which he/she is
already employed or for which he/she is going to be employed as key personnel; that the work
permit is directly related and limited to a specified task to be undertaken in the entity concerned and
that the applicant in performing this work can be considered either to belong to the category of "key
personnel" within the entity or is being trained for such a position; and that the transfer of the
applicant can be considered as a normal part of the activities of the international enterprise
concerned.

It is crucial that work permits for "key personnel", including technical personnel and consultants --
as opposed to work permits for other applicants -- be granted solely on such considerations, not on
the basis of the situation in the national labour market, and irrespective of the level of professional
or academic qualification of the applicant. There should be no inquiries whether there are nationals
who can perform the same job since it would lead to ambiguity concerning the criteria and, at the
same time, delay decisions.

These criteria imply that work permits for key personnel should be limited to the company or
projects concerned, to a specific job, and to a specified time span. The rules should not be intended
for persons who wish to immigrate permanently. For the efficient operations of multinational
enterprises and their national affiliates, it is essential that work permits for key personnel be granted
with short notice and with as little bureaucracy as possible.

*partie=titre Movement of Data: *partie=nil

In order to remain competitive, multinational enterprises must increasingly rely on the ability to
communicate freely within and outside their corporate structure. The free flow of information and
ideas, much like the free flow of goods, has become critical to future worldwide economic growth.
As with goods, restrictions on the transborder flow of information, such as export or import
controls, restrictive licensing arrangements or tariffs and similar measures, can distort foreign direct
investment flows.

A number of both OECD and Non-Member countries have begun initiatives to establish and
enhance large scale information infrastructures. These communications networks are and will
continue to be important bases for future global economic growth. The growth of these
infrastructures has been accompanied by concerns regarding information privacy. In order to take
advantage of information infrastructures, businesses must have adequate assurances that they can
transmit/receive data without compromising or disclosing proprietary information.

BIAC believes that, as with personnel, the MIA should provide for the free flow of data and should
address the privacy concerns related to the transborder flow of information. At a minimum, the MIA
could incorporate the provisions of the OECD Guidelines on the Protection of Privacy and
Transborder Data Flows.

*partie=titre Monopolies: *partie=nil

By definition, monopolies and government concessions restrain market access by foreign as well as
domestic investors. BIAC believes the MIA should ensure that market access is not restrained by
exclusive rights or the monopolisation of sectors such as telecommunications, which are vital to the
globalisation process. Government measures that permit monopolies to be granted or operated
should only do so in a non-discriminatory manner. However, BIAC appreciates that this is a
complex issue which may require much more analysis and discussion. BIAC would thus prefer that
the MIA development process is not unduly impeded by consideration of this topic.

*partie=titre Privatisation: *partie=nil

Questions of foreign investors ability to purchase shares from the State and the use of "golden
shares" should be dealt with on a national treatment basis. Exceptions should be permitted only for
reasons of national security in the strictest sense.

*partie=titre Private Practices: *partie=nil

BIAC is aware that there has been some discussion by CIME/CMIT of the detrimental effects of
corporate practices on foreign direct investment flows. However, the discussions have not led to any
clear identification of specific practices which should be disciplined by a multilateral investment
instrument. BIAC reserves its specific recommendations on such corporate practices until further
analysis of the different types of private practices and their effects on investment is conducted.

BIAC believes that the application of national treatment and non-discrimination provisions should
be sufficient to reduce the principal restrictions on foreign direct investment in this area until
harmonisation of company law in signatories is achieved over the longer term.

*partie=titre Public Procurement: *partie=nil

Bringing public procurement within the MIA would seem to be unnecessary since nondiscrimination
should be a fundamental principle covering this area.

*partie=titre Performance Requirements: *partie=nil

BIAC believes that it is very important for host countries to be prohibited from imposing
performance requirements on foreign investors.

BIAC believes that the NAFTA rules on performance requirements and those identified in the
Annex should be considered as a sound starting point for the MIA negotiations. The NAFTA rules
state that a government may not as a condition for the establishment or operation of an investment
require a firm to: i) limit its sales in the domestic market by conditioning such sales on exports or
foreign exchange earnings; ii) buy or use components from a local supplier or accord a preference to
domestic goods or services; iii) achieve a minimum level of "domestic content"; iv) limit its imports
to a certain percentage of exports or foreign exchange inflows associated with the investment; v)
transfer technology to any domestic entity; vi) export a specified level of goods or services; or vii)
supply designated regional or world markets solely from its local production.

