An Emerging International Framework for Transnational Corporations

The emergence of the transnational corporation (the “TNC”) as a main engine of global economic activity is a phenomenon characteristic of the post-Second World War period. These corporations revolutionized international business patterns, leading to an unprecedented level of transnationalization of the world economy. The importance of foreign investment and TNC activity in the world economy is best illustrated by the following figures: after a period of about five years of steady growth, in 1989 outflows of foreign direct investment reached a level of US$196 billion, while the total stock was US$1.5 trillion. Recent estimates suggest that, for a number of large developed economies, about ninety percent of technology payments occur through transnational corporations. For the United States, about eighty percent of its international trade takes place within TNCs, of which about forty percent is intra-company trade. At the same time, cross-border corporate strategies and complex inter-corporate alliances are making the identification of a single nationality for a TNC increasingly difficult..... But the nature of the transnational corporation as a group of enterprises with a unified structure and with common control and strategy has yet to find a legal regime that matches those characteristics...... One of the first works that looked into the possibilities of establishing an international regime for transnational corporations was the survey of transnational corporations in world development, which led to the creation of the Commission and the Centre on Transnational Corporations, which I now represent. But it soon became obvious that the establishment of such a regime would encounter major difficulties, as it would have to reconcile the global economic “realities” of a TNC-dominated economic system with the need to safeguard the sovereignty and economic independence of the state as a fundamental entity of the political system, and especially of the most vulnerable among states, the developing countries.