*partie=titre Incentives: *partie=nil

Investment incentives can have adverse welfare and efficiency effects similar to those of tariffs. Just
as tariffs reduce gains from trade, so too investment incentives may reduce the gains from
investment flows. BIAC believes that the MIA should provide for the availability of investment
incentives on a non-discriminatory basis. At the same time, alternatives should be explored for
prohibiting or, at a minimum, limiting their use. However, BIAC notes that there is a risk of
duplication since the Uruguay Round secured agreement on investment measures and in the area of
investment subsidies. The re-affirmation of existing arrangements should be welcomed, but simple
duplication of existing arrangements should not be supported.

*partie=titre Investment Protection *partie=nil

One of the main objectives of the MIA should be to provide clear and effective protection for
investors against nationalisation, expropriation and measures tantamount to expropriation, and in
the event that such actions take place, clear guarantees of appropriate standards of compensation.
BIAC would like to offer the following comments on investment protection:

*partie=titre Intellectual Property: *partie=nil As noted in the comments on definitions above, BIAC believes the MIA
should embody a broad definition of investment which includes intellectual property. If an investor's
only investment is intellectual property, the investor/investment should be covered. In the case of
expropriation of intellectual property, the investor would thus have recourse to the MIA dispute
settlement mechanism and other protections.

*partie=titre Expropriation and Compensation: *partie=nil The MIA should include a broad definition of expropriation
covering direct expropriation, "creeping expropriation," and measures tantamount to expropriation
(e.g., nullification of concession rights). Contracting parties should apply international standards
when expropriating investments, which provide that expropriations have a public purpose, be nondiscriminatory,
be carried out under due process of law, and be accompanied by the payment of
prompt, adequate and effective compensation, including payment of interest in situations where
compensation is delayed. Compensation should be paid in usable currencies which meet the
International Monetary Fund's standards. The MIA should include a provision which guarantees the
above mentioned rules on expropriation apply in cases of expropriation by sub-national authorities.
In addition, these international law standards should be provided in instances of expropriation and
losses resulting from war and similar events.

Consistent with our comments above on transfer of funds, the MIA should provide investors subject
to expropriation with the right to freely transfer payments at current market rates.

*partie=titre Subrogation: *partie=nil The inclusion of a subrogation clause is important for the protection of investors and
to facilitate the flow of foreign investment. This is because the ability of a home state to provide
investment guarantees rests on the notion of subrogation.

*partie=titre Dispute Settlement *partie=nil

Effective dispute settlement mechanisms are essential to secure the benefits of a MIA. Such
mechanisms should provide for both investor-state and state-to-state dispute resolution. A
discussion of key issues and recommendations follows.

*partie=titre Investor-State: *partie=nil

*partie=titre Consent/Agreement to Comply: *partie=nil Investors should have the choice between arbitration and litigation
although there should be a point in time when such choice is fixed. In the case of arbitration, the
MIA should record clearly the unconditional consent of the state parties to arbitration initiated by
the investor in accordance with the MIA. It should also state clearly the commitment of the parties
to abide by the terms of any resulting award such that failure to do so would constitute an
independent breach of the MIA.

*partie=titre Forum: *partie=nil While the investor and host government should be free to select whatever arbitration rules
or arbitral institution they wish, the MIA should provide for ICSID, the Additional Facility and
UNCITRAL Rules, and the ICC Court or Arbitration as default fora. It is important to preserve all
three options so that the investor has the choice between (a) an administered arbitration with selfcontained
review and enforcement mechanisms (i.e., ICSID), (b) ad hoc arbitration with
enforcement procedures as provided in the New York Convention, and a well-tried and accepted
procedure such as that available from the ICC Court of Arbitration. Given the dissatisfaction
expressed by some concerning the uncertainties and timeliness of ICSID review procedures, the
option for a non-ICSID forum remains important.

*partie=titre Scope of Investment Dispute: *partie=nil BIAC believes the MIA should define an investment dispute to
include disputes arising from alleged treaty breaches, investment authorization or investment
agreements. The reach of the MIA's dispute settlement mechanisms should also be broadened so as
to extend to disputes arising out of other treaties.

*partie=titre (a) MIA Violations: *partie=nil Dispute settlement must be broad enough to encompass any alleged violation
of the MIA. The MIA will confer rights with respect to both establishment and post establishment
treatment of investors and investments (e.g., national treatment and MFN). Accordingly, an investor
should be able to bring a claim that it was denied permission to invest in violation of the
establishment provisions just as it should be able to bring a claim for a post-establishment MIA
violation. Any concerns that may be raised about national security screening of takeovers can be
adequately addressed by the national security exception and need not require a blanket exclusion
form dispute settlement of all pre-establishment claims.

*partie=titre (b) Investment Authorizations: *partie=nil So long as screening is not abolished and members maintain
foreign investment authorities, it will be necessary to ensure that investors are able to bring claims
to enforce the terms of any such authorization and to redress host government action inconsistent
with those terms.

*partie=titre (c) Investment Agreements: *partie=nil BIAC believes the MIA should include a definition of investment
agreement at least broad enough to encompass the kinds of investment agreements typically
concluded between governments and investors. It should provide expressly the intent to cover
commercial as well as noncommercial breaches (without prejudice to whether any such breach may,
in addition, constitute an expropriation).

*partie=titre (d) Obligations Arising in Other Treaties: *partie=nil The MIA dispute settlement mechanism should extend
to obligations arising in other treaties, provided the dispute is related to an investment. This
provision would strengthen previously negotiated dispute settlement mechanisms and provide
investors with more options in settling a dispute.

*partie=titre (e) Taxation issues excluded: *partie=nil Generally, tax issues would not be subject to the dispute settlement
mechanism. BIAC would suggest, however, that a national or company that asserts in an investment
dispute that a tax matter involves an expropriation, may submit the dispute to the arbitration
provisions of the MIA. However, this submission would only be undertaken if the issue has first
been referred to the competent tax authorities or local courts and these authorities within at the most
6 - 9 months "have not determined that the matter ... does not involve an expropriation."

Consideration should also be given to whether a further exception to the rule that the dispute
settlement provisions do not apply to tax matters should be added for the case of a tax claim that is
entered in response to an expropriation claim. Such claims should be settled in the same forum as
the expropriation claim, not in the local courts of the expropriator.

*partie=titre Remedy *partie=nil Since money damages may generally suffice to remedy post-establishment breaches and for
pre-establishment disputes, it may be difficult if not impossible to calculate monetary damages for
denial of the right to invest, i.e., being excluded from the market. BIAC believes that the MIA
should permit an investor to seek both money damages and consider specific relief in the form of a
decree calling upon the state party to comply with treaty obligation. (Some have suggested that this
latter remedy is appropriate only in the state-to-state context although there is no compelling reason
why this should be so.)

*partie=titre Local Courts *partie=nil One of the recurrent problems is whether an investor may seek redress in local courts
without forfeiting the right to go to arbitration. BIAC believes that MIA should permit, at the option
of the investor, resort to local courts prior to initiation or arbitration and use of local courts for
injunctive and declaratory relief even after arbitration has been commenced. Particularly in the
expropriation context, it may be necessary to have access to both fora to ensure the rights of the
investor are preserved and that appropriate remedies can be obtained.

*partie=titre Procedural Matters *partie=nil There are a variety of procedural matters to be addressed including "cooling off" periods prior to initiating a claim; limitation periods on bringing claims; consolidation of claims
where common questions of law of fact prevail; participation in cases by nondefendant state parties
on questions of MIA interpretation, etc. It will be necessary for the MIA to ensure that individual
investors will have their claims heard and that the possibilities for fair adjudication are not
compromised.

*partie=titre State-State: *partie=nil

*partie=titre Scope *partie=nil In addition to binding arbitration for actual disputes over interpretation or application, the state-to-state dispute settlement mechanism should include broad consultation provisions enabling a
party to seek consultations with another party on any matter affecting the operation of the MIA or
affecting one of its investors. If a state fails to comply with binding arbitration, the other state
should be able to take proportionate countermeasures.

*partie=titre Relationship to Investor-State Proceedings *partie=nil The existence of ongoing investor-state proceedings on
the same issue or even an actual decision by an investor-state tribunal should not preclude a state
from bringing a claim against the host state.

*partie=titre Espousal/State Claim *partie=nil The MIA should permit a state to bring a claim for money damages for
injuries suffered by its investors. Appropriate provisions prohibiting double recovery should be
drafted. A state party should as well be able to bring a claim compelling compliance with MIA's
provisions, i.e., a change in inconsistent law or practice.

*partie=titre Institutional Considerations *partie=nil

*partie=titre Relationship of other Instruments to an MIA: *partie=nil

The question has been raised of whether and, if so, how the OECD Guidelines for Multinational
Enterprises should be treated in an MIA. BIAC has always shared the view that the Guidelines have
contributed to the international investment climate by building a sense of mutual trust and
confidence between governments and the multinational enterprises operating within their borders.
The Guidelines gained (and have maintained) the support of business and industry because they
were negotiated (and continue to be accepted) as a voluntary set of "best practice" management
standards. Although no one has yet officially suggested that the voluntary nature of the Guidelines
should be altered, appending the Guidelines to an MIA may imply a change in how their
implementation is viewed by signatory governments in relation to other articles of an instrument.

BIAC believes that a formal reference to the Guidelines would be a concession to the "progressive"
view of sources of binding international law: namely, that voluntary codes, non-binding declarations
and resolutions, etc., can become part of emerging international law. The more traditional approach,
supported by BIAC, is that international legal obligations only arise from the practices of States and
by creation of treaties, conventions, etc. Adopting the "progressive" approach in an MIA will cause
considerable uncertainty to investors.

Another vital point is that the MIA itself (with its provisions as to the incorporation of other
documents) is likely to rule together with principles of international law. International law, by its
nature, is much more wide-ranging in the selection of sources from which it derives its principles
than many national systems. A tribunal considering a dispute under the MIA may feel compelled to
take the Guidelines into account if they are annexed.

In summary, BIAC believes that any formal linkage between an MIA and the Guidelines may
undermine the objectives of the MIA by needlessly raising investor uncertainty. Even if the
language used in annexing the Guidelines made it clear that the voluntary nature was not being
changed, the act of annexation is certain to be interpreted by some as having some substantive legal
effect. Furthermore, it is not clear what impact annexation would have on clarifications of the
Guidelines or BIAC's reservations to such clarifications. Therefore, we would oppose appending the
Guidelines. BIAC is similarly concerned about the implications of including a preamble reference to
the Guidelines as it could be misconstrued as raising their status from a voluntary nature - which is
crucial for continued acceptance and application of the Guidelines.

*partie=titre Non-Members: *partie=nil

In order to achieve the highest possible standards, it may be desirable to restrict negotiations to
members of the OECD. However, the OECD should keep Non-Members well informed on the
progress of the MIA through established channels of communications with non-member countries,
such as the Dynamic Non-Member Economies and the Partners-in-Transition countries of Central
and Eastern Europe.

For BIAC, the accession of Non-Member countries is a crucial aspect of an MIA, and BIAC
therefore supports special efforts toward the recruitment of those countries. For their accession to
the agreement, however, the judgement whether or not to admit a certain country to MIA should be
made on a case-by-case basis. BIAC believes that, as with OECD Countries, some elements of
liberalisation should be required up front, combined with a schedule for post-accession
liberalisation of other measures that do not conform to the MIA. The fact that Non-Members will
benefit from the provisions of the MIA should act as an incentive for them to submit to the
obligations of the agreement.

*{Conclusion}

BIAC is very pleased to present this note as a contribution to the OECD's negotiations of an MIA,
which we hope will begin in earnest following the 23-24 May 1995 OECD Council Meeting at
Ministerial Level. BIAC looks forward to elaborating any points raised in this paper, and to working
with the OECD on any issues requiring input from the business community throughout the
negotiation process.

*{Supplementary BIAC Recommendation for the OECD Multilateral Investment Agreement
[This annex is based on a September 1994 BIAC Trade Committee submission to the OECD.]}

*partie=titre TRIMs *partie=nil

The Uruguay Round agreement on TRIMs clarifies the prohibition of local content requirements
and trade balancing requirements inconsistent with national treatment. It also prohibits measures
which are inconsistent with a country's obligations under GATT Article XI:I on quantitative
restrictions, whether on imports or exports by a foreign investor.

In addition, the BIAC Statement on a potential Broader Investment Instrument of December 1992
included a recommendation that the MIA contain provisions concerning freedom to transfer funds
relating to the operation or liquidation of a project as well as a general condemnation of TRIMs
which interfere with an investor's freedom to manage and operate their projects.

To the extent that the following specific TRIMs are not covered by the Uruguay Round
agreement, they should be added to BIAC's previous recommendations.

*partie=titre Export Performance Requirements *partie=nil

Export requirements typically oblige an investor to export a fixed percentage of production, a
minimum quantity or value of goods, or (like a trade-balancing requirement) some proportion of
the investment's import or current account balance.

*partie=titre Equity Ownership Requirements *partie=nil

Local equity requirements typically specify that a certain percentage of the equity of a company
created by foreign investment be held or controlled by local investors. Alternatively, such
measures may establish a ceiling on foreign equity. The share of equity designated for local
investors may increase over the life of the investment, and there may be restrictions on the form
in which foreign equity is held (for example, the foreign investor may or may not be allowed to
count a contribution of technology towards equity share). Local equity requirements may be
softened in return for commitments by the foreign investor to, for example, increase exports or
undertake local research and development.

*partie=titre Technology Transfer and Licensing Requirements *partie=nil

Technology transfer requirements typically require the foreign investor to adopt specified
production or processing techniques in local production in order to transfer certain technology. In
some instances, and investor may be prohibited from transferring technology to its subsidiary in
the host country. Investors may also be required to increase local research and development.

Technology transfer often takes place via a licensing requirement, whereby the investor is
compelled to permit the production, use or sale of a designated product or technology. The
license typically specifies terms (such as royalty ceilings, R&D requirements, local content, etc.)
to ensure that technology is transferred at costs acceptable to the host country.

Another common problem in this area is where an investor desires to transfer technology, often to
its own subsidiary or to a joint venture or a licensee. Often, governments interfere with the
safeguards the investor wants to place on ownership and use of the technology. For example,
characterizing the license as a sale; limiting the time when restrictions can be applied to the use of
technology (i.e., a license becomes a sale after five years); prohibiting grant-back of rights and
improvements; or limiting the territory where the technology or its products can be used.

*partie=titre Manufacturing Requirements *partie=nil

Manufacturing requirements typically oblige an investor to produce a component, product or
product line that the investor may not have originally intended to produce in the host country. As
part of such a requirement, the investor may be prohibited from importing like or similar
products. Manufacturing requirements also may require an investor to establish a manufacturing
facility as a prerequisite to conducting distribution operations in the host country.

*partie=titre Manufacturing Limitations *partie=nil

Manufacturing limitations generally prohibit an investor from producing certain goods or
upgrading or expanding its production and/or product line, often because the designated goods
have been reserved for local manufacturers.

*partie=titre Product Mandate Requirement *partie=nil

A product mandate requirement typically obliges the investor to earmark a product for export to a
specified country or region, or, more generally, to the world market. These measures have
characteristics and effects similar to export requirements.

*partie=titre Domestic Sales Requirements *partie=nil

Domestic sales requirements generally oblige an investor to sell a certain percentage or value of
production to local establishments, usually at prices lower than those on world markets. For
example, a foreign bank may be required to make loans to particular sectors or regions at
preferential rates. A host government employs such measures as a way to ensure that certain
products and services are available in sufficient quantities and at appropriate prices for the needs
of local entities.

*partie=titre Trading Limitations *partie=nil

Trading limitations prohibit foreign investors from participating in trading or require trading to be
carried out only through, or in association with, national entities. Trading for this purpose may
include exporting, domestic wholesaling, domestic retailing and importing. These trading
limitations can seriously inhibit the freedom of a foreign investor from managing and operating a
project. They also discriminate against foreign investors and are therefore inconsistent with
national treatment. Finally such measures are trade distorting.